China Raises the Heat on Glaxo
BEIJING—GlaxoSmithKline GSK.LN +0.03% PLC came under new pressure as Chinese state-run news outlets ran reports of employees purportedly detained in a government bribery investigation of the drug maker saying that company executives created a sales culture that led to corruption.
China’s national broadcaster on Tuesday aired reports featuring what it said were detained employees saying that managers pressured sales representatives to get drugs to Chinese customers faster. The identities of the people, whose faces were blurred, couldn’t be verified.
A person identified as sales manager Huang Hong, who China Central Television said was one of four Glaxo employees detained in July, said in the report that former Glaxo China chief Mark Reilly told workers to enter hospitals to develop relationships with administrators to speed drugs’ entries into pharmacies.
Mr. Reilly couldn’t be reached for comment. Glaxo Chief Executive Andrew Witty in July said authorities hadn’t alleged wrongdoing by Mr. Reilly.
“Upper management came from sales, so they should have realized what they were doing,” the person identified as Ms. Huang said in the report.
Glaxo said the issues mentioned in the reports “would be a clear breach of our corporate values and we have zero tolerance for any behaviour of this nature.”
Chinese officials have alleged that Glaxo transferred three billion Chinese yuan, or about $490 million, through travel agencies since 2007, creating fake invoices to help the company generate money that could be used to bribe doctors. Officials in July said that some of the travel agencies offered Glaxo employees bribes in the form of sexual favors to keep the company’s business. Authorities didn’t disclose further details.
Glaxo has said that some senior executives may have violated Chinese laws and that it is cooperating with the probe.
The person identified as Ms. Huang said in Tuesday’s report that management instructed sales representatives to approach clients from the biggest and most powerful hospitals at least once a week and provide them with travel opportunities and gifts. The Wall Street Journal reported similar information last month, outlining information on trips and kickbacks that Glaxo allegedly offered to doctors.
Chinese authorities in July said Mr. Reilly left the country as they began investigations. Glaxo said Mr. Reilly left China on a preplanned business trip.
Glaxo in late July replaced Mr. Reilly as head of China with Hervé Gisserot, who had been co-head of Glaxo’s pharmaceutical business in Europe. Glaxo said at that time that Mr. Reilly would remain with Glaxo in London, helping the company respond to the Chinese investigation.
A report from China’s state-run Xinhua News Agency on Tuesday quoted Ms. Huang as saying that Glaxo management set sales growth goals of 25%, much higher than the industry standard of 7% to 8%. “Mr. Reilly’s company objective was, ‘Sales are king,’ ” Ms. Huang said.
The official People’s Daily quoted Glaxo’s head of recruitment in China, Guo Jianhua, saying that company executives shrugged off responsibility when authorities made bribery allegations. “When the problems were exposed, the company pushed all responsibilities to individual employees,” Mr. Guo said.