Tuesday, July 02, 2013

GlaxoSmithKline Probe in China Follows Drug Safety Agency Revamp

GlaxoSmithKline Plc (GSK), the drugmaker being investigated in China for alleged bribery, is the latest foreign company to come under government scrutiny as Premier Li Keqiang tries to assuage anger over consumer safety breaches.

A senior Glaxo finance executive in Shanghai and employees in Beijing were detained as part of a corruption investigation, theSouth China Morning Post said yesterday, citing an unidentified person from Shanghai’s drugs industry. Simon Steel, a Glaxo spokesman in London, declined to comment yesterday on whether any staff have been arrested or detained.

An employee of GlaxoSmithKline (GSK) enters their office headquarters in Shanghai on July 1, 2013. Photographer: Peter Parks/AFP/Getty Images

China’s government reorganized its Food and Drug Administration in March to intensify scrutiny of safety breaches. It’s too early to tell if the Glaxo investigation is part of an industry wide crackdown, said Ronan Diot, Beijing-based chairman of the legal working group at the European Union Chamber of Commerce in China.

“In recent months, we’ve seen more actions and police investigations in relation to corruption in companies in China by Chinese authorities,” Diot said in an interview. “It sometimes happens that people are detained for a few hours or a few days.”

Senior executives at Glaxo China are suspected of economic crimes and are being investigated by Changsha public security officials, the city’s policy said June 28 on its official blog, without elaborating.

Anonymous Tipster

An anonymous tipster made allegations that Glaxo’s sales staff in China was involved in widespread bribery of doctors to prescribe medication, in some cases for unauthorized uses, between 2004 and 2010, the Wall Street Journal reported June 13. Glaxo found no evidence of wrongdoing after a four-month probe into a whistle-blower’s claims of corruption and bribery, the London-based company said at the time.

The same week, Glaxo said it fired the head of Chinese research and development after discovering that a paper the former employee helped write for the journal Nature Medicine contained data that had been misrepresented. A second individual submitted his resignation and three others have been placed on administrative leave, pending a final review, the company said in a statement June 10 on its website.

‘Still Unclear’

“We are still unclear on what the precise nature of the investigation is,” Steel, the Glaxo spokesman, said in an interview yesterday, referring to the current investigation. “We don’t know if it’s connected to the whistle-blower’s bribery and corruption allegations.”

China’s government is focusing on strengthening its health system, including stamping out corruption. Last week, Premier Li Keqiangurged changes that would ensure all citizens had access to a basic medical system. Last year, seven managers and directors of key public hospitals in Shenzhen were given jail sentences for taking kickbacks, China Daily reported in October.

Glaxo’s Beijing office was operating normally when called on this morning. A receptionist in the office, located on the city’s Fourth Ring Road, referred questions on the investigation to a spokeswoman in Shanghai.

China is the world’s fastest-growing major market for pharmaceuticals. Sales will expand an average of 21 percent annually through 2016, said Jason Siu, a health-care analyst with RHB OSK SecuritiesHong Kong Ltd.

“More demand for quality imported prescription drugs has been generated on the back of health care reform, urbanization and improving living standards in China,” Siu said in an interview. “The Chinese pharmaceutical space is still very attractive to both domestic and foreign drug companies.”


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