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Bribery part of GSK business plan, China police say

A police investigation in China has found that drugmaker GlaxoSmithKline’s alleged bribery of doctors ‘was coordinated by the British company and was not the work of individual employees,’ according to a report Tuesday by Reuters.

GSK allegedly paid up to $490 million to doctors in China through 700 travel agencies in exchange for sales of drug products.

‘It is becoming clear that it is organized by GSK China rather than … sales people’s individual behavior,’ Reuters said, citing the official Xinhua news agency.

Xinhua quoted Huang Hong, general manager of GSK’s business operations in China, as a source for its report.

Company goals for annual sales growth were ‘as high as 25 percent. That rate was 7 to 8 percentage points above the average growth rate for the industry,’ Huang said.

Meeting the sales targets, he said, wasn’t possible without ‘dubious corporate behavior.’

Huang is one of four GSK executives detained by China investigators in July.

In a statement, GSK said,

Our China business is currently being investigated by authorities in the country over allegations of fraudulent behavior. We are deeply concerned and disappointed by these allegations. Such behavior would be a clear breach of our systems, governance procedures, values and standards.

The statement said, ‘We are taking this matter very seriously and are co-operating fully with the Chinese authorities. GSK has zero tolerance for any behaviour of this nature.’

*     *     *

China’s pharmaceutical industry has been shaken by a series of graft allegations naming major foreign drug producers.

In addition to GlaxoSmithKline, targets of the massive industry sweep reportedly include Sanofi, AstraZeneca, UCB, Novartis, Novo Nordisk, and Eli Lilly.

One of the detained GSK executives, Liang Hong, admitted bribing doctors when he appeared from his jail cell during the evening newscast on China Central Television.

Glaxo, he said, used middlemen who helped stage conferences and overcharged for them. The middlemen then used the extra money to pay the bribes.

In his confession, Liang said he organized ten conferences in three years and grossly overstated attendance at the events to increase billings by the travel agents.

Since the scandal erupted in July, many medical conferences that were to be staged by pharmaceutical companies have been suspended.

‘Doctors are afraid of being drawn into corruption allegations through participation of medical conferences,’ a company representative said.

Last month, drug and medical device maker Baxter International Inc. said it investigated whistleblower allegations and found improper expense payments by a China joint venture.

The Guangzhou Baxter Qiaoguang Healthcare Co. staged a conference last year that didn’t happen, the report said. But the company paid a travel agency for the event.


Richard L. Cassin is the Publisher and Editor of the FCPA Blog. He can be contacted here.

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