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 The Serious Fraud Office (SFO) said late on Tuesday that its
director had "opened a criminal investigation into the commercial
practices of GlaxoSmithKline and its subsidiaries", confirming an
earlier brief statement from the company.
Shares in the company - Britain's biggest drugmaker and the
sixth-largest pharmaceuticals group in the world by sales - fell 1.5
percent in early Wednesday trading on the news.
"GSK is committed to operating its business to the highest ethical
standards and will continue to cooperate fully with the SFO," the
company said.
Neither the SFO nor GSK gave any further details about the case, and
a company spokesman declined to elaborate.
In an apparent plea for more information from GSK insiders, the SFO
added that whistleblowers were a valuable source of information and
it welcomed approaches "from anyone with inside information on all
our cases including this one".
The SFO action comes less than two weeks after Chinese police
announced on May 14 that they had charged the former British boss of
GSK's China business and other colleagues with corruption, after an
investigation there found evidence of an elaborate scheme to bribe
doctors and hospitals.
The case is the biggest corruption scandal to hit a foreign company
in China since the Rio Tinto affair in 2009, which resulted in four
executives, including an Australian, being jailed.
The decision by the British fraud office does not come as a complete
surprise, since lawyers and industry analysts had pointed out that
allegations against GSK in overseas markets could expose it to
charges under the 2010 UK Bribery Act.
The new act, like the long-established U.S. Foreign Corrupt
Practices Act (FCPA), prohibits payments to government officials,
including state-employed doctors, to obtain business overseas.
However, GSK can claim mitigation against prosecution if it can
demonstrate that it had robust policies and procedures in place that
were circumvented by rogue employees.
U.S. authorities are already investigating the British drugmaker for
possible violations of U.S. anti-bribery laws in China, sources
familiar with the matter told Reuters last September.
Societe Generale analyst Stephen McGarry said the ability to claim
mitigating circumstances meant GSK might not face major fines, but
the bad publicity "may restrain GSK's share price performance in the
near-term".
CHINA ALLEGATIONS "SHAMEFUL"
Authorities in China first accused GSK last July of funnelling up to
3 billion yuan ($480 million) in bribes to encourage doctors to use
its medicines in a case that the company described in 2013 as
"shameful".
Since then, allegations have surfaced in other countries and GSK is
now investigating claims that bribes were also paid to doctors in
Poland, Iraq, Jordan and Lebanon.
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The allegations that bribes were paid in Poland could be
particularly damaging, according to some lawyers, since the country
belongs to the European Union and GSK would be expected to uphold
the same standards there as in any other EU state.
The persistent controversies about its sales practices in emerging
markets are a major headache for Chief Executive Andrew Witty, who
has tried to make ethical behaviour a high priority since taking
charge in 2008.
Despite the barrage of bribery reports, GSK insists it does not have
a "systemic" problem with improper behaviour and says it has a clear
system for dealing with violations, which resulted in 48 dismissals
and 113 written warnings last year.
In a bid to try and put the problems behind it, GSK is rolling out a
new sales model designed to eliminate sharp marketing practices.
The firm aims to become the first in the industry to stop paying
outside doctors to promote its products, end payments for medics to
attend conferences and delink incentives for sales representatives
from individual sales targets.
Other large drugmakers have also run into problems over bribery
allegations in emerging markets. Pfizer and Johnson & Johnson have
both settled claims under the U.S. FCPA within the past three years,
and a Reuters examination in 2012 of filings by the world’s top 10
drug companies found that eight of them had warned of potential
costs related to charges of corruption in foreign markets.
In China, meanwhile, the authorities are continuing to investigate
potential corruption cases involving other companies, with the
eastern city of Hangzhou the latest to crack down on graft in the
healthcare sector this week, according to an internal memo from the
local government.
($1 = 6.2486 Chinese Yuan)
(Additional reporting by Andy Bruce; Editing by David Evans and Mark
Potter)
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