GlaxoSmithKline Execs Facing Bribery Charges in China

GlaxoSmithKline Execs Facing Bribery Charges in China

November 4th, 2013 // 4:49 pm @

Chines officials who have been investigating allegations of bribery and other corruption at GSK are going to probably charge some Chinese execs, but probably not the company Glaxosmithkline itself.

A charge against the company would be a very serious problem for the pharma firm, because it would imply that there was high level corporate corruption that could cause huge fines and even disrupt drug production in China.

Chinese police also are not likely to make criminal charges against Briton Reilly, who is the ex-head of GSK operations in China.

Reilly has been helping Chinese authorities on a voluntary basis, after accusations surfaced last summer that GSK was funneling as much as $3 billion yuan to various travel companies to encourage the bribes of various doctors and officials to increase sales of drugs. This alleged bribery is thought to have happened starting in 2007.

These accusations are some of the most serious against a corporation in China in many years. GSK China sales dropped more than 60% in the 3rd quarter after hospital staffers were rejecting visits by many sales teams after all of the bad PR from the corruption probes.

The investigation is happening at the same time there is more scrutiny in China of how foreign companies are doing business in China, which has the second biggest economy in the world. The spotlight in China is strong especially on pricing and bribes in the drug and infant milk formula market.

The investigation by the police into the company is going to probably be finished by the end of the year. However, it is hard to guess what the authorities in China are going to do.

The most likely scenario is that they are going to bring charges against Chinese GSK officials, according to a person with knowledge of the details of the investigation.

The Xinhua news organization stated earlier this fall that the investigation had determined that bribery of doctors was fully coordinated by GSK and was not just the work of rogue employees.

The Ministry of Public Security has looked for evidence that may tie GSK as a company to all of the wrong doing. But is not likely that the police are going to be able to have legal proof at a corporate level.

GSK has noted that some of its top Chinese officials seem to have broken several laws. It did say that it has no tolerance for corruption and bribery.

Police have so far taken four senior executives in China for GSK into custody. They include a VP and an operations manager.

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