GlaxoSmithKline's Spin Doctoring Doesn't Cure Corruption Problems
Andrew Witty, GlaxoSmithKline GSK -1.81%’s CEO, has been a busy man over the past couple years, taking every opportunity to convince the public that the company has reformed its culture and marketing practices.
But despite the full-on PR campaign, claims continue to surface about Glaxo using bribes to induce doctors to prescribe Glaxo drugs. Allegations of Glaxo’s bribery in China have hung over the company for nearly a year, and just recently similar concerns have been raised publicly about the company’s marketing practices in Poland, Iraq, Jordan and Lebanon – in all, a list that is becoming as long as an Amazing Race itinerary.
It has been less than two years since Glaxo paid the US government a record-setting $3 billion to settle a range of fraud and bribery allegations, including allegations that it paid kickbacks to doctors to prescribe Glaxo drugs and that it marketed many of its drugs for unapproved uses, making unsubstantiated claims about results. (A number of those allegations were raised by whistleblowers my firm represented.)
If the latest allegations are true, Andrew Witty will need to work overtime to dispel the conclusions that Glaxo simply “off-shored” illegal sales tactics first developed in the United States and that the pharma giant continues to foster a culture where bribery and kickbacks are considered standard sales practices.
CEO Witty promised in 2012 that GSK would make “displaying integrity in everything we do” a priority. However, the temptation of rapidly growing markets in Asia, the Middle East and Europe may have proven too difficult to resist. After all, it’s harder to convert “integrity” into rising share prices than it is to boost profits through questionable business practices.
The flood of bribery allegations is a test even for Glaxo’s professional spin doctors who, rather ironically, try to distract the public from bad news on the ethical front by announcing the company’s latest steps to reinvent itself as an ethical business venture.
For example, prior to its November 2011 announcement that the company would pay $3 billion to resolve the U.S. liabilities, Glaxo moved to pre-empt the bad news by announcing it was changing its US sales representatives’ compensation structure so that they would no longer be rewarded based on the volume and value of prescriptions sold. Such incentive-based compensation is considered to encourage illegal practices that drive sales.
But as the latest alleged bribery revelations suggest, limiting those changes to the US sales force left the rest of the world – including Glaxo’s most rapidly growing markets – open to questionable practices encouraged by incentive compensation structures that Glaxo failed to change outside the US.
In 2013, dogged by numerous media stories that it was bribing doctors in China to prescribe its drugs, Glaxo tried to blunt the fallout by belatedly announcing that all of its sales representatives worldwide would be compensated under the same terms as its US sales force, replacing financial incentives based on sales with ones based on the quality of service sales reps provide doctors and other healthcare providers.
Then in March, a top Glaxo official said in a media interview that Glaxo would hire doctors in-house to market its drugs, rather than pay physicians to speak to other doctors about its products. Within just a few weeks, like clockwork, allegations of GSK bribing physicians in Iraq, Jordan, Lebanon and Poland surfaced.
One gets the feeling that Glaxo’s compliance efforts are geared more to pre-empting bad news than they are to making meaningful and effective changes to its business culture. Glaxo’s piecemeal approach to compliance holds back on clearly needed wholesale changes while the executive suite waits for the next investigation of unethical conduct to crop up.
With Glaxo’s recent history, it is hard to keep a straight face when reading the company’s statement responding to the latest bribery allegations involving Jordan and Lebanon. Glaxo declares: “We are confident in our processes and controls and that we do not have a systemic issue with unethical behavior in GSK.”
If Glaxo truly doesn’t recognize that bribery allegations in multiple countries around the globe add up to a “systemic issue,” then the company has even bigger management problems than it seems. In that case, GSK and Andrew Witty should be prescribed a full dose of reality – with unlimited refills.