GSK China head arrested over bribery charges

A British man who headed-up GlaxoSmithKline’s troubled China business has been charged with two other executives on charges of bribery and corruption.

Mark Reilly and two Chinese executives, Zhang Guowei and Zhao Hongyan, have been charged by authorities in the countries on the suspicion of bribing officials in the industry and commerce departments of Beijing and Shanghai.

This is according to the official Xinhua news agency, quoting police in Hunan province.

“(GSK) departments offered bribes to hospitals and doctors as well as personnel to boost their sales. The money involved was in the billions of yuan,” a Ministry of Public Security official told a press conference in Beijing.

The charges carry a maximum sentence of life in prison in the case of bribery. Officials gave no specific details on the amount of bribes paid or exactly how much the company had illegally earned.

But last year Chinese officials accused GSK executives of laundering around three billion yuan ($482 million) to travel agencies to facilitate bribes to doctors and officials.

Reilly left China when the accusations were first made in July last year, but later voluntarily returned to co-operate with police.

Chinese officials made no mention of possible sanctions against GSK itself, although Xinhua said the firm had forged accounts, faked transactions to inflate revenue, pressed sales staff to engage in bribery and tried to cover its tracks.

The London-based firm’s revenue in China jumped to 6.9 billion yuan ($1.11 billion) in 2012 from 3.9 billion yuan in 2009, the first year that Reilly headed operations, Xinhua says.

Before the scandal, GSK’s China sales had risen 14% year-on-year in the three months to end-June, but revenue in the country plunged 61% in the third quarter and 29% in the final quarter of 2013 after the allegations surfaced.

Overall, the revenue coming from China only represents around 3% of the total of GSK’s business, but given its population and growth of a wealthy middle-class, the industry is keen to get a strong foothold in the country for future growth.

China is being particularly forceful with GSK, but there are also similar accusations against Novartis, Sanofi and Lilly.

It is believed that the harshness of the Chinese authorities has come as a result of wanting to drive down medicine prices, which have been growing inexorably in the past few years.

GSK is also facing allegations of bribery in Poland and Jordan. It has said from the outset that it will work with local authorities to try and resolve the situation. 

GSK responds

GSK is now saying that it understands that the authorities have issued the case to the Changsha People’s Procurator in Hunan Province and the procurator was now reviewing the case.

“We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK,” it said in a brief statement.

“We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens.”

Ben Adams