China Pharma Update

A quick follow-up to our post yesterday about the corruption scandal that has engulfed GlaxoSmithKline’s China business: chief executive Andrew Witty played a dead bat in commenting on it publicly for the first time, saying head office had had no knowledge of the alleged bribery; that it was all the doing of senior Chinese staff working around the company’s systems. That is the same line the company’s head for emerging markets, Abbas Hussain, took after meeting Chinese authorities earlier this week.

Four senior executives, all Chinese, are being held by Chinese police on suspicion of having committed “serious economic crimes.” “The alleged activities are not what we expect of our people and are totally contrary to our values,” Witty said at the presentation of the company’s second-quarter results. All of which was about the least he could say.

Beneath the still surface, feet are no doubt paddling away furiously. There is much to protect, beyond reputation. GSK employs more than 7,000 staff in China, where it now has five factories and a research center, and where its second-quarter sales were up 14% to $326 million. “Clearly, we are likely to see some impact to our performance in China as a result of the current investigation, but it is too early to quantify the extent of this,” Witty said.

With the investigation into western drug companies expanding, others will read this report on state media about U.S. fines for some other pharma companies with some trepidation.

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