China details bribery claims against GlaxoSmithKline as four senior executives detained

Chinese police on Monday disclosed further details of its investigation into GlaxoSmithKline, revealing that company staff in the country paid bribes to officials and doctors through travel agencies to boost sales and to increase drug prices. Gao Feng, head of the economic crimes investigation unit at the Ministry of Public Security, suggested that since 2007 the drugmaker had transferred as much as 3 billion yuan ($489 million) to around 700 travel agencies and consultancies.

"We have sufficient reason to suspect that these transfers were conducted illegally," Gao said, adding "you could say the travel agencies and [GlaxoSmithKline] were criminal partners." Gao indicated that four senior Chinese executives from the drugmaker had been detained as part of the probe. According to Xinhua, the executives are Liang Hong, vice president and operations manager of GlaxoSmithKline China, human resources director Zhang Guowei, legal affairs director Zhao Hongyan and business development manager Huang Hong.

Last week, the Ministry of Public Security said that some GlaxoSmithKline executives had admitted to corruption in the county, with later reports suggesting that at least 30 company employees, including five or six executives, had been placed under house arrest. Xinhua noted that the four detained executives are all Chinese nationals.

The drugmaker previously indicated that 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. GlaxoSmithKline said Monday it was "deeply concerned and disappointed" by the "shameful" allegations, adding that such behaviour would breach the company's "systems, governance procedures, values and standards."

"We will cooperate fully with the Chinese authorities in the investigation of these new allegations," GlaxoSmithKline noted, adding "we will take all necessary action required by the outcome of this investigation." The company also indicated that it was reviewing all third-party agency relationships, had stopped using travel agencies that have been identified in the investigation and was "conducting a thorough review of all historic transactions related to travel agency use."

According to the People's Daily newspaper, GlaxoSmithKline is alleged to have collaborated with travel agencies to funnel bribes to doctors and officials by creating fake "conference services" as expenditure for the company in order to misappropriate funds, some of which would then be spent on bribes. Commenting on the case, Yang Zhaodong of law firm King & Capital said "the police would not usually reveal the details of cases they are handling ... they usually wouldn't reveal so much information before a final judgment is handed down." Zhaodong added "if they are already revealing such information, it means that they feel they have a fairly complete set of evidence."

Gao also noted that during its investigation it had uncovered information that pointed to similar money transfers made by other multinational pharmaceutical companies. "We haven’t [yet] ascertained whether these were illegal activities," Gao remarked.

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