Pharmaceutical giant GlaxoSmithKline is in hot water in China. Embroiled in a corruption scandal, the company admitted on Monday that several of its executives appear to have violated Chinese law.
Last week, China accused GSK of bribing doctors and other officials to increase sales of its drugs and keep their prices high. Chinese police allege that the company transferred as much as 3 billion yuan ($489 million) to consultancies and travel agencies over the past six years. The police are barring GSK finance director Steve Nechelput from leaving the country, and have detained four other executives.
"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 International President Abbas Hussain said in a statement. "I want to make it very clear that we share the desire of the Chinese authorities to root out corruption wherever it exists.”
The bribery may only be the beginning of GSK's trouble. Also on Monday, the New York Times published information from a confidential document it acquired, revealing that an internal audit in November 2011 uncovered some troubling research practices at GSK's Shanghai research and development center. For example, the company did not report the results of animal trials of certain drugs before they were already in human trials, a serious ethical violation.
Though GSK claims that another audit last year found that the problems had been resolved, experts told the New York Times that the results of the initial audit showed that the company failed in its oversight of the research facility while the company was expanding in China's emerging market, and that these results were concerning enough to give pause.
For more InsideCounsel coverage of bribery, see below: