GSK Fined $484 Million by Chinese Government

GlaxoSmithKline (GSK) reports that the Changsha Intermediate People's Court in Hunan Province, China has ruled that GSK China Investment Co. Ltd (GSKCI) has, according to Chinese law, offered money or property to non-government personnel in order to obtain improper commercial gains and has been found guilty of bribing non-government personnel. The verdict follows investigations initiated by China's Ministry of Public Security in June 2013.

As a result of the court's verdict, GSKCI will pay a fine of £297 million ($484 million or 3 billion RMB at a currency exchage rate of 10.0980) to the Chinese government. This will be funded through existing cash resources. Associated costs and charges related to restructuring will be included in GSK's third-quarter update.

“The illegal activities of GSKCI are a clear breach of GSK's governance and compliance procedures, and are wholly contrary to the values and standards expected from GSK employees,” said GSK in company statement. GSK has published a statement of apology to the Chinese government and its people on its website. GSK says it has “cooperated fully with the authorities and has taken steps to comprehensively rectify the issues identified at the operations of GSKCI. This includes fundamentally changing the incentive program for its salesforces (decoupling sales targets from compensation), significantly reducing and changing engagement activities with healthcare professionals, and expanding processes for review and monitoring of invoicing and payments,” said the company in a statement.

GSK Chief Executive Officer, Sir Andrew Witty said: “Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK. We have and will continue to learn from this. GSK has been in China for close to a hundred years, and we remain fully committed to the country and its people. We will continue to expand access to innovative medicines and vaccines to improve their health and well-being. We will also continue to invest directly in the country to support the government’s health care reform agenda and long-term plans for economic growth.”

Source: GlaxoSmithKline

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