China Details Allegations Against Glaxo

http://www.nytimes.com/2013/07/27/business/global/china-details-allegations-against-glaxo.html

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SHANGHAI — The Chinese government released more details on Friday about its accusations involving GlaxoSmithKline, which has been rocked in recent weeks by a bribery and corruption scandal at its unit in China.

The company also late Thursday named Hervé Gisserot, one of the company’s top executives in Europe, to succeed Mark Reilly as the head of its operations in China. Mr. Reilly left the country for London after the company’s offices were raided by the police in late June.

The company said Mr. Reilly was not a target of the bribery and corruption investigation and would remain at the company to help conduct an internal review of the China operation.

On Friday, new details in the case were presented in interviews published by Xinhua, the official state-run news agency in China.

According to those reports, several Glaxo employees have confessed to bribing doctors with gifts, travel, lecture fees and cash bonuses to persuade them to prescribe more of the company’s drugs. In some cases, the Glaxo employees reportedly said, doctors were compensated for conferences or lectures that never took place.

One 35-year-old Glaxo employee told Xinhua she regularly visited doctors’ offices to offer assistance and even “to meet their sexual desires,” according to the report.

The government has said it has detained four Chinese-born senior executives from Glaxo’s China operations. Xinhua reported Friday that 18 more Glaxo employees have been held in the city of Zhengzhou, in Henan Province in eastern China.

Although no formal charges have yet been filed against Glaxo or its employees, the scandal has been a huge embarrassment for the company in one of its fastest-growing markets.

Glaxo’s top executives in London have apologized and pledged to cooperate with Chinese investigators.

In a conference call after the company released its earnings on Wednesday, its chief executive, Andrew P. Witty, called the accusations against his company’s China operations “deeply disappointing.”

Glaxo also said on Friday that Steve Nechelput, a British national and the company’s head of finance in China, was no longer being barred by the authorities from leaving the country.

The scandal appears to be part of a broader crackdown on bribery and corruption in China. The Chinese government has sent investigators to other global pharmaceutical companies operating in the country. Officials have also begun to review drug pricing policies and question doctors and hospital employees about whether they have accepted bribes.

In Glaxo’s case, the government accused the company of using travel agencies to help funnel bribes to doctors, hospitals and government officials. The company was also accused of committing tax fraud and cheating consumers with artificially high drug prices.

In interviews with the state-run news media, Glaxo sales representatives said they had been trained in how to increase drug sales by bribing and entertaining doctors and that some of this was done through the use of fake invoices.

One hospital employee told Xinhua that a Glaxo representative, identified only by the surname Wang, offered bribes for business.

“After we got familiar, Wang visited me during festivals, treated me to dinner and bought me gifts,” the hospital employee said. “When our department held events, Wang also paid the bill.”