GSK fined US$489m in bribery case
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E-mail Xinhua, September 20, 2014
The Chinese branch of British drugmaker GlaxoSmithKline has been fined 3 billion yuan (US$489 million) for bribery, the biggest fine ever imposed by a Chinese court, and five officials given suspended prison terms.
Yesterday's closed-door trial was held at the Changsha Intermediate People's Court in central China's Hunan Province.
GSK China had "resorted to bribery to boost sales of its medical products and sought benefits in an unfair manner," the court statement read.
Mark Reilly, a British national and former manager of GSK China, was sentenced to three years with a four-year reprieve and will be expelled from China.
Former human resources director Zhang Guowei, former vice president and operations manager Liang Hong, and former legal affairs director Zhao Hongyan, were given two to three-year sentences with reprieves.
Former business development manager Huang Hong received three years with a four-year reprieve for both giving and receiving bribes.
The court said the sentences were reduced since the officials had confessed the facts fully and were considered to have given themselves up.
The court found that from 2009, Reilly, then head of GSK China, advocated a "sales-led" philosophy in the company, which bred a thirst for sales expansion in an ambience of ignorance with regard to Chinese laws and regulations.
The company employed a large number of sales staff, restructured its departments and allowed its employees to bribe hospital staff.
GSK revenue in China increased from about 3.9 billion yuan in 2009 to 6.98 billion yuan in 2012.
"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 CEO Andrew Witty said in a statement.
"The illegal activities of GSKCI (GSK China Investment Co Ltd) 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," the company said in an apology posted on its website, adding that it "has reflected deeply and learned from its mistakes and must work hard to regain the trust of the Chinese people."
GSK said it remained committed to China — a huge and growing market for pharmaceutical companies — and promised to become a "model for reform in China's health care industry."
Future commitments include investment in Chinese science and improved access to medicines across the country through greater expansion of production and flexible pricing, it said.
Shares in the company were slightly higher yesterday, despite the court verdict, as the market took the news in its stride. A fine had been widely expected and the US$489 million hit will be relatively manageable for a company with a market value of US$113 billion.
"GlaxoSmithKline will hope that this will draw a line under events in China, but it will take time for its Chinese commercial operations to recover," said Mick Cooper, an analyst at Edison Investment Research in London.
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