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China Police Say GlaxoSmithKline Broke Law To Boost Sales Prices

posted 15 Jul 2013, 04:39 by Mpelembe   [ updated 15 Jul 2013, 04:40 ]

Chinese police say British drugmaker GlaxoSmithKline used travel agencies and consultancies as vehicles to bribe officials and doctors, and illegally boost the sales prices of its drugs sold in China.

 CHANGSHAHUNAN PROVINCECHINA  (CCTV) -  British drugmaker GlaxoSmithKline (GSK) used travel agencies and consultancies as vehicles to bribe officials and doctors and illegally boosted the sales prices of its drugs sold inChina, police said on Monday (July 15).

Since 2007 the company had transferred as much as 3 billion yuan ($488.80 million) to over 700 travel agencies and companies, Gao Feng, a police official in charge of the investigation into the company, told a news conference.

The investigation had found GlaxoSmithKline was chiefly responsible for the bribes, including instances of sexual bribery, Gao said. Four senior Chinese executives have been detained.

The ministry said on Thursday that GSK executives in China had confessed to bribery and tax violations during one of a string of investigations into foreign firms in the world's second-biggest economy.

Until Monday, Chinese authorities and state media had released few details on the probe into Britain's biggest drugmaker, one of a string of investigations into foreign firms and their pricing practices in the world's second-biggest economy.

The detained executives include Liang Hong, vice president and operations manager of GSK (China) Investment Co Ltd and Zhang Guowei, the company's vice president and human resources director, the official Xinhua news agency reported.

The official People's Daily newspaper said GSK collaborated with travel agencies to funnel bribes to doctors and officials by creating fake "conference services" as expenditure for GSK in order to misappropriate funds, some of which would then be spent on bribes.

"We routed expenses that we couldn't claim through our company. It included expenses that we spent when dealing with government departments and we couldn't normally claim through our company. We used Linjiang (Travel Agency) to get the money out," Liang told two police officers during his questioning.

"We started to use Linjiang Travel Agency from 2010, so we have been using it for three years. We didn't use it in 2009 when we first started. We arranged about 10 conferences, internal conferences, with the biggest one involving 2,000 people last year. The smallest conference was for over 100 people. We collected over 10 million yuan ($1.6 million USD) as expenses for last year's conference that was for 2,000 people" he said.

Xinhua, given access to Liang by the authorities, quoted the detained executive as saying medicine which cost 30 yuan (around 5 USD) to make could end up being sold to patients for 300 yuan.

"Through my reflections in the last 10 days, I realised that the prices of the medicines were raised due to the cost of these sorts of operations. Because they are part of the cost right?" Liang said.

GSK officials were not immediately available for comment on Monday.

The company has previously said it had found no evidence of bribery or corruption in China, but added it would cooperate with the authorities. It has said it was only told about the investigation in early July.

The police last week said the case against GSK involved a large number of staff, with bribes offered to Chinese government officials, medical associations, hospitals and doctors.

Legal experts said the fact the police had disclosed so much information during its investigation suggested the executives would be charged and found guilty.

Under China's legal system, formal charges would only be announced after preliminary investigations are completed.