Bribes and Backdoor Deals Help Foreign Firms Sell to China’s Hospitals

Siemens said that it terminated its relationship with Yameiya when it learned of the cases in 2014. But Yameiya is involved in dozens of recent transactions as a middle agent for Siemens, G.E., Philips and Toshiba equipment, according to publicly available procurement documents from Chinese hospitals. Just a few months ago, Yameiya bought a Siemens M.R.I. machine from an authorized dealer. In another deal a year ago, Yameiya sold a G.E. device to a hospital in Anhui Province.

Siemens, Philips, Toshiba and G.E. said that Chinese law required hospitals to hire third-party companies to import foreign equipment and that they had no say in who was involved. “Being a responsible company, everyone in Philips is expected to always act with integrity,” said Steve Klink, a company spokesman.

Often the bidding is just a show. A court last year convicted Xiao Feng, an administrator at an unidentified Beijing hospital, of taking $330,000 in bribes to buy Toshiba and Siemens equipment. A second administrator identified as Dong in court documents testified that the hospital had already chosen the device and “the bidding is simply a formality that makes the procurement process legal and legitimate.”

Companies know the bids are rigged, said an authorized seller of Toshiba products identified as Han in court documents. “This is an unspoken industrial rule,” Mr. Han testified during Mr. Xiao’s trial. “We cooperate with each other.”

Canon Medical Systems Group, which bought Toshiba’s medical device business in 2016, has “a zero-tolerance policy toward bribery and unethical business practices,” said Hiroko Eno, a spokeswoman.

That cooperation can lead to higher prices for hospitals, say health care and compliance experts.

Public bidding documents indicate device prices differ sharply between deals with third-party brokers and direct sales. When Siemens won a bid to sell an M.R.I. machine to the Chinese Academy of Medical Sciences in Beijing in 2016, the price was $2,800. In another deal, in which Siemens sold the M.R.I. machine through a third-party broker called Chongqing Kangtian Medical Equipment, the price was $4,700.

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