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GlaxoSmithKline Rocked by China Bribery Scandal

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December 19, 2013 3:48 pm
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GlaxoSmithKline Rocked by China Bribery Scandal

A bribery scandal in China is forcing GlaxoSmithKline (NSYE: GSK) to review all of its business practices, The Financial Times reported.

Four of GlaxoSmithKline's top Chinese executives have been arrested and dozens more questioned in an ongoing corruption investigation. Chinese police allege Glaxo executives used travel agencies to conceal hundreds of millions of dollars in bribery payments to Chinese officials and doctors.

Glaxo chief executive Sir Andrew Witty has unveiled a series of reforms designed to discourage the practice of bribing doctors to prescribe the company's drugs. According to the FT, the corruption allegations have hurt GSK's bottom line, causing its sales in China to drop by 61 percent.

Regulators around World Cracking Down on Big Pharma

Glaxo isn't the only big pharmaceutical house facing such problems. Last month, the U.S. Department of Justice announced that Johnson & Johnson (NYSE: JNJ) had agreed to pay more than $2.2 billion in fines — to resolve criminal and civil investigations into physician kickbacks and the promotion of several drugs for "for uses not approved as safe and effective by the Food and Drug Administration."

Access to China is critical for many drug companies. China is now the world's second largest market for pharmaceuticals after the United States.