China hands drugmaker GSK record $489 million fine for paying bribes

Fri Sep 19, 2014 9:45am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Adam Jourdan and Ben Hirschler

SHANGHAI/LONDON (Reuters) - China fined GlaxoSmithKline Plc (GSK.L: Quote) a record 3 billion yuan ($489 million) on Friday for paying bribes to doctors to use its drugs, underlining the risks of doing business there while also ending a damaging chapter for the British drugmaker.

A court in the southern city of Changsha handed suspended jail sentences to Mark Reilly, the former head of GSK in China, and four other GSK executives of between two and four years, according to state news agency Xinhua.

Briton Reilly, shown on state television wearing a suit and looking tired during the trial, will be deported, a source with direct knowledge of the case said.

The verdict, handed out behind closed doors in a single-day trial, highlights how Chinese regulators are increasingly cracking down on corporate malpractice.

However, it also offers GSK a potential way forward in the fast-growing Chinese pharmaceutical market, a magnet for foreign firms who are attracted by a healthcare bill that McKinsey & Co estimates will hit $1 trillion by 2020.

"If GSK China can learn a profound lesson and carry out its business according to the rule of law, then it can once again win the trust of China's government and people," Xinhua said in a commentary. Xinhua closely reflects China's official government view.

The fine, equivalent to around 4 percent of GSK's 2013 operating profits, was less than some investors had feared. GSK will take a charge in the third quarter and pay the penalty from existing cash resources.

  Continued...

 
The logo of GlaxoSmithKline (GSK) is seen on its office building in Shanghai July 12, 2013. REUTERS/Aly Song