At least four senior executives in GlaxoSmithKline’s (GSK) Chinese operations have been detained by police in the ongoing investigation into bribery and corruption, according to news reports.
Reports of GSK being under scrutiny for “economic crimes” surfaced earlier this month and came to a head last week after the Ministry of Public Security published allegations that executives at the company had confessed to using bribes and kickbacks on a massive scale to promote the use of its medicines in China.
A report in the Telegraph newspaper says the head of the Ministry’s economic crime unit Gao Feng has accused the pharma company of dispensing 3bn Chinese renminbi ($489m) in bribes since 2007, using a network of hundreds of middlemen – mostly travel agencies and consultancies – to funnel cash to health officials and doctors.
GSK is also accused of tax violations related to activities such as the issuance of fake VAT receipts, according to a statement published on the Ministry website last week, while China’s state-owned Xinhua news agency has reported that senior executives also received kickbacks from travel agencies to ensure the business relationships were continued.
The Telegraph article suggests that the detained executives are four Chinese nationals, although other sources claim that the number of executives being held could be as many as six and include at least one UK citizen. It also reports that, all told, some 30 GSK employees are being held under house arrest.
Meanwhile, GSK’s general manager for China and Hong Kong, Mark Reilly, reportedly left the country on June 27 and has yet to return, although a company spokesperson told PMLiVE this travel was in the course of his usual duties.
The company would not comment further on any individual company executives, but said it would be “reviewing all third party agency relationships”, and placing an immediate stop to the use of travel agencies that have been identified in the investigation.
“We are conducting a thorough review of all historic transactions related to travel agency use,” said the spokesperson, adding: “We are deeply concerned and disappointed by these serious allegations of fraudulent behaviour and ethical misconduct by certain individuals at the company and third-party agencies”.
GSK said last week said it had carried out an internal investigation – based on allegations from a whistleblower – and found no evidence of wrongdoing. The spokesperson said that this related to specific claims – separate to the ongoing investigation being brought by the Chinese authorities – adding the company has pledged to work with the investigating unit “to root out corruption”.
“These allegations are shameful and we regret this has occurred,” he added.
By contrast, China’s Ministry of Public Security Gao told a press briefing that “bribery is a core part of the activities of the company”, and further alleged that GSK acted as a “ringleader” in the scheme. He also suggested the probe could be widened to include other drug companies.
Around 60 pharma companies are already under scrutiny by the Chinese National Development and Reform Commission (NDRC) in an inquiry into the production and distribution costs and prices of medicines sold on the domestic market.
This article was updated on July 15, 2013, to add comments from GSK