GlaxoSmithKline pledges reform after China bribery scandal

A senior executive from GlaxoSmithKline told Chinese police the British drugmaker will reform its business in the country in the wake of a bribery scandal, as the Chinese crackdown on corruption in the drugs industry widened.

GSK's president for emerging markets Abbas Hussain, who was sent to China to deal with the scandal, made the pledge in a meeting with officials.

'We will actively look at our business model to ensure we make a significant contribution to meeting the economic, health care and environmental needs of China and its citizens'—Abbas Hussain, GlaxoSmithKline

Chinese police officials are investigating whether GSK employees bribed doctors and hospital administrators to prescribe its drugs. Four employees have been detained.

"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," Hussain said in a statement.

AstraZeneca investigated in Shanghai

The admission that GSK executives may have broken the law comes as rival drugmaker AstraZeneca said police are investigating one of its sales representatives.

AstraZeneca said police in Shanghai visited its office there "regarding a local police matter focused on a sales representative."

China announced a crackdown last Wednesday on misconduct in its drug market, including unauthorized drug production, improper online drug retailing and sales of fake traditional Chinese medicines.

The country has suffered repeated scandals over fake or shoddy medications, some of which caused deaths and injuries. Manufacturers, markets, clinics and online stores are to come under investigation over the next six months, the State Food and Drug Administration said.

The new leadership is also concerned over the rising cost of drugs, which may be a factor in the GSK case.

Police say the Glaxo employees funneled as much as three billion yuan ($506 million Cdn) through travel agencies and consulting firms to hide the source of bribes, according to Chinese news reports. The employees appeared to have evaded GlaxoSmithKline PLC's internal anti-bribery controls.

Global policies against corruption

Hussain said GSK is supportive of China’s efforts to root out corruption.

"We fully support the efforts of the Chinese authorities in their reforms of the medical sector and stand ready to work with them to make the changes for the benefit of patients in China," he said.

"We will actively look at our business model to ensure we make a significant contribution to meeting the economic, health care and environmental needs of China and its citizens."

AstraZeneca said it also has an international policy prohibiting illegal or unethical conduct..

"We have a strict global policy on ethical interactions, which all our employees and third parties acting on our behalf must follow," the company said in a statement. "All AstraZeneca China employees and third parties on AstraZeneca's behalf are required to strictly comply with these guidelines in the conduct of business."

The British-Swedish drugs company said it believes a single individual in its sales force is under investigation.