(Yicai) Dec. 5 -- The former vice general manager of state-backed pharmacy chain operator Shanghai First Pharmaceutical is being probed for serious breaches of discipline and law, as China clamps down on unlawful activities in the pharmaceutical industry.

Fang Yuan is being investigated by a joint team of inspectors from Balian Group, a large retail group under the Shanghai government which owns 45 percent of First Pharmaceutical, and from Shanghai’s Hongkou district, Hongkou district’s discipline inspection committee said on Dec. 2.

The first signs that there was trouble brewing was when First Pharmaceutical said on Dec. 1 that 58-year-old Fang had resigned from his post as vice GM for personal reasons, just as he was approaching the end of his three-year contract.

Fang no longer works for the company and does not hold any shares in the firm, First Pharmaceutical said. The handover has been completed and his departure will not affect the normal operations of the pharmaceutical chain.

Fang was First Pharmaceutical’s highest paid employee in 2023 with an annual salary of CNY1.3 million (USD178,900), according to the company’s annual report. Before joining First Pharmaceutical in December 2021, he worked at other large drugstore chains such as Yifeng Pharmacy Chain and LBX Pharmacy China.

First Pharmaceutical had 198 stores as of the end of September, all of which are located in Shanghai. In the first three quarters, the company's net profit surged two-and-a-half-fold from the same period a year ago to CNY147 million (USD20.2 million), but this mainly came from the sale of assets. Once this one-off gain was deducted, net profit plunged 70 percent to CNY7.8 million (USD1 million). Revenue climbed 2.5 percent to CNY1.4 billion (USD192.6 million).

China has been cracking down on illegal activities in the pharmaceutical industry since the second half of last year. Many senior executives of large drugmakers, including the former chairman of Guangzhou Pharmaceutical Group, Li Chuyuan, and the president of British pharmaceutical giant AstraZeneca China, Wang Lei, have recently been probed.

Editors: Dou Shicong, Kim Taylor