The GlaxoSmithKline-China bribery scandal just keeps unwrapping new layers. The latest revelation: In 2001, GSK fired 30 employees within its China vaccine business after discovering they were bribing Chinese officials and taking kickbacks. While this isn’t directly related to the more recent allegations made by Chinese government officials that the U.K.-based pharma company paid up to $500 million in bribes to doctors and hospitals, the U.S. Department of Justice told the Financial Times that it will look into the past scandal to see if this represents a pattern of behavior.
All in all, there has not been much good news for GSK lately. On July 23rd the company was forced to slash its earnings expectations for the year as second-quarter total sales were down 13%, according to their latest earnings report. Meanwhile, a few days earlier on July 13th prosecutors in Shanghai formally indicted Peter William Humphrey and his wife Yu Ying Zeng for illegally obtaining private information of Chinese citizens. The couple has previously admitted to being hired by GSK China’s Mark Reilly as private eyes in 2013 to find the informant who disclosed GSK China’s bribery scandals to Chinese authorities and GSK’s executives.
As this web continues to unravel, let’s review how we got here in the first place:
April 19, 2013: Consumer watchdog organization, the Office of Fair Trading, accuses GSK of market “abuse.” GSK is accused of bribing their competition to delay release of certain products. GSK responds that they “acted within the law” and “support fair competition.”
July 11, 2013: The Chinese Ministry of Public Security announces that they are probing allegations of bribery on the part of GSK executives. The four detained executives are suspected of bribing doctors and public officials in order to increase their sales, as well as fraudulently filing their taxes. GSK responded that they had no evidence of wrongdoing in China: “We continuously monitor our businesses to ensure they meet our strict compliance procedures—we have done this in China and found no evidence of bribery or corruption of doctors or government officials. However, if evidence of such activity is provided, we will act swiftly on it.”
July 15, 2013: GSK releases an official response to the investigation: “We are deeply concerned and disappointed by these serious allegations of fraudulent behavior and ethical misconduct by certain individuals at the company and third-party agencies. Such behavior would be a clear breach of GSK’s systems, governance procedures, values and standards. GSK has zero tolerance for any behavior of this nature. GSK shares the desire of the Chinese authorities to root out corruption. These allegations are shameful and we regret this has occurred.” They go on to explain that they had ceased doing business with any and all travel agencies identified in the allegations and are reviewing all of their third-party relationships.
July 16, 2013: One of the four detained GSK executives confesses on state television that he had used bribery in order to inflate drug prices.
July 25, 2013: GSK announced that Hervé Gisserot would replace Mark Reilly as the British head of its Chinese operations. Meanwhile, Reilly remains with the organization as “no allegations of wrongdoing” had been filed against him and he was said to be “very willing to help the authorities with their investigation.”
July 26, 2013: New details are released on the case. Glaxo employees admit to bribing doctors with gifts, travel expenses and cash as payment for prescribing more of the company’s drugs. They also compensated the doctors for fictional conferences or lectures in several cases. One employee confesses to trading sexual favors for an increase in prescriptions. 18 more employees are reportedly detained.
August 16, 2013: GSK-hired private investigator Peter Humphrey and his wife, Yu Ying Zeng, are arrested for breaking the law on at least 10 separate occasions. They allegedly sold consumers’ personal information, including addresses, family member information, car ownership records and real estate records, to their clients.
October 23, 2013: GSK sales plummet as a result of the allegations. Their July-to-September quarter drops by 61%.
April 4, 2014: GSK announced that it has fired a “very small number” of GSK’s 7,000-member staff in China for breaching expenses rules. The company also admitted a few days prior that it has since increased its monitoring of employees’ expenses since the Chinese investigation was launched. The company added in a statement, “We are determined to ensure our processes are being properly followed and will thoroughly investigate where our monitoring has raised potential issues.”
April 7, 2014: GSK investigates possible improper conduct in their Iraq business. They will investigate claims that over a dozen doctors were hired as paid sales representatives since 2012. A source close to the company reportedly emailed the allegations to the company in late 2013. GSK said in a statement, “In total, we employ fewer than 60 people in Iraq in our pharmaceuticals operation and these allegations relate to a small number of individuals in the country.”
April 13, 2014: A similar investigation begins in Poland. Eleven doctors and a GSK regional manager are charged with corruption, as GSK is accused of paying doctors to promote their drug, Seretide.
May 14, 2014: Chinese police officials accuse British executives at GSK of bribing doctors and other hospital staff to use GSK’s products. It was supposedly part of a “massive bribery network” run by the former head of GSK’s China unit, Mark Reilly.
June 30, 2014: A sex tape adds to the GSK scandal. GSK confirms the existence of a tape of Mark Reilly having sexual relations with his Chinese girlfriend. Private investigator Peter Humphrey is unable to determine who was responsible for the video being made.
July 4, 2014: Professor William Lam, a top expert on China’s justice system, according to the U.K’s Mail Online, says 98% of Chinese court proceedings end in conviction, so no matter what the facts are, Mark Reilly will be found guilty. The news organization added that Reilly could face up to 20 years in a Chinese prison.
July 16, 2014: The U.S. Justice Department investigates a 2001 GSK bribery scandal, for which GSK officials admit guilt. GSK employees were caught bribing Chinese government officials. The Justice Department may invoke harsher penalties for the more recent bribery scandal if a pattern of corruption is found.