GlaxoSmithKline (GSK) Says Certain Executives In Its Shanghai And Beijing Operations May Have Broken Chinese Law

Pharmaceutical giant GlaxoSmithKline PLC (ADR) (NYSE:GSK) said Monday that some executives in its Shanghai offices may have broken Chinese law in a bribery scandal.

A Glaxo official said the London, England, company had zero tolerance for employees who broke the law and promised changes in the company's business model that would lower the cost of medicine in the country

"Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls, which breaches Chinese law," GSK's head of emerging markets, Abbas Hussain, said in a statement.

GSK supplies key products such as vaccines in China, as well as drugs for lung disease and cancer. Police in Shanghai and Beijing have accused Glaxo executives of bribing officials and doctors to boost sales and raise the price of its medicines. So far, four senior Chinese executives from GSK have been detained.

Chinese investigators say Glaxo transferred up to 3 billion yuan ($489 million) to 700 travel agencies and consultancies over six years to facilitate the bribes.

"Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions," said Hussain, "ensuring our medicines are more affordable to Chinese patients."

In two related investigations, police also alleged that British drugmaker AstraZeneca PLC (ADR) (NYSE:AZN) and Belgian biopharmaceutical company UCB SA (EBR:UCB) each engaged in bribery and price-fixing within their China operations.