Compliance the buzzword for foreign firms in China after Glaxo

Wed Jul 17, 2013 7:34am EDT
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By Michael Martina

BEIJING (Reuters) - A Chinese bribery investigation into British drugmaker GlaxoSmithKline (GSK.L: Quote) has sent tremors through multinational pharmaceutical firms in China, prompting at least one to review how they do business in the country.

Experts said foreign companies across the spectrum were watching closely to see what happened to GSK and its four detained Chinese executives given bribery and business go hand-in-hand in the world's second biggest economy.

Chinese police on Monday accused GlaxoSmithKline of bribing officials and doctors to boost sales and raise the price of its medicines. They said GSK transferred up to 3 billion yuan ($489 million) to 700 travel agencies and consultancies over six years to facilitate the bribes.

Britain's biggest drug maker said it was deeply concerned by the developments, which it called "shameful".

On the same day police announced their revelations, senior managers from another multinational pharmaceutical firm in China were telling staff to make sure they complied with Chinese regulations governing the industry, one employee said.

"The message from the top is that if I have to choose between compliance and winning business, I would rather lose the business," the employee told Reuters, requesting anonymity because of the sensitivity of the matter.

Bribes to government officials, underfunded hospitals and poorly paid doctors have long facilitated the regulatory approval, distribution and the pricing of medicines in China.

Experts said it was too soon to tell if the GSK investigation would change such practices.   Continued...

A flag (L) bearing the logo of GlaxoSmithKline (GSK) flutters next to a Chinese national flag (C) and a Union Flag (R), outside a GlaxoSmithKline office building in Shanghai July 12, 2013. REUTERS/Aly Song