China Probes U.K.

Pharmaceutical Firm
GlaxoSmithKline After
Corruption Claims Aired
7/05/2013 @ 4:38AM

Police in China have reportedly detained an unknown number of

employees for U.K. pharmaceutical
giant GlaxoSmithKline GSK +0.33%amid allegations of improper
payments made to health officials. State media said Monday that
police in the city of Changsha were investigating senior management
at Glaxo for suspected economic crimes. Corruption cases are in
this vague category. The South China Morning Post reported
that Glaxo staff in Beijing, Shanghai and Changsha had been detained
since last week and that a foreign finance manager had been held in
Shanghai, the firms China headquarters. A call Monday to Glaxos
UK media relations office wasnt immediately returned.
Corruption is rampant in Chinas health system, according to
industry insiders. Public hospital budgets depend on commissions
from the sale of medicines and doctors low salaries are
supplemented by payments from patients and kickbacks from
equipment and drug suppliers. State news agency Xinhua reported
last year that a government initiative was underway to create a
national database of drug prices in order to prevent markups and
graft.
Last month Glaxo said that it had investigated complaints by an
internal whistleblower over alleged bribery of doctors in China. The
whistleblowers allegations, according to The Wall Street Journal,
which broke the story, included claims about fees paid to doctors,
both in kind and cash, and all-expense trips. The quid pro quo was
prescription of Glaxo-supplied drugs. In 2010 Glaxo disclosed it had
been contacted by the Justice Department and the SEC about its
overseas operations as part of a wider FCPA investigation into
pharmaceutical-industry business practices abroad, including in
China. In a regulatory filing last year, the company said the matter is
ongoing, the WSJ reported.
The company denied making improper payments in China. Over the
last four months, we have used significant resources to thoroughly
investigate each and every claim from this single, anonymous source

and have found no evidence of corruption or bribery in our China

business, it said last month in a statement. Glaxo has also run into
problems with its research facilities in China. It recently fired its head
of R&D over the misrepresentation of data in a 2010 report published
in Nature Medicine. Four other staff were fired or forced to take
leave. The company said it would retract the article from the
publication.