Bloomberg News reports: GlaxoSmithKline Plc’s sales in China jumped 20 percent to about 1 billion pounds ($1.5 billion) last year, almost quadruple the pace of growth across its emerging markets. Police say bribes and sexual favors spurred the gain.
The drugmaker now faces allegations of economic crimes involving 3 billion yuan ($489 million) of spurious travel and meeting expenses, and trade in sexual favors, the Public Security Ministry said yesterday. The allegations are “shameful” and would be a breach of the company’s systems and values, Glaxo said in a statement.
Prior to a police probe that began last month, Glaxo embarked on a strategy that tripled its Chinese sales force to more than 4,000 people in three years as the U.K.’s largest drugmaker sought a bigger share of the market. As that expansion was ramping up, Chief Executive Officer Andrew Witty told analysts on a February 2010 conference call that controlling Glaxo’s operations in China was “not a trivial proposition.”
Bribes paid to hospitals, doctors and health officials contributed to the resulting gains in revenue, according to the ministry, which controls China’s police. If found guilty, Glaxo could be ordered to pay a penalty of $5 million to $10 million, according to estimates by Kepler Capital Markets based on fines paid in China for similar violations. [Continue reading…]