GlaxoSmithKline CEO Responds To Chinese Corruption Allegations

The New York Times reports GlaxoSmithKline CEO Andrew Witty said in a conference call on his company’s second-quarter earnings Wednesday that accusations of bribery and corruption by Glaxo officials in China were “deeply disappointing,” but said senior executives in London were unaware of any fraud taking place, and the executives in China were operating “outside of our system of controls.” He told reporters, “Clearly they are shameful allegations if they are true.” He also said the company was cooperating with the Chinese government and has “opened up channels” to the British and US governments. Witty attempted to distance the company’s headquarters in London from the scandal, claiming they “knew nothing” about the alleged bribery.

On the front of its Marketplace section, the Wall Street Journal adds that Glaxo officials have responded in different ways to the current corruption allegations and ones made in January who notified company authorities about the same bribery by an anonymous tipster. This individual informed Glaxo’s board and senior executives via email that the company’s sales force in China engaged in corrupt practices between 2004 and 2010. Witty said that the allegations made by the tipster and Chinese officials are different, even though a review by the Journal indicates there was an amount of overlap in the accusations.

Bloomberg News reports Witty also announced Glaxo has “commissioned an independent review to investigate the root cause of alleged fraudulent behavior among senior executives in China.” Witty said the company is “absolutely committed to rooting out corruption” and intends to get “to the bottom of what’s happened here.” The company’s “drug and vaccine sales in China rose 14% in the second quarter to 212 million pounds ($325 million),” even though the country’s sales only account for less than 3.5% of Glaxo’s global pharmaceutical sales.

Reuters also reports on this story, covering how the scandal will affect the company’s financial performance.

More Pharmaceutical Companies May Be Involved In Scandal

Reuters reports that the Xinhua news agency said that more pharmaceutical companies could be implicated in the corruption scandal, but declined to name any specific firms or hospitals. The English-language commentary noted that Chinese authorities are committed to stopping the malpractice and reform the nation’s health system.

The Philadelphia Inquirer also points out in its “Philly Pharma” blog that the Chinese government has questioned executives from other major drug companies in recent days.

Glaxo Official In China Hints Company May Lower Drug Prices

Bloomberg News reports Abbas Hussain, Glaxo’s president overseeing emerging markets, said in a statement that appears on the website of China’s Ministry of Public Security, that Glaxo supports “the efforts of the Chinese authorities in their reforms of the medical sector” and promised its medications will be “more affordable to Chinese patients.” The company’s anti-corruption probe of international pharmaceuticals is being driven by a “populist campaign to drive down drug prices as China” and to expand “health care to the poor and uninsured.” One analyst believes that in addition to a fine and legal repercussions, “Glaxo may also give further price discounts as a means of goodwill and reparation.”

Glaxo May Have Broken Corporate Integrity Agreement

Contributor Ed Silverman writes in Forbes that GlaxoSmithKilne’s corruption probe in China is generating “sensational headlines” but the controversy may cause “trouble” for the British pharmaceutical. The drugmaker signed a Corporate Integrity Agreement last year as part of its $3 billion settlement to “resolve civil and criminal charges of selling drugs for unapproved uses and withholding clinical trial data.” Such a violation could cause HHS’ Office of Inspector General to “seek to exclude the drugmaker from contracts with federal healthcare programs, such as Medicare and Medicaid.” The worst-case scenario for the company is unclear, because the Federal government is “loathe to pursue an entire company,” especially one that “sells a plethora of medicines that, in some cases, may not be easily afforded or obtained from other suppliers.”