Cover Story: How AstraZeneca’s China Fraud Was About More Than Greed

AstraZeneca Plc is currently embroiled in a deepening scandal in China amidst a three-year crackdown on alleged medical insurance fraud, with the latest blow being an investigation into Leon Wang, president of the company in China [para. 1]. The company recently confirmed his cooperation with the investigation, yet details remain sparse. These issues come on the heels of other scandals, including the detainment of Eva Yin, a key former manager [para. 2][para. 4]. She worked at AstraZeneca until 2021 under Wang and may be linked to fraud cases [para. 3][para. 4].

Founded in China in 1993, AstraZeneca, with a workforce of about 20,000, is no stranger to controversy, consistently grappling with numerous scandals concerning insurance fraud, potentially involving millions of yuan [para. 5]. The center of these storms is its lung cancer drug, Tagrisso, which is covered by Chinese state-backed insurance but only for a few eligible patients until coverage was expanded in 2021 [para. 6]. The intense need to meet sales targets reportedly drove some company representatives to falsify genetic test results, allowing more patients access to Tagrisso despite being ineligible for insurance coverage [para. 7].

Since 2021, investigations regarding Tagrisso-related fraud have been reported across eight provinces, including Guangdong and Shanghai. More than 50 regional managers and sales representatives have found themselves implicated, and several, such as Zuo Yingquan, have faced legal consequences [para. 8]. Wang's investigation represents a significant escalation of the scandal, reflecting his rise and influence in the company since joining in 2013 [para. 9].

Even amidst controversies, AstraZeneca continues to invest heavily in China, signaling a $1.2 billion commitment for projects in Qingdao and Wuxi over 2022 and 2023 [para. 10]. Despite these challenges, China remains AstraZeneca's second-largest market, generating $5.9 billion in revenue in 2023, which accounts for 13% of its total earnings [para. 11]. Global CEO Pascal Soriot reaffirms that the company is fully committed to working with Chinese authorities to resolve these issues, emphasizing compliance [para. 11].

AstraZeneca's troubles began in earnest in mid-2021 when the Shenzhen Healthcare Security Bureau opened an inquiry into fraud involving the company's employees [para. 14]. As seizures increased, several executive exits followed, including Eva Yin, shifting to BeiGene in 2022 [para. 15]. The cascade continued with arrests like those of Zuo Yingquan and, months later, other managers charged with manipulating test results [para. 17].

The allegations center primarily on test results related to EGFR-T790M mutations for Tagrisso users. Initial approvals limited Tagrisso's use only to patients resistant to first-line treatments until its broader coverage under national insurance in April 2021 [para. 26]. This loophole encouraged sales reps to alter tests, facilitated through partnerships with testing companies like Genowise Corp, culminating in the fraudulent insurance claims [para. 30].

Debate persists surrounding the motivations for this widespread fraud. While subsidiaries claim financial gain as a driving force, others deny direct benefits from these acts. AstraZeneca employees face intense pressure to meet sales targets, which has been identified as a root cause of the misconduct [para. 49]. Performance-linked compensation seemingly motivated illegal practices, though some agents maintain their actions were often at patients' urgings [para. 49][para. 56].

The situation has heightened tensions within AstraZeneca and significantly tarnished its standing in China, signaling potentially broader implications for other multinational firms [para. 49][para. 58]. This skyrocketing scandal underlines the complex dynamics of doing business in a rapidly evolving regulatory landscape [para. 51].