GSK names new boss for China and pledges to cooperate in probe

[ImperialWalker]

GSK names new boss for China and pledges to cooperate in probe
Staff Reporter 2013-07-27 13:59

GSK's stand at a trade show in Beijing. (Photo/CFP)

British pharmaceutical giant GlaxoSmithKline has appointed Herve Grisserot as the new general manager to lead its Chinese division, which has been thrown into turmoil by a scandal revealing the depth of a culture of bribery and corruption in China's medical industry. The previous manager Mark Reilly will return to China to cooperate with the investigation being carried out by the local authorities, according to the state news agency Xinhua and our sister paper China Times.

China's Ministry of Public Security announced on July 11 that a number of senior GSK China executives are under investigation for bribing government officials, industry groups, hospitals and doctors to promote sales of their drugs and for violating tax laws. Four senior executives from the company are being held by police over their alleged involvement.

The pharmaceutical firm has announced that Grisserot, one of its chiefs in Europe, will replace Reilly, who has been at the firm's London office and will return to China to assist in the investigation, which is seen as certain to take a toll on GSK's performance in the country.

GSK CEO Andrew Witty said the investigation has been focusing on its Chinese managers and not British nationals in executive positions after the firm admitted on Monday that some senior staff at the Chinese division have broken the law. Witty stressed that 99.9% of GSK's employees are law-abiding people and the British headquarters had no knowledge of the bribery prior to the investigation.

Liu Chunquan, a lawyer with Panocean Law Firm Shanghai, said the firm is likely to push all responsibility for wrongdoing onto its Chinese staff. "After these multinational giants are accused of commercial bribery, their headquarters usually apologize and promise it will never happen again and then put the blame on their Chinese managers," the lawyer said.

The owner of a Chinese pharmaceutical company said bribery has always been a grey area in the country's medical sector. Multinationals are clearly aware of the situation but can do nothing to change it and have to quietly give in and play the game if they are to succeed. Other industrial sources said GSK, the world's second-largest pharmaceutical company, has coveted the rapidly growing Chinese market, sending multiple foreign managers to China; it should have aware of the bribery but chose to look the other way, they said.

The Chinese division has been restructuring its operational model to lower the price of its medicines in the wake of the scandal. Bribes and incentives allegedly account for 30% of the cost of its drugs, and many have speculated that the company will have to lower its prices by a similar amount.

GSK has pledged full cooperation with the Chinese investigators and has sent its senior audit officials and legal advisers to Shanghai to assist in the investigation. The Ministry of Public Security welcomed GSK's move and said it hoped the Chinese division can resume business soon.