China accuses former GlaxoSmithKline country head of bribery

Chinese police on Wednesday accused GlaxoSmithKline's former head in the country Mark Reilly of ordering his sales team and other employees to bribe hospital doctors, healthcare organisations and other parties on "a large scale" to boost drug sales. The announcement by officials from China's Ministry of Public Security follows a probe of the drugmaker, which was initiated last year.

Ministry official Gao Feng said revenue that came from alleged bribery amounted to several billion yuan since Reilly joined GlaxoSmithKline's China operation in 2009. Gao also alleged that the company pushed up the prices of drugs in China, as much as seven times the price compared with other countries, to fund the bribery. "Glaxo's acts of bribery penetrated all aspects of the company's business operation," he commented.

According to the official Xinhua news agency, two other GlaxoSmithKline executives, Zhang Guowei and Zhao Hongyan, were also suspected of bribing officials within the industry and commerce departments of the cities of Beijing and Shanghai. Officials said that GlaxoSmithKline also paid bribes in an effort to obstruct Chinese investigations into the matter. Gao noted that it is "now the duty of the prosecutors and the court to deal with" as the probe has been completed.

Deutsche Bank analyst Mark Clark said "as far as Glaxo's concerned it doesn't really get us any further in terms of what sanctions will be applied to the company, whether it will be large financial penalties, any constraints on doing business. There’s nothing that takes us any further here, all it does it talk about individuals."

Last year, GlaxoSmithKline said that some of its senior executives may have violated Chinese law after the company was accused of funneling up to 3 billion yuan ($482 million) to travel agencies to facilitate bribes to doctors and officials. Gao praised the drugmaker, saying "it has held a responsible attitude" during the investigation and has provided assistance.

In response to the news, a GlaxoSmithKline spokesperson said "we have today met with the [Ministry of Public Security] who updated us on their investigation." The spokesperson noted that the matter has been passed "to the Changsha People’s Procurator in Hunan Province," which is "now reviewing the case." The spokesperson added that GlaxoSmithKline "will continue to fully co-operate with the authorities in this matter. We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens."

"We take the allegations that have been raised very seriously," the spokesperson said, adding "they are deeply concerning to us and contrary to the values of GSK." Last year, the company said it would scrap individual sales targets for all sales employees following the implementation of a similar programme in the US in 2011. The drugmaker indicated that it would also start a consultation on stopping direct payments to healthcare professionals for speaking engagements and for attendance at medical conferences.

Commenting on the news, Kenneth Jarrett, president of the American Chamber of Commerce Shanghai, said he was surprised at the "strong response" from the Ministry of Public Security. "I would agree that it's not what I would have expected because it seemed like GSK were cooperating very closely with the authorities," he remarked, adding "I don't think that anyone had been lulled back into complacency, but if anybody had this will wake them up." Other drugmakers that were visited by Chinese officials last year as part of a broad investigation into the industry include Novartis, AstraZeneca, Sanofi , Eli Lilly and Bayer.

To read more Top Story articles, click here.