GSK Head Ordered Bribery Says China Police

GSK Head Ordered Bribery Says China Police

China initiated sweeping probes into alleged malpractice by foreign companies in various sectors, and against the backdrop of an anti-graft campaign backed by President Xi Jinping to root out official corruption.

BEIJING -- Chinese authorities have accused a top GlaxoSmithKline (IW 1000/100) executive of ordering employees to commit bribery, following a 10-month probe into the embattled British drugmaker, state media said on Wednesday.

Police in the central city of Changsha said Mark Reilly, GSK's former head of China operations, had "pressed his sales teams to bribe hospitals, doctors and health institutions" in order to gain billions of dollars in illegal revenue, the official Xinhua news agency said.

Reilly and two other GSK executives, Zhang Guowei and Zhao Hongyan, also allegedly bribed Chinese government officials in Beijing and Shanghai, Xinhua said.

Changsha police have handed the case over to prosecutors.

GSK said that representatives of the company had met with Chinese police on Wednesday and "will continue to fully co-operate with the authorities in this matter."

"We take the allegations that have been raised very seriously," the company said. "They are deeply concerning to us and contrary to the values of GSK."

Last June, Chinese authorities detained four Chinese GSK executives on allegations that employees used nearly $500 million in bribes to boost sales.

Reilly, a British national, left China days after the detentions and investigation were announced.But he returned within weeks in order to "help further with the investigation," GSK said at the time, and has reportedly been barred from leaving the country since. A London-based GSK spokesman declined to comment when asked about Reilly's current whereabouts.

Probes into Foreign Firms

China's healthcare sector is widely considered to be riddled with graft, given the opaque tendering system for drugs and doctors' low salaries.

The inquiry was launched at a time when China initiated sweeping probes into alleged malpractice by foreign companies in various sectors, and against the backdrop of an anti-graft campaign backed by President Xi Jinping to root out official corruption.

In addition to GSK, pharmaceutical giants including Merck, Novartis and Baxter have been involved in a far-reaching pricing probe, while Sanofi is also being investigated over allegations that it bribed more than 500 doctors.

Foreign baby formula firms have also been targeted. Last August, China fined six manufacturers $100 million for price-fixing, among them New Zealand's Fonterra, the world's biggest dairy company.

The moves have drawn criticism from some analysts who argue that foreign firms have become convenient scapegoats for authorities facing consumer anger over high prices and safety scares among domestic companies.

A total of 46 suspects are involved in the GSK case, Xinhua said, and dozens of the firm's local employees have been arrested.

The agency previously reported that company staff had offered bribes to officials and doctors, with physicians allegedly earning a 7% to 10% cut from sales of GSK drugs they prescribed, Xinhua previously reported.

GSK staff were also suspected of taking kickbacks from travel agencies to organize conferences, some of which were fake.

Reilly and other GSK executives "tried every effort to cover the illegal sale practice during regular checks by regulatory authorities," Changsha police said, according to Xinhua.

Also being held are foreign fraud investigator Peter Humphrey and his wife, Yu Yingzeng, who were detained in Shanghai last summer on charges of illegally obtaining personal information.

Humphrey is the British founder of Shanghai-based risk advisory firm ChinaWhys, while Yu, an American citizen, worked as its general manager.

The firm did work for GSK, although the connection went unmentioned by state broadcaster China Central Television (CCTV) last summer when it paraded the duo after their arrest and aired a televised "confession" by Humphrey.

-Felicia Sonmez- AFP

Copyright Agence France-Presse, 2014

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