GSK bribery probe ends, former China head charged

Want China Times, Staff Reporter 2014-05-15

GSK China's office building in Shanghai. (Photo/Xinhua)

The Ministry of Public Security in south-central China's Hunan province has completed an investigation into bribery allegations involving British pharmaceutical giant GlaxoSmithKline's Chinese subsidiary GlaxoSmithKline (China) Investment (GSKCI), and said that the case will be handed over to prosecutors and those involved will be charged, reports the state-run China News Service (CNS).

Following the more than ten-month long probe, Mark Reilly, GSK's former head of China operations, will be charged for his suspected involvement in bribing hospitals, doctors, medical associations, and other healthcare agencies since January 2009 to buy drugs from his company in a bid to achieve sales goals set by the drug maker's headquarters.

Assisted by Chinese executives, Zhang Guowei and Zhao Hongyan, Reilly expanded the company's sales network in China and intensified its bribery efforts by inflating drug prices to make illegal profits worth of billions of yuan.

The investigation found that GSKCI claimed that it sold drugs produced overseas, rather than in China, so that it was able to charge higher prices. Under such a scheme, the Chinese subsidiary was able to earn handsome profits to help it continue its bribery practices and sell more drugs.

By inflating the drug prices, GSKCI's products sold in China are seven times more expensive than the drugs the British company sells in other countries. Through bribery, GSKI executives successfully achieved an annual sales goal set by the headquarters, with sales in 2012 rising to 6.9 billion yuan (US$1.1 billion) from around 3.9 billion yuan (US$625.9 million) recorded in 2009.

Reilly has also been accused of opening his own financial department to process the bribes, which transferred illegal profits resulting from the subsidiary's fraudulent trade to an overseas company.

The investigation showed that GSKCI had used all of its drug production and sales divisions to push for the bribery scheme in a bid to sell more prescription drugs and vaccines in the huge Chinese market.

Under the subsidiary's broad sales network, GSKCI sales representatives were responsible for bribing doctors, heads of smaller regional sales divisions aimed at bribing major customers, with directors at large regional sales divisions being designated to bribe VIP clients. Staffers from GSKCI's marketing department also targeted medical experts. The "sophisticated" bribery chain enabled the company to conduct such illegal activities across the country, CNS said.

In addition, GSKCI was able to pay for passenger cars, television sets, electric cars, video cameras and other devices as gifts to bribe disease control centers and vaccine dispensing stations to boost the company's vaccine sales, the investigation showed.

Related Article:

China accuses British GlaxoSmithKline executive in bribery case