GSK says its executives appear to have broken the law
Source: Agencies |
July 23, 2013, Tuesday
|
Print Edition
Print Edition
British drugmaker GlaxoSmithKline said yesterday that some of its executives in China appeared to have broken the law in a bribery scandal, as it promised changes in its business model that would lower the cost of medicine in the country.
GSK is the latest in a string of multinationals to be investigated by Chinese authorities over alleged corruption, price-fixing and quality controls.
Chinese police visited the Shanghai office of another British drugmaker, AstraZeneca, a company spokeswoman said yesterday. They arrived on Friday and took away a sales representative for questioning.
Health Minister Li Bin maintained the pressure on the drugs industry by stating that her department would place people and companies guilty of bribery on a blacklist and punish them.
GSK's head of emerging markets, Abbas Hussain, said the company had zero tolerance for employees who broke 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," he said in a statement.
Hussain, sent to China last week to lead GSK's response to the crisis, held a meeting with the Ministry of Public Security at which he also promised to review GSK's business model.
"Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring that our medicines are more affordable to Chinese patients," Hussain said. The company gave no details on the changes or the extent of price cuts. GSK supplies key products such as vaccines in China, as well as drugs for lung disease and cancer.
Chinese police last week accused GSK of bribing officials and doctors to boost sales and raise the price of its medicines.
They said GSK transferred up to 3 billion yuan (US$489 million) to 700 travel agencies and consultancies over six years to facilitate the bribes. Four senior Chinese executives from GSK have been detained.
Britain's biggest drugmaker has said it was deeply concerned by the allegations."
Last week, Chinese authorities also visited the Shanghai office of Belgian drugmaker UCB and the latest visit to AstraZeneca shows Chinese authorities are spreading their net.
Local police matter
AstraZeneca said it believed the case involving its employee was a local police matter.
"We believe that this investigation relates to an individual case and while we have not yet received an update from the Public Security Bureau, we have no reason to believe it's related to any other investigations," the spokeswoman said.
In a statement, China's Ministry of Public Security said GSK's Hussain apologized for the scandal during the meeting at the weekends.
He was sent to China last week by Chief Executive Andrew Witty, along with two other senior executives.
Witty will detail what action the drugmaker is taking in response to the allegations when he presents quarterly results tomorrow, sources said.
GSK had another setback yesterday when it abandoned a scheme to increase its stake in GSK Consumer Nigeria, its consumer health care business in the country, following shareholder opposition.
China has long been known for a culture in which drug companies make payments to doctors, since physicians rely on rewards for writing prescriptions to offset meagre salaries.
One of the agencies at the center of the scandal has been identified as Shanghai Linjiang International Travel Agency.
The New York Times said documents it obtained showed that in the past three years at least six other global pharmaceutical firms, including Merck, Novartis, Roche and Sanofi, had used that agency to make arrangements for events and conferences.
It said the documents contained no indication of wrongdoing.
Roche said it used Shanghai Linjiang International Travel Agency among others but that once the allegations surfaced it immediately stopped working with it and began a review of its business with the agency.
Merck also said it had used the agency in the past and would no longer do so. The other companies could not be reached for comment.
The travel agency's business has been suspended.
GSK is the latest in a string of multinationals to be investigated by Chinese authorities over alleged corruption, price-fixing and quality controls.
Chinese police visited the Shanghai office of another British drugmaker, AstraZeneca, a company spokeswoman said yesterday. They arrived on Friday and took away a sales representative for questioning.
Health Minister Li Bin maintained the pressure on the drugs industry by stating that her department would place people and companies guilty of bribery on a blacklist and punish them.
GSK's head of emerging markets, Abbas Hussain, said the company had zero tolerance for employees who broke 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," he said in a statement.
Hussain, sent to China last week to lead GSK's response to the crisis, held a meeting with the Ministry of Public Security at which he also promised to review GSK's business model.
"Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring that our medicines are more affordable to Chinese patients," Hussain said. The company gave no details on the changes or the extent of price cuts. GSK supplies key products such as vaccines in China, as well as drugs for lung disease and cancer.
Chinese police last week accused GSK of bribing officials and doctors to boost sales and raise the price of its medicines.
They said GSK transferred up to 3 billion yuan (US$489 million) to 700 travel agencies and consultancies over six years to facilitate the bribes. Four senior Chinese executives from GSK have been detained.
Britain's biggest drugmaker has said it was deeply concerned by the allegations."
Last week, Chinese authorities also visited the Shanghai office of Belgian drugmaker UCB and the latest visit to AstraZeneca shows Chinese authorities are spreading their net.
Local police matter
AstraZeneca said it believed the case involving its employee was a local police matter.
"We believe that this investigation relates to an individual case and while we have not yet received an update from the Public Security Bureau, we have no reason to believe it's related to any other investigations," the spokeswoman said.
In a statement, China's Ministry of Public Security said GSK's Hussain apologized for the scandal during the meeting at the weekends.
He was sent to China last week by Chief Executive Andrew Witty, along with two other senior executives.
Witty will detail what action the drugmaker is taking in response to the allegations when he presents quarterly results tomorrow, sources said.
GSK had another setback yesterday when it abandoned a scheme to increase its stake in GSK Consumer Nigeria, its consumer health care business in the country, following shareholder opposition.
China has long been known for a culture in which drug companies make payments to doctors, since physicians rely on rewards for writing prescriptions to offset meagre salaries.
One of the agencies at the center of the scandal has been identified as Shanghai Linjiang International Travel Agency.
The New York Times said documents it obtained showed that in the past three years at least six other global pharmaceutical firms, including Merck, Novartis, Roche and Sanofi, had used that agency to make arrangements for events and conferences.
It said the documents contained no indication of wrongdoing.
Roche said it used Shanghai Linjiang International Travel Agency among others but that once the allegations surfaced it immediately stopped working with it and began a review of its business with the agency.
Merck also said it had used the agency in the past and would no longer do so. The other companies could not be reached for comment.
The travel agency's business has been suspended.
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