Friday, April 04, 2014

GlaxoChinaGate - Let the reeducation begin

GlaxoSmithKline Plc (GSK) fired some workers and withheld bonuses in China after a corruption investigation begun last year spurred a deeper review of employee expense claims, a person familiar with the matter said.

The firings involved a very small proportion of Glaxo’s 7,000-person workforce in China, said the person, who asked not to be named because the process is confidential. The Chinese newspaper 21st Century Business Herald reported April 2 that more than 150 people had been fired, including sales staff. The newspaper cited a sales representative who used a pseudonym.

“We are determined to ensure our processes are being properly followed and will thoroughly investigate where our monitoring has raised potential issues,” London-based Glaxo said in an e-mailed statement today.

The firings come amid a global and highly publicized push by Glaxo to burnish its reputation by changing the way it markets drugs. Chinese authorities alleged in July that Glaxo sales people bribed doctors, hospitals and officials. The company said in December it is changing the way it compensates salespeople and will stop paying doctors for giving speeches and attending medical meetings.

In China, Glaxo stepped up its routine monitoring of employee expense claims after the government investigation. When it found potential issues, it reviewed them further and “withheld incentive payments where appropriate,” according to the company’s statement.

Glaxo said it continued to pay base salaries for all employees under investigation.

Drug companies may find that the changes in marketing practices continue to hurt their revenue in China, Iris Wang, an analyst at Credit Suisse Group AG in Hong Kong, said in a phone interview today.

“After GSK, multinational pharma have to further strengthen their internal compliance,” she said. “But my observation is that overall academic promotion and doctor education remains quite low after the GSK scandal of 2013. The reduced doctor education will lead to lower revenue growth than expected for new drugs, because new drugs require more doctor education.”

For Related News and Information: Glaxo to Bring Doctors In-House as Educational Speakers

To contact the reporter on this story: Naomi Kresge in Berlin at

To contact the editors responsible for this story: Phil Serafino at Kristen Hallam

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