A Chinese court has fined GlaxoSmithKline (GSK) £297m – a record in the country – for bribing doctors and hospital officials to use its products.
The pharmaceutical firm confirmed the penalty imposed by the Changsha Intermediate People’s Court in Hunan Province, saying it accepted that illegal activities took place and the fine would be paid through existing cash resources.
The Chinese state news agency, Xinhua, reported that Briton Mark Reilly, the former head of GSK in China, and other executives faced jail terms.
However, a GSK source told Sky News that Reilly was to be deported after being handed a three-year suspended sentence.
The London-listed firm’s statement said the court found that “GSK China Investment (GSKCI)… offered money or property to non-government personnel in order to obtain improper commercial gains.
“The illegal activities of GSKCI are a clear breach of GSK’s governance and compliance procedures; and are wholly contrary to the values and standards expected from GSK employees.
“GSK has published a statement of apology to the Chinese government and its people on its website.
“GSK has co-operated fully with the authorities and has taken steps to comprehensively rectify the issues identified at the operations of GSKCI.
“This includes fundamentally changing the incentive programme for its salesforces (decoupling sales targets from compensation); significantly reducing and changing engagement activities with healthcare professionals; and expanding processes for review and monitoring of invoicing and payments.”
GSK chief executive Sir Andrew Witty added: “Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK.
“We have and will continue to learn from this. GSK has been in China for close to a hundred years and we remain fully committed to the country and its people.”
The investigation took a number of twists with a British man, who was hired as an investigator by GSK, being jailed for two-and-a-half years in August.
Chinese authorities claimed Peter Humphrey illegally obtained Chinese citizens’ personal information and sold it to companies including GSK.
GSK hired him after an anonymous email containing a sex tape of Reilly and his Chinese girlfriend was sent to senior management in January last year.
The email alleged corrupt practices in GSK’s China operation.
GSK’s ethical standards have also been called into question in Lebanon, Iraq, Jordan, Syria and Poland.
Its share price was almost 0.6% higher in the wake of the announcement.
GSK’s Letter Of Apology To Chinese
GSK’s statement of apology to the people of China:
Following a comprehensive investigation by the Chinese judicial authorities, GSK China Investment Co Ltd (GSKCI) has been identified according to Chinese law to have offered money or property to non-government personnel in order to obtain improper commercial gains, and has been found guilty of bribing non-government personnel.
GSK plc fully accepts the facts and evidence of the investigation, and the verdict of the Chinese judicial authorities.
Furthermore, GSK plc sincerely apologises to the Chinese patients, doctors and hospitals, and to the Chinese Government and the Chinese people.
GSK plc deeply regrets the damage caused.
GSK plc also apologises for the harm caused to individuals who were illegally investigated by GSKCI.
The illegal activities of GSKCI are a clear breach of GSK plc’s governance and compliance procedures; and are wholly contrary to the values and standards we expect from our employees.
It is deeply disappointing that these issues were not identified and addressed.
GSK plc has reflected deeply and learned from its mistakes, has taken steps to comprehensively rectify the issues identified at the operations of GSKCI, and must work hard to regain the trust of the Chinese people.
Today, GSK plc makes a further commitment to the Chinese government and people that GSKCI will take tangible actions to establish itself as a model for reform in China’s healthcare industry: by continuing to invest in China and supporting China’s scientific development; and by further development of innovative new medicines and vaccines for diseases prevalent in China.
GSKCI will also increase access to its products in both city and rural areas of China through greater expansion of production and through price flexibility.
This long-term development strategy of GSK plc will promote the future health and well-being of the Chinese people, and positively contribute to China’s economic and social development.
Source: Sky News