18 More Detained in GSK Probe

China’s state media report that at least 18 more people have been detained as the probe against the British pharmaceutical giant (GSK) continues. From Ben Blanchard, Fang Yan, and Ben Hirschler at Reuters:

China’s state radio reported late on Friday on its website that police in the central city of Zhengzhou had “recently held, in accordance with the law, 18 GlaxoSmithKline (China) employees and some medical personnel”.

It provided no details of the detentions nor say exactly when they happened.

[…] China’s Ministry of Public Security said late on Friday GSK’s former general manager for the country, Mark Reilly, currently in Britain, would return to China to cooperate in the investigation. [Source]

At the same time, Chinese state media have released detailed bribery allegations against GSK. From AFP:

Company representatives offered bribes of 10 to 20 yuan ($1.6-$3.2) each time prescribed some GSK products in China, the official Xinhua news agency reported, giving new details of the case.

[…] “Some executives gave clear directives to the sales department to offer bribes to doctors or opportunities to attend academic conferences,” Xinhua quoted a GSK regional sales manager as saying.

[…] Doctors earned a seven to 10 percent cut from sales of GSK drugs they prescribed, the report said. [Source]

Despite GSK officials denying knowledge of the corruption problems before investigation from the Chinese police, an email from an anonymous whistleblower to the GSK board in January contained many similar allegations. From Malcolm Moore and Denise Roland at The Telegraph:

The whistleblower’s email, a copy of which has been seen by The Sunday Telegraph, claimed that “almost every” new GSK sales employee was wired 10,000 renminbi (£1,060), into “their personal bank accounts”.

“The cash advance is to be used for business purposes, not personal use. Each employee has significant discretion as to how best to utilise his or her cash to maximise sales,” it claimed.

The email alleged this money, which was replenished each month, was used to pay cash bribes to doctors to prescribe drugs. It also mentions that travel agencies were used by GSK to arrange doctors’ trips. “The sales team decides who the most important decision makers are at the hospitals and invites those doctors to attend an international conference,” it claimed. [Source]

And it has been reported that U.S. citizen Yingzeng Yu and her British husband Peter Humphrey, both corporate fraud investigators, are being detained for, “a possible violation of China’s laws on possession of personal information.” From  Heather Timmons at Quartz:

It is not yet clear who Yu, a veteran corporate adviser, and Humphrey, a former journalist with Reuters, were investigating or what they may have found, but their raises serious questions about how China is pursuing its investigation of in the pharmaceutical sector, how its privacy laws are being applied, and how businesses hoping to protect themselves from fraud should proceed in the future.

Chinese authorities have accused GSK of illicitly paying up to 3 billion yuan ($489 million) to doctors, hospitals and government officials to win more business and raise drug prices. GSK acknowledges that some of its employees have broken the law in China, but would not confirm whether GSK was a client of ChinaWhys.

ChinaWhys specializes in investigating and identifying fraud at companies doing business in China, a crucial skill in a business environment where bribery is rampant, but where the government is cracking down some illegal activities. [Source]

Some political watchers see China’s investigation into GSK as a move to “lower drug price and win domestic political support”.

See more on the GSK scandal via CDT.