Glaxo warns China corruption scandal will hit business

Wed Jul 24, 2013 3:59pm EDT
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By Ben Hirschler

LONDON (Reuters) - A "shameful" corruption scandal in China will inevitably impact GlaxoSmithKline's business, the British drugmaker's chief executive said on Wednesday, adding he was ready to go to Beijing "at the right moment."

In his first public comments since the crisis broke a fortnight ago, Andrew Witty said GSK would set up an independent review to investigate the "deeply disappointing" allegations.

GSK believes the alleged corruption involved senior Chinese staff working around its systems to potentially defraud the company as well as cheating the Chinese healthcare system, adding that head office had had no knowledge of the situation.

"The alleged activities are not what we expect of our people and are totally contrary to our values," Witty told reporters as he presented the company's second-quarter results.

"Clearly, we are likely to see some impact to our performance in China as a result of the current investigation, but it is too early to quantify the extent of this."

GSK's reputation has been damaged and its management team in China left in disarray by Chinese police allegations that it funneled up to 3 billion yuan ($489 million) to travel agencies to facilitate bribes to doctors and officials.

China's official news agency Xinhua suggested on Wednesday that more foreign and local pharmaceutical firms could soon be implicated in the corruption scandal sweeping the industry.

GSK has admitted that some Chinese executives appeared to have broken the law and says it plans to change its business model to lower the cost of medicines in the country.   Continued...

A box of Panadol pain relief tablets is seen at a pharmacy in a photo illustration in London July 24, 2013. British drugmaker GlaxoSmithKline, rocked by charges of corruption in China, is expected to try and reassure investors about its business prospects when it reports quarterly results. REUTERS/Paul Hackett