The drama that has become GlaxoSmithKline operations in China took a more serious turn as authorities say several senior executives, who are being investigated for alleged bribes and tax-related violations, have confessed to the crimes, according to the Xinhua News agency, citing a statement by China’s Ministry of Public Security.
The statement describes their alleged offenses as “serious economic crimes” for purportedly offering large bribes to government officials, medical industry associations and foundations, hospitals and doctors in hopes of expanding the market for Glaxo drugs and to raise prices. The bribes were generally paid through travel agencies or as “project sponsorships,” although that was not clearly defined (here is a translated version of the ministry statement).
Moreover, Glaxo is suspected of being involved in a form of tax evasion, by falsely issuing exclusive value-added tax invoices and colluding with travel agencies to issue false invoices in order to finance allegedly illegal activities, according to Xinhua, adding that several senior Glaxo execs are also suspected of accepting kickbacks and bribes from travel agencies. The number of Glaxo employees involved was not specified, but travel agency employees are also being held as suspects and questioned by police.
The disclosure comes shortly after Glaxo acknowledged conducting internal investigations into allegations by an anonymous tipster that employees were bribing doctors to prescribe various medications, including the Botox treatment. So far, the drugmaker has maintained there has been no evidence of wrongdoing (back stories here and here).
In response, Glaxo says this: “We are willing to cooperate with the authorities in this inquiry. But this is the first official communication that has been published by the Public Security Bureau in relation to the specific nature of its investigation. We take all allegations of bribery and corruption seriously. We continuously monitor our businesses to ensure they meet our strict compliance procedures - we have done this in China and found no evidence of bribery or corruption of doctors or government officials. However, if evidence of such activity is provided we will act swiftly on it.”
Of course, gift giving is a regular practice in China, where industry watchers says corruption is also rife, particularly among domestic drugmakers. Nonetheless, a key question is whether Chinese officials will now be motivated to explore business practices of other global drugmakers that have been racing to expand operations there. US officials, for instance, are investigating several drugmakers, including Glaxo, for potential violations of the Foreign Corrupt Practices Act. Will Chinese authorities turn their attention to others?
In general, Glaxo activities in China have been under a cloud for weeks. Last month, the drugmaker determined that a scientific paper that was published in Nature Medicine contained fabricated data and dismissed Jingwu Zang, one of the listed authors, who was a senior vp and head of R&D in Shanghai. The drugmaker is also seeking a retraction, and three other employees were placed on administrative leave pending a final review and a fifth has resigned (back story).
The scandals are proving hugely embarrassing for another reason: they emerged less than a year after Glaxo (GSK) agreed to plead guilty and pay $3 billion to resolve criminal and civil charges in connection with off-label promotion of several drugs, failing to report safety data and reporting false prices. At the time, Glaxo ceo Andrew Witty vowed that "we have learnt from the mistakes we made" and would run a more compliant and transparent operation (read more here).
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bribe pic thx to donhankins on flickr