GSK hands SEC $20M to put China bribery charges to rest

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GlaxoSmithKline can finally shut the door on 2013’s China bribery scandal--at least, as far as the SEC is concerned.

The pharma giant has forked over $20 million to the agency to settle charges that it violated the Foreign Corrupt Practices Act when its China arm used travel agencies to funnel $489 million in bribes to local doctors and healthcare professionals.

According to the SEC, GSK violated the FCPA’s internal controls and books-and-records provisions by recording the corrupt payments--which took many forms, including gifts, shopping excursions and cash--in its books as legitimate business expenses, such as conferences, speaker fees and marketing costs.

The British drugmaker also “failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program to detect and prevent these schemes,” the SEC said.

Glaxo, for its part, has tried to move on after admitting it fouled up in China. Since the scandal broke out, it’s publicly apologized, nixed doctor speaking fees and done away with quotas for its sales reps. In China, it’s also tripled an in-house compliance team that now checks every submitted receipt--and some industry-watchers say the moves may even be hobbling GSK’s drug sales in an incentive-hungry climate.

Still, though, bribery scandals have continued to plague the drugmaker by popping up around the world. Most recently, the company in April said it was conducting an internal investigation into allegations that its Yemen-based subsidiary brought on government workers to influence purchasing decisions and beef up drug sales.

Meanwhile, the SEC penalty sum pales in comparison to what China charged Glaxo for its conduct in the country. Last September--following a trial that was held behind closed doors--China charged the company nearly $500 million--though it also allowed a former top local exec, Mark Reilly, to escape without doing prison time.

GSK isn’t the only drugmaker to receive an SEC wrist-slap for its practices in China.  In August, AstraZeneca agreed to shell out $5.5 million to settle bribery claims from China and Russia, and this March, Novartis wrapped up its own SEC China probe with a $25 million payment.

- get more from the SEC here and here (PDF)

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