GlaxoSmithKline's China probe triggers U.S. bribery investigation

Once again, GlaxoSmithKline has the U.S. Justice Department on its tail. Prosecutors are investigating bribery allegations that Glaxo ($GSK) faces in China, trying to determine whether the drugmaker violated U.S. law.

First reported by Reuters, the news of the U.S. investigation illustrates the Justice Department's renewed zeal about Corporate America's operations overseas. Prosecutors have been eyeing pharma (and other industries) for violations of the Foreign Corrupt Practices Act (FCPA), and several drugmakers have paid millions of dollars to settle corruption probes. Though Glaxo is based in Britain, its shares are listed in the U.S., making it vulnerable to FCPA prosecution.

And now, Glaxo is a natural target. According to Chinese authorities, Glaxo's employees funneled almost $490 million in bribes to scores of doctors, all in an effort to meet aggressive sales-growth targets. Because doctors are civil servants in China--technically, "government officials"--kickbacks to physicians could easily run afoul of the FCPA.

The company anticipated the latest U.S. probe. Spokesman David Mawdsley told Reuters that Glaxo started working with the Justice Department as the bribery allegations surfaced. "Since the investigation in China began, we have proactively reached out to relevant regulators," Mawdsley told the news service."This includes the DoJ, and we have been in an ongoing dialogue with them."

GSK could also face prosecution under the U.K.'s anti-corruption legislation. But there's a key question, and its answer interests everyone, from investigators to rival drugmakers to pharma bystanders: How much did the company know, and how high up did the knowledge go? Recently, a detained Glaxo sales rep told Chinese officials that the company's local unit facilitated bribery and rigged internal audits to disguise it; he also said the China unit chief pushed salespeople to meet aggressive sales targets using whatever means necessary. Top GSK officials maintain London knew nothing of the alleged shenanigans. 

In falling under the DoJ's foreign-bribery microscope, GlaxoSmithKline isn't alone. Pfizer ($PFE) agreed to pay $60 million to wrap up FCPA allegations, while J&J paid $70 million to settle a probe involving suspect payments in Iraq, Greece, Poland and Romania. Bristol-Myers Squibb ($BMY), Merck ($MRK), Baxter ($BAX), Eli Lilly ($LLY) and AstraZeneca ($AZN) have all disclosed FCPA probes. 

It's also not GlaxoSmithKline's first trip to the DoJ doghouse. The company last year paid $3 billion to settle a portfolio of marketing allegations, including off-label promotions and physician kickbacks. And before that, it paid $750 million in civil and criminal penalties to wrap up allegations that it produced and sold adulterated drugs. 

- read the Reuters news

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