AstraZeneca China President Under Investigation: Second Multinational Pharmaceutical Executive Investigated in Ten Years, Company Faces Serious Compliance Issues

Late on October 30, Astrazeneca's official website announced that Wang Lei, global executive vice president, chairman of international operations and president of China, is facing investigation. The news shocked the medical industry, especially given that it is only the second multinational pharmaceutical company in the past decade to have its head in China investigated, the last being GlaxoSmithKline in 2013. Astrazeneca's situation may be more serious this time, because there are unresolved insurance fraud cases dating back to 2021.

Although Astrazeneca admitted in 2022 that employees had falsified genetic test results for cancer patients to defraud healthcare funds and pledged to improve compliance, similar cases have continued since. Wang Lei's whereabouts have attracted public attention, especially in his absence from China. Astrazeneca's record investments in Wuxi and Qingdao demonstrate the company's continued commitment to the Chinese market, but the investments have not entirely dispellated concerns about compliance issues.

Recently, Yin Min, the former head of Astrazeneca's oncology division, was investigated, further intensifying the public's concern about Wang Lei's investigation. Mr Wang's investigation means Astrazeneca may be on the verge of revealing the full extent of its problems.

Among the famous multinational pharmaceutical companies, Astrazeneca holds a record that no one has surpassed: its revenue in China accounts for the highest proportion of total group revenue.

In 2022, Astrazeneca's revenue in the Chinese market was $5.792 billion, while in 2023 it grew to $5.876 billion. If calculated in CNY, this achievement far exceeds any domestic pharmaceutical industry leader. In 2020, Astrazeneca's most brilliant year, China's market revenue accounted for 20.2% of global revenue, while the US market accounted for only 33%.

Recently, the national health care negotiations have been successfully concluded. The reason why the medical insurance negotiation is vividly called "soul bargaining" comes from the wonderful bargaining words of a negotiating official that were widely spread in 2019: "If 4.4 CNY is used, the number 4 sounds ominous to Chinese people, we will reduce it by another 4 cents, 4.36 CNY, do you think it is OK?" Since then, every year at the price negotiations, Astrazeneca representatives have always been in the limelight. Because Astrazeneca has a wide range of products and high sales, its willingness to accept price cuts partly affects the overall success rate of healthcare negotiations.

Objectively speaking, although Astrazeneca is known as the "second largest pharmaceutical company in the UK", it is often located in the ranking of global pharmaceutical companies, and can not be counted as a top pharmaceutical company. However, in the Chinese market, Astrazeneca has achieved a height that all foreign pharmaceutical companies cannot match. The formation of this situation, mainly thanks to the contribution of Wang Lei. Wang Lei's career has been extensively covered by various media outlets: He graduated from Shanghai International Studies University in 1992, worked as a foreign tour guide for three years, entered the pharmaceutical industry in 1996, and joined Astrazeneca in 2013.

At the time, Astrazeneca was in a tough spot: it was cutting jobs around the world, patents on blockbuster drugs were expiring, and follow-on product lines were not well aligned. In this context, Wang Lei spent five years to bring Astrazeneca China to the right track. In 2017, Wang Lei was promoted to Global Executive Vice President of Astrazeneca as President of China. It is worth mentioning that before in multinational pharmaceutical companies, no local professional manager can become a global vice president in a non-core market. The reason why Wang Lei can reach this height is by virtue of its excellent sales performance in the Chinese market.

However, these results are not without flaws. The problems at Astrazeneca go far beyond massive insurance fraud. In July this year, the Guangdong Provincial Drug Administration disclosed a major case in an anonymous manner: on April 22, 2024, it successfully destroyed a large smuggling overseas drug gang, and seized more than 80 kinds of smuggled drugs, totaling more than 5,000 boxes, with sales of nearly 200 million CNY. Prosecutors in Guangzhou have approved the arrest of eight suspects on suspicion of interfering with drug administration.

"Illegal criminal gangs operate frequently on the smuggling route between Guangdong and Hong Kong, and have long used the water to smuggle imported drugs without drug approval documents. It involves a wide variety, a long time span and a huge value of cases, most of which are drugs for cancer prevention, anti-cancer and treatment of diabetes and other diseases."

Wang Lei, Astrazeneca's top executive in China, may now be held accountable for these incidents.

We always keep our doors open and welcome outstanding companies from all over the world to invest and start businesses in China to achieve win-win results and common prosperity. However, this does not mean that we will condone the illegal behavior of foreign enterprises without any bottom line. In the past five years, domestic pharmaceutical innovation has experienced fluctuations from peak to trough, but the market demand for new drugs is still urgent. If foreign pharmaceutical companies cannot meet the needs of the Chinese market legally and in compliance, then local companies should step up and assume their responsibilities.