Accusations Come Amid Heightened Scrutiny of Foreign Corporations.
BEIJING—Chinese officials stepped up pressure on GlaxoSmithKlineGSK.LN +0.37% PLC, accusing the U.K. drug maker's personnel of tax fraud and of bribing doctors, hospitals and others to prescribe medicine, and taking bribes of their own.
In a statement Thursday, China's Ministry of Public Security said it found evidence that Glaxo's sales personnel in China rewarded medical and hospital personnel, government officials and foundations with cash and perks for prescribing medications. The ministry also said it suspects Glaxo's high-level personnel accepted their own bribes through conference rebates and project fees.
Glaxo said it was aware of the ministry's statement and that it was "willing to cooperate with the authorities in this inquiry."
The company added that Thursday's statement was the first official communication it had received from the ministry in relation to the specific nature of its investigation.
"We take all allegations of bribery and corruption seriously. We continuously monitor our businesses to ensure they meet our strict compliance procedures—we have done this in China and found no evidence of bribery or corruption of doctors or government officials. However, if evidence of such activity is provided we will act swiftly on it," Glaxo said in its own statement.
The company has said in the past that its policy complies with U.S. and Chinese policy prohibiting off-label promotion of pharmaceuticals.
The accusations come as Glaxo faces scrutiny of its business practices on a number of fronts. Company executives have been probing a tipster's allegations that the company in recent years was involved in widespread bribery of doctors to prescribe drugs, in some cases for unauthorized uses.
Glaxo also is investigating the tipster's allegations that its sales staff in China rewarded doctors with kickbacks for prescribing the medication Botox.
In addition, the company, alongside other pharmaceutical makers, is being investigated by U.S. authorities over whether it paid bribes to foreign government officials.
According to the ministry's statement, Glaxo used travel agencies to bribe officials and health industry workers, falsifying tax invoices. In China, employees at corporations are typically reimbursed with cash when they provide their employers with receipts and tax invoices. The statement didn't identify travel agency names.
It said suspects involved in an interrogation confessed to crimes, without disclosing further details about those suspects or any relationship to Glaxo.
The ministry said it gathered evidence from Glaxo operations and management around the country, in cities such as Shanghai and the central cities of Changsha and Zhengzhou. The statement said the evidence showed that acts of bribery involved many workers and amounted to a significant amount of money.
Police in China said last week that they detained an undisclosed number of Glaxo employees on suspicion of economic criminal activity, without releasing additional information.
It isn't clear whether the ministry's statement is part of a broader Chinese probe.
But scrutiny of foreign corporations operating in China has been heightened in recent months, as the government has launched a campaign to clean up its commercial sector, cracking down on practices authorities view as abusive or anticompetitive.
The National Development and Reform Commission, the country's economic planning body, launched at the beginning of July an investigation of foreign makers of infant formula, such as Switzerland's Nestle SA NESN.VX -0.31% and France'sDanone SA, BN.FR -0.31% for possible price fixing and anticompetitive activity. Both companies have lowered prices of their baby formula in response to the probe.
Industry insiders say the complexities of China's hospital and pharmaceutical network make it particularly thorny for companies to navigate.
Doctors' workloads are heavy while their pay is low, ranging from $470 a month or less, to $1,250 a month at many public hospitals, according to consultancy McKinsey & Co.
Some physicians seek to boost their pay by prescribing pharmaceuticals and taking home a commission for the sales or by taking direct payments from drug companies, according to China's Ministry of Health. Officials have been attempting for years to crack down on such hospital practices.
The Wall Street Journal reported Monday that Glaxo is investigating allegations its sales staff in China rewarded doctors with kickbacks for prescribing Botox and that the staff allegedly tried to cover their tracks by using private email.
Emails and documents reviewed by the Journal discuss a marketing strategy for Botox that targeted 48 doctors and planned to reward them with either a percentage of the cash value of the prescription or educational credits, based on the number of prescriptions the doctors made. The strategy was called "Vasily," borrowing its name from Vasily Zaytsev, a noted Russian sniper during World War II, according to a 2013 PowerPoint presentation reviewed by the Journal.The number of prescriptions given out by the doctors was tracked on spreadsheets, according to other documents.
It is unclear whether any money was paid to physicians who met sales quotas. The size of the planned payments, as described in the documents, ranged from roughly $245 to $490. A Glaxo spokesman has said the company probed the Vasily program and "[the] investigation has found that while the proposal didn't contain anything untoward, the program was never implemented."—Yang Jie, Jessica Hodgson and Christopher M. Matthews contributed to this article.http://online.wsj.com/article/SB10001424127887324694904578598772902807846.htmlGraham
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