In the weeks since our
first post on the Chinese investigation of GlaxoSmithKlein
(GSK) for alleged "widespread bribery of doctors" to
induce the prescription of GSK's drugs, more details have
emerged about the bribery scheme. The investigation has also
broadened to potentially involve other pharmaceutical companies and
foreign nationals, including one U.S. citizen who Chinese police
On July 17, 2013, after the investigation of GSK became public,
the Chinese State Food and Drug Administration announced a six-month crackdown on misconduct
in its drug market. From July to December 2013, the crackdown will
focus on unauthorized drug production, improper online drug
retailing, and sales of fake traditional Chinese medicines.
Last week, in addition to detaining four GSK executives, Chinese
officials barred GSK's China finance director, Steve Nechelput,
from leaving the country, and Shanghai police detained Peter Humphrey, a British citizen who
runs an international business risk advisory firm that works with
drug companies, including GSK. On July 22nd, GSK admitted in a statement that some of its
executives "appear to have acted outside of [GSK's]
processes and controls, which breaches Chinese law." That same
day, AstraZeneca announced that police in Shanghai visited its
office there "regarding a local police matter focused on a
sales representative," but the company stated that the inquiry
related to an individual case rather than a wider investigation.
GSK has sent several senior executives to China to deal with the
crisis, including Abbas Hussain, GSK's president for emerging
markets. Abbas told Chinese police that GSK will review and
reform its business model in China in an effort to reduce drug
Chinese police have said that GSK employees engaged in a complex scheme that provided doctors,
government officials, pharmaceutical industry groups, and hospitals
with cash and gifts in exchange for promoting sales of GSK's
pharmaceutical products. As much as $490 million may have been funneled through as
many as 700 travel agencies and consulting firms over
the course of six years to evade GSK's internal controls and
compliance policy. According to Chinese police, one way in which
the travel agencies funneled GSK's money to government
officials and doctors was by organizing health care conferences on
behalf of GSK, some of which did not actually exist. The money from
GSK for the conferences was then passed through to the
Chinese authorities have ordered one of the travel agencies used by GSK
– Shanghai Linjiang International Travel Agency – to
stop doing business due to "illegal activities,"
including fake billing. Linjiang's legal representative in
China told Chinese state television that Linjiang
arranged cash payments of $6,500 to $81,000 for GSK. Other
pharmaceutical companies based in the U.S. and Europe have also used Linjiang in the past, but all
of the companies have since terminated their relationships with the
Today, in the latest news to come out of China regarding the GSK
bribery investigation, the Chinese Health Ministry announced that 39
employees at a hospital in southern Guangdong Province would be
punished for taking illegal kickbacks of $460,000 from two unnamed
drug companies between January 2010 and December 2012. The 39
employees include nine doctors who were dismissed, suspended or had
their licenses revoked for allegedly directly receiving kickbacks,
as well as the vice chairman of the hospital's trade union and
two people in charge of the hospital's relationship with the
drug companies. Moreover, an unnamed American citizen has been detained in China in
connection with the wider Chinese investigation into that
country's drug company corruption scandal. It is not known
which drug company employed the American citizen.
China has a history of selective enforcement of its anti-bribery
laws, despite having criminal codes with some of the harshest
penalties in the world. In one stark example from 2007, China executed the former head of the State Food and
Drug Administration after he was convicted of accepting $850,000 in
bribes to register medical companies' products without the
necessary licensing checks.
Although pharmaceutical and medical device companies have been
investigated for bribery issues in China before, it has been the
U.S. government who has typically enforced American anti-bribery
laws against culpable individuals and companies. The investigation
into GSK marks one of the first instances where Chinese authorities
appear to have independently enforced its own anti-bribery laws
against employees of non-Chinese companies.
The details on this rising tide of Chinese anti-bribery
enforcement are coming fast and furious from multiple news outlets,
so we will continue to monitor and report on these new
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In a criminal trial the charge is the foundation of the accusation & every care must be taken to see that it is not only properly framed but evidence is only tampered with respect to matters put in the charge and not the other matters.
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