China Targets GlaxoSmithKline In Drug Sales Probe

Police in China have detained four Chinese managers at GlaxoSmithKline and are preventing a foreign executive in charge of finances from leaving the country. The actions are part of a growing investigation into GSK’s drug sales practices in China.

The Chinese Ministry of Public Security charges that the drug firm has used inflated conference fees paid to travel agencies as a cover for kickbacks to doctors, hospitals, and government officials that purchased GSK drugs or prescribed them.

GSK called the allegations “shameful” and said it will fully cooperate with Chinese authorities. At the time of the arrests, the company was completing an internal investigation of its sales practices in China that it said had not uncovered evidence of wrongdoing.

Hong Liang, GSK’s vice president of operations in China, admitted in an interview on Chinese television that the payments to doctors and government officials inflate the price Chinese patients pay for GSK drugs by as much as 30%.

State-controlled TV news programs have covered the case intensely, although it is unclear why China is singling out GSK. It’s almost impossible for a drug or medical device company to sell to Chinese hospitals without also delivering kickbacks, according to a Shanghai-based consultant on China’s drug industry. The consultant requested anonymity from C&EN because of the sensitivity of the matter.

Outside China, GSK and other major drug firms have faced legal sanctions for their sales practices. Last year, GSK was fined $3 billion in the U.S. for fraudulent sales practices involving 10 drugs. And in 2009, Pfizer paid a fine of $2.3 billion, also in the U.S., for wrongly promoting certain medications and paying kickbacks to doctors.

China’s actions against GSK coincide with the launch of a campaign against fraud in the country’s pharmaceutical industry. A few days after the arrests, China’s State Food & Drug Administration announced a six-month crackdown on drug manufacturing violations, counterfeit drugs, and unauthorized online sales of drugs.