Top China pharma exec takes his life during government probe

The Chinese government has spent the last several months investigating allegedly improper marketing practices by foreign pharmaceutical makers--most notably GlaxoSmithKline ($GSK)--but now the crackdown has hit closer to home. Liu Zhanbin, the chairman of Chinese generics maker Harbin Pharmaceutical Group Sanjing Pharmaceutical, committed suicide Sunday, according to a statement from the company that was obtained by Bloomberg. Local officials were investigating him for possible corruption, according to Bloomberg.

Two days before Liu's death, prosecutors launched a formal investigation, though Sanjing has not yet released any further details about the probe, according to the Wall Street Journal. Liu went to a local hospital on Sunday following "discomfort" at breakfast, evaded guards, and then jumped out of a third-story bathroom window.

It was the latest dramatic twist in an anticorruption campaign by Chinese President Xi Jinping. Just last week, the country handed three GSK executives bribery charges that could land them in jail. Mark Reilly, who headed up the company's China office, is accused of creating a "massive bribery network" that involved payoffs to doctors, hospitals and government officials. The maximum sentence for such charges is life in prison.

Chinese President Xi Jinping

In a May 16 editorial, the Chinese newspaper Xinhua called the GSK case a "warning" to other large companies "that ethics matter." The article went on to say that GSK's hepatitis B drug Heptodin costs more than twice as much in China as it does in the U.S., and it blasted the company for manipulating drug prices to disguise their true costs. Xinhua's editorials are understood to reflect the views of China's government.

Now China is raising questions about whether GSK evaded its tax obligations there. On Friday, a government-run legal newspaper alleged that the company failed to pay more than 100 million yuan ($16 million) in import duties and taxes for an HIV drug between 2005 and 2008. But even before that news broke, it was clear the ongoing scandal is taking a major toll on GSK's China business: Drug and vaccine sales dropped 20% there in the first quarter.  

- here's the Bloomberg story
- read more at the WSJ (sub. req.)

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