GSK China executive charged with bribery

An executive with British drugmaker GlaxoSmithKline has been charged with leading a vast network to bribe doctors and hospitals to use the company's drugs, Chinese police said on Wednesday.

Mark Reilly from Britain, the former China head of GSK, and two Chinese executives are also suspected of bribing officials in the Beijing and Shanghai industry and commerce departments, Xinhua News Agency quoted police in Hunan province as saying.

The case is considered the biggest corruption scandal to engulf a foreign company in China since that involving Rio Tinto in 2009, which resulted in four executives from the mining giant being imprisoned for between seven and 14 years for bribery and theft of trade secrets.

Prosecutors have started to examine the GSK case, which surfaced in Hunan, and involves 46 suspects. After a 10-month investigation, police found that Reilly had ordered subordinates to offer bribes.

Since 2009, Reilly allegedly pressed his sales teams to bribe hospitals, other medical institutions and organizations, and doctors through various means to use his company's products, netting billions of yuan in illegal revenue, police said.

They said Reilly and his colleagues also disguised illegal revenue in the Chinese market by forging transactions between GSK China and several foreign arms of GSK, making the revenue appear as funds used to buy raw materials in China.

They made every effort to cover up the illegal practice during regular checks by regulatory authorities, Xinhua reported.

Police said they found that all GSK China pharmaceutical factories and departments nationwide had been involved in commercial bribery regarding sales of prescription drugs and vaccines.

GSK China's domestic revenue rose from about 3.9 billion yuan ($627 million) in 2009 to 6.9 billion yuan in 2012, Xinhua reported.

Police said Reilly was still in China, but did not provide further details.

Gao Feng, deputy director of the Ministry of Public Security's economic crimes unit, said that Reilly engaged in "wanton" bribery to meet high sales targets set by GSK's head office.

To fund the bribes, GSK inflated drug prices by declaring high costs to China's Customs authorities, Gao said.

"In other words, the more drugs it sold, the more money it had to bribe. The more it bribed, the more drugs it could sell," he said.

GSK China's communications department told China Daily on Wednesday that it had met with officials from the Ministry of Public Security, who had updated the company on the investigation.

"We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK," the company said.

"We understand the Ministry of Public Security has sent the case to the Changsha People's Procuratorate in Hunan province. The procurator is now reviewing the case. We will continue to fully cooperate with the authorities on this matter.

"We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens."

Contact the writer at wanghongyi@chinadaily.com.cn