GlaxoSmithKline, the UK’s largest drug maker, has joined the ranks of drug makers who have been found acting illegally in China to spur their growth. Chinese police say that Glaxo used bribes and sexual favors amounting to $489 million to increase its sales in China.
This follows on the heels of two other drug makers being forced to pay tens of millions of dollars for their misconduct; Eli Lilly & Co., which paid $29.4 million last December after the U.S. Securities and Exchange Commission found its employees bribed officials in China, as well as Russia, Poland and Brazil, and Pfizer Inc., which consented to pay $60.2 million to settle bribery cases in foreign countries including China.
Gao Feng, head of the economic crimes investigations unit at the Public Security Ministry, said, “To boost the prices and sales volume of their drugs, the company has taken some illegal actions. GSK’s marketing strategy includes many things that allow and even encourage bribery activities. GSK takes a large portion of the profits from its drug sales in China to bribe government officials, medical associations, hospitals and doctors. Expenses for bribery are ultimately being covered by the public.”
Although Glaxo will have to pay the fines because of bribing hospitals, doctors, and health officials, there are those who believe that it won’t hurt them too severely. The company’s sales skyrocketed 20% last year, ascending to $1.5 billion. Glaxo’s fines could amount to $5 million to $10 million.
Fabian Wenner, a Kepler Capital health-care analyst in Zurich, said, “While being involved in criminal offenses and associated with illegal actions is clearly damaging for GSK’s reputation, I doubt that this will be of material impact for the company. I haven’t spoken to any investor who is concerned about this yet.”
Deutsche Bank AG’s London-based analyst Mark Clark said on June 12, “As GSK supplies a range of important drugs for public health, we doubt that there will be an enduring impact on its business in China.”
Last year Glaxo paid $3 billion to after the U.S. filed suit claiming it illegally promoted prescription drugs without reporting safety data.