GSK sends contingent to China, even as country prevents one exec from leaving

Given that China is preventing a top GlaxoSmithKline ($GSK) exec from leaving the country as it investigates alleged bribery in the country, it seems risky to send more of his colleagues into the fray. But that is what the British drugmaker is doing, even as the probe widens to other companies.

Sources tell Bloomberg that GSK CEO Andrew Witty has sent a contingent to sort the matter out, lead by Abbas Hussain, the London-based company's president of Europe, Japan, emerging markets and Asia Pacific. He is accompanied by the global head of Glaxo's internal audit unit and its deputy chief counsel for China.

Chinese authorities have reportedly detained about 30 GSK employees, including four top execs, in a probe that accuses the company of funneling ¥3 billion ($489 million) through travel agencies to hide money that was paid to doctors and officials to get business done in China. The travel agencies reportedly reciprocated with financial and "sexual" kickbacks. While GSK is at the center of the probe, investigators have said they have found similar problems with four other companies they have yet to name.

A spokesman for Belgium-based UCB acknowledged it has had investigators come to talk with the company, but said it understood all drugmakers are getting similar visits. Some others, like Novartis ($NVS) and Bayer AG, have said they have not been contacted.

Rewarding doctors and officials for permits and prescriptions is considered common practice in a country where bribery is endemic. Some China-watchers think authorities may be using GSK and other Western drugmakers to signal a change in its tolerance for this kind of behavior. "This could be the government killing the chicken to scare the monkeys, using the GSK case to send a signal to pharmaceutical companies to say 'maybe it's time to stop this type of practice,'" Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations in New York, told Bloomberg. It could also be a way of making a point to its own physicians and officials that change is on the way. In a television interview with Liang Hong, one of the GSK execs being held as part of the probe, he outlined how the scheme worked and even named state agencies that allegedly received bribes in return for expediting GSK's business. Investigators have not said if China's own agencies are being investigated.

The GSK contingent was sent even though the company this week confirmed that China is preventing Steve Nechelput, its finance chief in China, from leaving the country. A spokesperson for the company said it's "important to stress that at no time has he been questioned or arrested--nor is he one of the individuals in detention. He continues in his role as finance director for GSK China." Bloomberg reports that Mark Reilly, who has been running GSK's China operations since 2009, did manage to leave China June 27.

- read the Bloomberg story

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