China drug scams challenge pharmaceutical firms

By Michael Wei and Tan Ee Lyn

BEIJING/HONG KONG (Reuters) - When Pang Jianli walked into a Beijing pharmacy to buy medicine for his flu-stricken son, he was greeted by an overwhelming display of boxes and bottles emblazoned with promises of miraculous cures.

"Unlike shopping in supermarkets, where I buy the brands I know and I know the brands I buy, buying drugs is different; the brands you know may not be what they claim to be," said the 38-year-old father.

China's poorly regulated medical market has spawned a new 'Wild West' for untested drugs offered by fly-by-night firms. The medical 'free-for-all' is reminiscent of the era of 'snake-oil salesmen' over a century ago in the United States.

From impotency treatments, to drugs that prevent hair loss, to medicines that cure chronic diseases, Chinese consumers are bombarded by adverts for a vast array of treatments making false or inflated promises.

Analysts say the murky business practices and misleading claims may actually help the prospects of foreign drug companies scrambling for a piece of the $110 billion (75.5 billion pounds) medications market in China.

"Nowadays, Chinese people don't trust Chinese medications. They trust Western brands more as they have a better reputation," said Huang Jianshi, Assistant President of the Chinese Academy of Medical Sciences and Peking Union Medical College.

Foreign drug companies such as GlaxoSmithKline (GSK.L) and Pfizer (PFE.N) usually work directly with hospitals and doctors and rarely advertise, explained Du Jinsong, a pharmaceutical analyst with Credit Suisse in Hong Kong.

"Fake drug adverts have limited impact on foreign brands as foreign companies sell and market their products in a different way," he said.