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GSK concedes execs may have broken Chinese law

President of international operations suggests senior execs were involved in bribery scandal

GSK GlaxoSmithKline house

GlaxoSmithKline (GSK) admitted today that some its executives may have violated the law in China as claimed in the ongoing investigation into bribery and corruption. The pharma company also pledged to cut prices in China to ensure its medicines are more affordable.

In a statement, GSK's president of international operations, Abbas Hussain, said that some senior executives in China "who know our systems well appear to have acted outside of our processes and controls which breaches Chinese law".

Hussain was sent to China to look into allegations by the Chinese authorities that senior GSK China employees had confessed to bribing doctors and government officials to encourage the use of the company's medicines and met with representatives of the Ministry of Public Security over the weekend.

Last week it was reported that at least four executives were being detained in connection with the investigation, amid claims that almost $490m in kickbacks had been paid since 2007 using a network of around 700 middlemen, including travel agencies and consultancy firms. China also banned a fifth executive - finance director Steve Nechelput - from leaving the country.

"We have zero tolerance for any behaviour of this nature," said Hussain. "I want to make it very clear that we share the desire of the Chinese authorities to root out corruption wherever it exists."

The company said it would continue to work with the MPS and would take all "necessary actions required as this investigation progresses".

There had been speculation that GSK was prepared for a rough ride in China after the company released an unusually frank statement last week indicating it was "deeply concerned and disappointed" by the "shameful" allegations.

It is understood that GSK gave an apology to the MPS at the meeting, and it could be construed that the pledge to reduce drug prices is a bid to pacify the Chinese authorities, which is also investigating the prices of medicines sold on the domestic market by around 60 companies, including GSK.

Hussain said the company would "actively look at our business model to ensure we make a significant contribution to meeting the economic, healthcare and environmental needs of China and its citizens".

Savings from changes to the operational model "will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients", he added.

22nd July 2013

From: Sales, Regulatory, Healthcare

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