British drug company GlaxoSmithKline has been caught in the middle of a serious bribery scandal that could affect its long-term outlook in China. The company has been accused of bribing thousand of Chinese doctors using ‘travel agencies,’ which paid out doctors in cash, expensive gifts, and other luxuries.
Chinese police and economic investigators claim to have extensive proof of the UK-based firm’s involvement in the bribery scandal, which involved several high-level GlaxoSmithKline executives In China. Investigators claim that the evidence includes indicators of foreign companies being involved in the scam as financial partners.
Four GSK executives are currently under house arrest in China, but have not been charged with any crimes. While most of the executives arrested by investigators in the case are Chinese, one British GSK executive has been forbidden from leaving the country as investigations into his role continue.
GlaxoSmithKline’s UK operations, on the other hand, expressed surprise regarding the investigation. The drug maker, Britain’s largest pharmaceutical firm, hadn’t any knowledge that it was being investigated by Chinese police until its Shanghai office was raided late last month.
The company was, however, alerted to unethical practices amongst its sales reps in early February, when an investigation claimed that some executives used gifts and cash payments to encourage doctors to make prescriptions. GSK launched its own investigation and released a statement claiming that the claims were false.
The Chinese investigation, however, could reveal the extent of the bribery, which many believe will cause irreparable damage to the company’s image both in China and abroad. Chief executive Sir Andrew Witty will be flying to China this week as part of an internal investigation into the group’s bribery allegations in China.
GlaxoSmithKline has commented on the case, noting that although it admits that the fraud occurred, it believes that the total amount of bribery involved in the scandal is significantly less than the alleged 3-billion renminbi figure. GSK announced that, like the Chinese police, it also has desires of ‘rooting out corruption’ in the industry.
