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Chinese city targets pharma firms in graft crackdown

SHANGHAI, May 27 (Reuters) - China's eastern city of Hangzhou is cracking down on graft in the healthcare sector, according to an internal memo from the local government, putting more pressure on global drugmakers operating in the country.

Earlier this month, China charged executives at British drugmaker GlaxoSmithKline Plc with corruption. GSK said it was cooperating with the authorities.

Swiss drugmaker Roche Holding AG last week said it was cooperating with authorities after China's anti-graft watchdog visited its Hangzhou offices.

The Hangzhou crackdown is another sign that Chinese authorities are getting increasingly active in the fight against graft in the country's healthcare sector, a concern for drugmakers and medical device firms looking to target the country's near 1.4 billion population.

Industry and legal sources told Reuters that probes into the sector were likely to rise in the wake of the investigation against GSK, putting increasing downward pressure on profits and sales.

The city's health bureau has ordered healthcare departments to carry out internal compliance probes before the end of June and to report any kickbacks they had received, the 21st Century Business Herald newspaper reported on Tuesday, citing the internal document from the ministry.

An official at the Hangzhou Health Bureau told Reuters that the document existed, but declined to elaborate further saying it was meant to be an internal notification.

COMPANIES NAMED

The health bureau memo named Britain's AstraZeneca Plc , U.S.-based Eli Lilly and Co and Denmark's Novo Nordisk A/S as examples of drugmakers suspected of making kickbacks, the 21st Century Business Herald reported. The health bureau official declined to comment.

A Denmark-based spokesman for Novo Nordisk said that he couldn't comment directly on internal documents, but that the firm fully supported the Chinese government's work.

"Investigations by various authorities are not uncommon in China, nor are they a new phenomenon, and like many other companies Novo Nordisk receives inspections from time to time," the spokesman said.

An AstraZeneca spokeswoman said the firm was aware of the media reports but had not received any "official communication" on the matter from Chinese authorities.

"AZ China cooperates with various Chinese authorities on a regular basis across a wide range of interactions," she said.

Eli Lilly said it had not been contacted by the authorities in China over the matter.

"Lilly has not been contacted by Hangzhou Health Bureau. We fully cooperate with any inquiries we receive from government and its agencies in China," a China-based spokeswoman said.

Last year Chinese authorities visited global drugmakers including Novo Nordisk, Novartis AG, AstraZeneca, Sanofi SA, Eli Lilly and Bayer AG as part of a broad investigation into the sector.

(Additional reporting by SHANGHAI newsroom; Editing by Erica Billingham)