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Monday
Jul222013

GSK apologizes for breaking China law

GlaxoSmithKline's Abbas Hussain (image courtesy of GSK)GlaxoSmithKline said Monday some of its executives in China appear to have broken the law in the giant bribery scandal still unfolding there.

Abbas Hussain, the head of emerging markets for the U.K.-based drug maker, said 'Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls which breaches Chinese law.'

Last week, China detained four senior executives of GlaxoSmithKline. They're suspected of orchestrating $489 million in bribes to doctors and medical officials. The detained officials are Chinese nationals.

The Ministry of Public Security said GSK used 700 travel agencies to pay the bribes since 2007. 

China state TV last week broadcast a confession by GlaxoSmithKline's vice president of China operations, Liang Hong. He admitted paying off doctors, saying the bribe amounts -- up to thirty percent of the cost of the drugs -- were passed along to consumers.

Hussain was sent to China Friday, along with a company auditor and lawyer. In a meeting with the Ministry of Public Security, he apologized for the company's behavior.

He said GSK will reduce the price of medicines for Chinese patients following changes in the company's business model.

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Richard L. Cassin is the Publisher and Editor of the FCPA Blog. He can be contacted here.

Reader Comments (1)

GSK has a Code of Conduct pursuant to the Sarbanes-Oxley Act as well as a VP Ethics & Governance. This is a nightmare for any company doing business globally where the actions of a few locally engaged rogue employees can wreck the company’s image. That is why ethics and compliance training is essential in overseas subsidiaries to avoid corporate relativism and this training must cover respecting local anti-bribery and anti-corruption laws. If I was a share-holder, I’d be concerned at what sort of creative accounting had been used to hide the bribes in its balance sheet. It reminds me of the Siemens bribery scandal of the last decade. If I was a consumer, I’d be worried that if GSK doesn’t have the same high conduct standards wherever it operates, it might be cutting corners locally on the quality control standards for its drugs and vaccines.
July 28, 2013 | Unregistered CommenterMike Baker
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