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GlaxoSmithKline Plc, the drugmaker being investigated in China for alleged bribery, is the latest foreign company to come under government scrutiny as Premier Li Keqiang tries to assuage anger over consumer safety breaches.
A senior Glaxo finance executive in Shanghai and employees in Beijing were detained as part of a corruption investigation, the South China Morning Post said yesterday, citing an unidentified person from Shanghai's drug industry. Simon Steel, a Glaxo spokesman in London, declined to comment today on whether any staff have been arrested or detained.
China's government reorganised its Food and Drug Administration in March to intensify scrutiny of safety breaches. It's too early to tell if the Glaxo investigation is part of an industry-wide crackdown, said Ronan Diot, Beijing-based chairman of the legal working group at the European Union Chamber of Commerce in China.
"In recent months, we've seen more actions and police investigations in relation to corruption in companies in China by Chinese authorities," Diot said in an interview. "It sometimes happens that people are detained for a few hours or a few days."
Senior executives at Glaxo China are suspected of economic crimes and are being investigated by Changsha public security officials, the city's police said June 28 on its official blog, without elaborating. The probe, which began June 27, isn't affecting Glaxo's operations in China, Steel said.
Anonymous tipster
Glaxo rose 0.3 per cent at 9.58 am in London, where the company is based. The stock has gained 28 per cent this year including reinvested dividends, compared with a 17 per cent return in the Bloomberg Europe Pharmaceutical Index.
An anonymous tipster made allegations that Glaxo's sales staff in China was involved in widespread bribery of doctors to prescribe medication, in some cases for unauthorised uses, between 2004 and 2010, the Wall Street Journal reported June 13. Glaxo found no evidence of wrongdoing after a four-month probe into a whistle-blower's claims of corruption and bribery, the company said at the time.
The same week, Glaxo said it fired the head of Chinese research and development after discovering that a paper the former employee helped write for the journal Nature Medicine contained data that had been misrepresented. A second individual submitted his resignation and three others have been placed on administrative leave, pending a final review, the company said in a statement June 10 on its website.
"We are still unclear on what the precise nature of the investigation is," Steel, the Glaxo spokesman, said in an interview yesterday, referring to the current investigation. "We don't know if it's connected to the whistle-blower's bribery and corruption allegations."
Glaxo is one of several drugmakers that have been contacted by US authorities in an industry-wide probe of whether the companies engaged in violations of the Foreign Corrupt Practices Act. The investigation, which began in 2010, covers practices in countries including China, according to Glaxo's 2012 annual report. The company said it's cooperating with the Securities and Exchange Commission and the Department of Justice.
In a separate US probe, Glaxo last year agreed to pay $3 billion to resolve criminal and civil allegations it illegally promoted prescription drugs and failed to report safety data. At the time, the settlement was the largest ever in a health-care fraud case.
"On behalf of GSK, I want to express our regret and reiterate that we have learned from the mistakes that were made," Chief Executive Officer Andrew Witty said in a statement at the time. "Since I became CEO, we have had a clear priority to ingrain a culture of putting patients first."
