Siemens Investigating Alleged Fake Healthcare Equipment Deals

Siemens recently initiated an internal investigation into a Chinese media report that the company negotiated bogus healthcare deals with local distributors in China.

According to Reuters, the Chinese news outlet Yicai recently described how Chinese distributors and representatives of Siemens’ healthcare unit in China engaged in a scheme to register fake contracts. The Chinese daily reportedly said that distributors would make a 10 percent down payment in order for Siemen’s local division to satisfy a minimum requirement to book contracts. Siemens reportedly would then pay back the distributors through other means. Yicai said one distributor named Wu described the dealings as “common practice.”

Siemens recently released a statement saying that it was seriously looking into the matter. It said it is not engaged in illicit business practices.

“Regarding the points raised by some business partners as described in the news report, Siemens has attached high attention to them and has initiated internal investigations,” the company said in the statement, according to Reuters. “Siemens pays high attention to taking pre-emptive measures against unfair competition and any other inappropriate business conduct.”

According to Reuters, the Yicai report said Siemens had started to curb the irregular practice as early as the second half of 2014 and told local distributors that the 10 percent percent down payments would be forfeited. A group of distributors was reportedly seeking to be paid back more than 30 million yuan ($5 million) they had already given to Siemens as down payments.

Chinese authorities have intensified their crackdown on illegal and corrupt practices in the local medtech sector. Recent measures include heftier fines and the cancellation of operating licenses for committing corporate malpractice, misleading regulators, and unauthorized manufacturing and sale of medical equipment.

Reuters claims Siemens reported sales of 6.44 billion euros ($7.23 billion) in China in 2014. The Chinese market accounts for approximately 8 percent of the company’s total sales. Siemens reported weak order intake and price pressure at its healthcare division in the last quarter of 2014, dragged down by markets in China and Japan.

Siemens and other medical device manufacturers are facing a stricter regulatory environment in China as the government starts to boost its homegrown medical device industry. Currently, three-quarters of the market is dominated by manufacturers based in the United States, Europe, and Japan.