GlaxoSmithKline says executives may have broken Chinese law; police visit second drug maker

BEIJING, China – GlaxoSmithKline, target of a bribery probe in China, said Monday some executives may have broken the law, while rival drug maker AstraZeneca said police are investigating one of its sales representatives.

GSK said its president for Asia-Pacific and emerging markets met with Chinese police officials who are investigating whether GSK employees bribed doctors and hospital administrators to prescribe its drugs.

“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,” the executive, Abbas Hussain, said in a statement.

Four employees of GSK China, including a vice-president, have been detained, according to police. The company says its China finance director is barred from leaving the country but is not detained.

Also Monday, AstraZeneca said police in Shanghai visited its office there “regarding a local police matter focused on a sales representative.”

“We believe that this investigation relates to an individual case,” the company said in a statement. “We have no reason to believe it’s related to any other investigations.”

AstraZeneca “does not tolerate any illegal or unethical conduct,” the company statement said.

“We have a strict global policy on ethical interactions, which all our employees and third parties acting on our behalf must follow,” it said. “All AstraZeneca China employees and third parties on AstraZeneca’s behalf are required to strictly comply with these guidelines in the conduct of business.”

The new Chinese leadership that took power in November has promised to improve China’s health system and rein in surging costs of medicine and medical care that are fueling public frustration.

Police cited by state media have said bribery by Glaxo employees might have pushed up the cost of medication for patients.

Police say the Glaxo employees funneled as much as 3 billion yuan ($490 million) through travel agencies and consulting firms to hide the source of bribes, according to Chinese news reports. Investigators have not made clear how much of that money was paid as bribes.

The official Xinhua News Agency said last week the employees appeared to have used that strategy to evade GlaxoSmithKline PLC’s internal anti-bribery controls.

Hussain’s statement gave no additional details of the investigation.

“I want to make it very clear that we share the desire of the Chinese authorities to root out corruption wherever it exists,” said Hussain in the statement.

“We fully support the efforts of the Chinese authorities in their reforms of the medical sector and stand ready to work with them to make the changes for the benefit of patients in China,” Hussain said. “We will actively look at our business model to ensure we make a significant contribution to meeting the economic, health care and environmental needs of China and its citizens.”

Also Monday, The Financial Times newspaper reported Shanghai police have detained an anti-fraud investigator who worked for GSK. The newspaper identified him as Stephen Humphrey, a British national who operates a firm in Hong Kong.

The British Embassy in Beijing confirmed that a British national was detained July 10 in Shanghai but said it could give no other details. A Shanghai police spokesman, who would give only his surname, Xu, said he had no information on any detention of a Briton.

Last week, China’s drug regulator launched a crackdown on misconduct in its pharmaceutical market, though it gave no indication it was linked to the GlaxoSmithKline probe.

The State Food and Drug Administration said the campaign is aimed at stamping out unauthorized drug production, improper online drug retailing and sales of fake traditional Chinese medicines.

Meanwhile, the Cabinet’s planning agency is investigating production costs at 60 Chinese and foreign pharmaceutical manufacturers, according to state media, possibly a prelude to revising state-imposed price caps on key medications.