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 State-Run Drug Maker Answers Outrage Over Opulent Palace
CreateTime:2011-09-13     Source:wsj Editor:lile
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A state-run drug maker in China that came under fire for constructing a luxurious palace worthy of a Colombian cartel is now claiming that photos of the building posted online are part of an internal museum.

Harbin Pharmaceutical Group Sixth Pharm Factory, a state-owned firm based in northeast China’s Heilongjiang province, recently published a set of photos on its official website revealing its factory sumptuously awash in yellow gold and marble.

In the lobby, two plainly dressed couples–presumably employees–are shown dwarfed by four marble columns thick as tree trunks. Over them looms a triple-tiered crystal chandelier hung from the gold-plated ceiling. A photo of an indoor terrace resembles a concert hall with its white baby grand. The meeting rooms, meanwhile, have been outfitted with luxurious Chinese traditional furniture in mahogany and wooden lanterns.

The gorgeous photos have quickly drawn a barrage of criticism from Chinese Internet users for its lavish spending on the building.

“It’s a palace which is built on the pain of millions of patients,” one internet poster with the online pseudonym Medical Pioneer 2 said on China’s Twitter-like Sina Weibo microblogging site. Another web user who gave the name Mo Xi wrote: “Now I finally know why Chinese people can’t afford to go to the doctor and buy medicines.”

In the face of growing public anger, the company removed the sensational photos from its website, and said that they were of a wood-block-printing art museum located in the same building as the company’s headquarters.

The official Xinhua News Agency quoted Lu Chuanyou, head of the company, as saying that the factory’s European-style main building, constructed in 2004, has six floors –the ground to the third for working areas and the rest for the wood-block-printing museum (in Chinese)

Except for the magnificent lobby, the design and decoration of the working section is generally plain and simple, while the art museum’s section (from the fourth floor to the sixth) looks sumptuous, decked out with crystal chandeliers and finely crafted copper-coated wooden figures as well as grandly-decorated meeting rooms and parlors, the Xinhua report said.

The construction of the building and interior decorating cost the company more than 93 million yuan (US$15 million), Mr. Lu said, adding that the intention in building the museum was to promote cultural development and highlight the company’s social responsibility.

Established in 1977, Harbin Pharmaceutical Group Sixth Pharm Plant is a subsidiary of state-owned Harbin Pharmaceutical Group Holding Co., which is China’s first publicly listed drug maker. Besides manufacturing drugs, the Sixth Pharm Plant also produces beverages and health food.

It’s still unclear why the pharmaceutical company decorated the plant’s art museum section in such a luxurious style. A spokesman at the company on Friday declined to comment.

The company’s effort to deflect public attention appears to have done little to calm down the anger of the mass.

Chinese newspaper Southeast Press said on Friday in its microblog: “Simple wood-block-printing art doesn’t need an extravagant museum!” An Internet user posting under the name Ttparishilton on Sina Weibo wrote: “As long as Harbin Pharmaceutical Group Sixth Pharm Plant is a state-controlled enterprise, we are allowed to ask with whose money the company realized its art dream and who should have the right to approve the spending of the money.”

Harbin Pharmaceutical is by no means the first government entity in China to invite public scorn by spending lavishly on a building that appears to have little function beyond satisfying leaders’ vanity. As recently as March, a local government in rural Anhui province ignited a firestorm of criticism after its plans for an opulent complex covering nearly 45 acres were revealed online.

In one of the most forehead-smacking examples of government decorating excess, one local environmental protection bureau was discovered in January to have used sidewalk tiles for the blind to create a decorative pattern on either side of the main road leading into its headquarters.

Harbin Pharmaceutical, however, appears to have prompted more than the usual dose of public outrage over such indulgences — a reaction that could be attributed to widespread dissatisfaction in China over the state of the country’s health care system.

It’s unknown how profitable Harbin Pharmaceutical Group Sixth Pharm Plant is. But a research note from China Merchants Securities Co. showed that the country’s more than 100 listed drug makers had an average net profit margin of 10% in the first half of this year, up from 7.7% in 2008. By contrast, Pfizer Inc. had an average 20% net profit margin from 2006 to 2010.

Chinese pharmaceutical makers’ lower net profit margin suggests their operations are less efficient. In fact, complaints about costly medicines have been on the rise in recent years, making the high cost of health care services — along with surging housing prices and education spending — among the biggest source of public discontent in China.

Hospitals all over the country are notorious for padding the bonuses of doctors who prescribe expensive medicines or order up high-tech tests. Data from the Ministry of Health show that around 50% of total health spending is for drug purchases in China, a disproportionately high amount compared to other countries (in Chinese). In the U.S., the figure stands at about 10%.

– Rose Yu with contributions from Jean Yung

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