Chinese officials say GlaxoSmithKline staff admit to bribery, tax violations

Chinese officials announced Thursday that some GlaxoSmithKline executives admitted to corruption in the country after authorities uncovered evidence of bribery and tax law violations. "After initial questioning the suspects have admitted to the crimes, and the investigation is ongoing," the Ministry of Public Security added.

According to the ministry, a probe in Changsha, Shanghai and Zhengzhou found that GlaxoSmithKline tried to establish new sales channels and increase drug prices in China by directly bribing government officials, pharmaceutical industry associations and foundations, hospitals and doctors. "There are many suspects, the illegal behaviour continued over a long time and its scale is huge," the ministry said. GlaxoSmithKline staff also reportedly used fake receipts in unspecified tax law violations. Last month, police in Changsha disclosed they were investigating senior executives at GlaxoSmithKline.

In response to the news, the UK drugmaker said it is "willing to cooperate with the authorities in this inquiry," but indicated that "this is the first official communication...received from [China’s Public Security Bureau] in relation to the specific nature of its investigation." GlaxoSmithKline noted that it continually monitors its businesses to ensure they meet the company’s compliance procedures. "We have done this in China and found no evidence of bribery or corruption of doctors or government officials," the company said, adding "however, if evidence of such activity is provided we will act swiftly on it."

In June, GlaxoSmithKline said it found no evidence of wrongdoing after concluding a probe into allegations that the company's sales staff in China were involved in widespread bribery of doctors to prescribe drugs, in some cases for unauthorised uses, between 2004 and 2010. Earlier this week, the drugmaker confirmed that it is also investigating claims that sales staff used improper tactics to market Botox (onabotulinumtoxinA) in China.

Credit Suisse analyst Jo Walton noted that in 2012, China accounted for less than 3 percent of GlaxoSmithKline’s global sales, so the immediate impact of the latest news was unlikely to be that significant. However, Walton said the accusations could not be ignored, adding "emerging markets are seen as important for future growth and the China market is going to be one of the biggest markets in the world, and you have to grow in line with the market."

China's National Development and Reform Commission (NDRC) also recently launched a probe into production costs and prices charged at 60 foreign and Chinese pharmaceutical companies, including GlaxoSmithKline.

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