GlaxoSmithKline has fired some employees in China in recent months after the company stepped up the monitoring of staff expense claims, news sources citing a person familiar with the matter reported Friday. The drugmaker confirmed that it regularly tracks employee expenses globally and has "increased this monitoring in China," where authorities launched an investigation last year into bribery allegations implicating GlaxoSmithKline staff.
The company, which has a total Chinese workforce of about 7000, declined to provide details about the dismissals, although a report suggested that about 1000 medical representatives were found to have committed compliance violations, with more than 150 employees terminated so far, including sales management staff. "Where we have found potential issues, we are thoroughly reviewing them and have withheld incentive payments where appropriate" GlaxoSmithKline said, adding that it has continued to pay base salaries, while employees who pass monitoring remain eligible for bonuses.
Chinese authorities alleged that GlaxoSmithKline employees had improperly transferred 3 billion yuan ($493 million) in bribes to doctors, hospitals and government officials, usually through travel agencies, and that some company executives even admitted to corruption in the country. The UK drugmaker has since reported that sales of prescription drugs and vaccines in China fell 61 percent in the third quarter of 2013, rebounding in the fourth quarter with a drop of 18 percent.
Meanwhile, CEO Andrew Witty stated last December that the company would provide an update on the investigation "quite soon." The drugmaker also announced later that month that it would abolish individual sales targets for all sales employees following the implementation of a similar programme in the US in 2011. Independent industry adviser George Baeder suggested that GlaxoSmithKline's overhaul of staff incentives could further hurt sales in the short term, but it puts the company on the right side of a global shift away from commission-based pay in the sector. "In the end, it could be a competitive advantage," he said, adding that GlaxoSmithKline "has been forced to develop innovative solutions…ahead of the others that will ultimately be forced to figure out new approaches as well."
A number of other drugmakers have faced greater scrutiny of their operations in China since the scandal surfaced, with Frost & Sullivan analyst Zhong Hongyue suggesting that medical representatives in the country have been very cautious about contacting doctors recently. He noted that even the number of legitimate promotion events has been reduced. However, other analysts and industry executives note that the sense of crisis appears to have faded with time. Bruno Gensburger, Sanofi's external affairs director in China, said "the market is back to its former abnormality," and that while "it has never been normal…it does seem to be more quiet now."
Last September, Novartis' Alcon unit revealed it was investigating allegations that the company used funds intended for post-marketing studies to bribe physicians in China, while Eli Lilly and Sanofi also announced probes regarding similar claims. Meanwhile, Novo Nordisk said Chinese officials visited one of its production facilities in the country, with similar disclosures made by AstraZeneca and UCB. Additionally, employees of Chinese drugmaker Sino Biopharmaceutical were detained this January by authorities as part of an investigation into alleged corruption.
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