State Drugmaker Snared Over Scheme to Rip Off Government

State-owned drugmaker Guangzhou Baiyunshan Pharmaceutical Holdings Co. Ltd. (600332.SH) has been implicated in a sophisticated scheme to defraud China’s medical subsidy system by enlisting the help of raw ingredients suppliers to mark up its drug prices.

The National Healthcare Security Administration (NHSA), which oversees China’s medical insurance system, revealed this month details of a probe into three Baiyunshan subsidiaries, finding that over a period of four years they had worked with some 50 downstream agents to artificially inflate the prices of active pharmaceutical ingredients (APIs) used in 87 of the firm’s government-subsidized drugs.