China Charges Drug Company with Bribery

Pharmaceutical giant GlaxoSmithKline has been accused of bribing government officials and doctors to boost its drug sales in China. According to Chinese officials, the British drugmaker was involved in a conspiracy involving hundreds of millions of dollars that has spanned several years.

Chinese authorities claim that senior Glaxo executives used travel agencies to launder money that was ultimately used for bribes. Travel agencies reportedly enticed GSK executives by offering cash, luxurious travel accommodations, and even hiring prostitutes for “sexual bribery.” The agencies allegedly invented fictitious corporate meetings that required travel; the budget would then be used to bribe doctors to prescribe GSK drugs. Gao Feng, a Chinese ministry official said Glaxo and the travel agencies have exchanged three billion Chinese yuan ($489 million) since 2007.

China Widens Probe of Sexual Bribes and Glaxo ExecsBloomberg TV, YouTube, July 16, 2013.

Damage Control

While these allegations appear salacious and damaging to GSK, even if the drugmaker is penalized by the Chinese, the corporation isn’t likely to suffer any major losses. Media reports put possible fines at $5 -10 million, a drop in the bucket considering GSK’s revenue of $26.4 billion last year. Still, Glaxo officials are clearly trying to mitigate investor worries. They issued a statement that the company finds the allegations “shameful” and that it had put an “immediate stop” to the use of the named travel agencies. The company further commented that it shares the desires of the Chinese government and is cooperating with the investigation.

Just the Tip of the Iceberg?

Charges of bribery in China are nothing new. Many contend the country is rife with corruption and see investigations such as this as posturing by the Chinese government to appear strong and keep drug prices by outside companies low. Indeed, rumors are already circulating that four other multinational pharmaceutical corporations are also being investigated for similar violations.

So, is bribery simply the price of doing business in China, or is this case symptomatic of wide-spread corruption within the industry as a whole? Well, just last year Glaxo plead guilty and paid $3 billion dollars to resolve federal and civil charges in the United States. Their offenses included aggressive off-label marketing, withholding safety data, and bribing doctors… what do you think?

Source:

Glaxo Used Travel Firms for Bribery, China Says” by David Barboza, The New York Times, July 15, 2013.

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