LONDON/SHANGHAI: British drugmaker GlaxoSmithKline said yesterday some of its executives in China appeared to have broken the law in a bribery scandal, as it promised changes in its business model that would lower the cost of medicine in the country.
GSK is the latest in a string of multinationals to be targeted by Chinese authorities over alleged corruption, price-fixing and quality controls.
Chinese police visited the Shanghai office of another British drugmaker, AstraZeneca, a company spokeswoman said yesterday. They arrived on Friday and took away a sales representative for questioning, she said.
Health Minister Li Bin maintained the pressure on the drugs industry by stating that her department would place people and companies guilty of bribery on a black list and punish them.
GSK’s head of emerging markets, Abbas Hussain, said his company had zero tolerance for employees who broke the law.
“Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls, which breaches Chinese law,” he said in a statement.
Hussain, sent to China last week to lead GSK’s response to the crisis, held a meeting with the Ministry of Public Security at which he also promised to review GSK’s business model.
“Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients,” Hussain added.
Britain’s biggest drugmaker gave no details on the changes or the extent of price cuts — but the move addresses a key issue for Beijing, which launched a probe into pricing at 60 local and international drug firms earlier this month.
GSK supplies key products such as vaccines in China, as well as drugs for lung disease and cancer.
Chinese police, who have detained four Chinese executives from GSK, last week accused the firm of bribing officials and doctors to boost sales and raise drug prices by funnelling up to 3 billion yuan ($489m) to travel agencies.
GSK has called the allegations “shameful”.
Last week, Chinese officials also visited the Shanghai office of Belgian drugmaker UCB. The latest visit to AstraZeneca shows authorities are spreading the net, although AstraZeneca described the case as a local police matter.
“We believe that this investigation relates to an individual case and while we have not yet received an update from the Public Security Bureau, we have no reason to believe it’s related to any other investigations,” the spokeswoman said.
In a statement, China’s Ministry of Public Security said GSK’s Hussain, who was dispatched to China last week by CEO Andrew Witty, apologised for the scandal during the meeting.
Witty will detail what action the drugmaker is taking in response to the bribery allegations when he presents quarterly results tomorrow, sources said.
GSK’s intention to cut the price of its medicines in China would be in line with how other foreign companies have responded to pressure from Beijing. European food groups Nestle and Danone said they would cut infant milk formula prices in China after Beijing launched an inquiry into the industry. REUTERS
