Executives in China could have broken the law: GSK

‘SHAMEFUL’::Following allegations of bribery, Britain’s largest drugmaker has ordered a third-party review and sent senior executives to China to lead the firm’s response

Reuters and AFP, LONDON and SHANGHAI

Tue, Jul 23, 2013 - Page 15

GlaxoSmithKline (GSK), facing a major bribery scandal in China, said yesterday that some of its executives in the country appeared to have broken the law.

“Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls which breaches Chinese law,” the British drugmaker’s head of emerging markets, Abbas Hussain, said in a statement.

Chinese authorities say GSK employees bribed government officials, pharmaceutical industry groups, hospitals and doctors to promote sales.

Hussain, who was sent to China last week to lead GSK’s response to the crisis, held a meeting with the Chinese Ministry of Public Security at which he also promised to review GSK’s business model, leading to price reductions in the country.

Hussain apologized during the meeting on behalf of GSK, according to a ministry statement yesterday

“The GSK head office fully supports the determination and actions of the Chinese government in combating corruption,” he was quoted as saying.

A police official has previously claimed GSK staff funneled nearly US$500 million in suspected bribes through travel agencies and consultants since 2007.

Police have held four top executives of GSK China and prevented another, the firm’s British finance director, from leaving the country, though he has not been formally detained.

GSK executives also took kickbacks from travel agencies in return for organizing conferences, some of which did not exist, police say.

Media reports say more than 20 people have been detained in the case, including pharmaceutical and travel industry personnel.

Police in Shanghai have detained a British fraud investigator who did work for GSK, Peter Humphrey, Dow Jones Newswires reported on Sunday.

Meanwhile, GSK chief executive officer Andrew Witty will detail what action the drugmaker is taking in response to allegations of bribery against it in China when he presents quarterly results tomorrow, sources familiar with the matter said.

Although an internal company investigation has yet to conclude, people familiar with the matter said Witty would discuss what may have gone wrong in the scandal, which has rocked GSK’s reputation and left its management in China in disarray.

Britain’s biggest drugmaker, which has described the allegations against it in China as “shameful,” has already hired professional services firm Ernst & Young to conduct an independent review of its systems in the country and sent three senior executives to lead the response on the ground.

A company spokesman said it was also keeping all relevant regulators updated as appropriate.

The charges from China could expose GSK to prosecution under Britain’s Bribery Act and the US Foreign Corrupt Practices Act.