GlaxoSmithKline is a global pharmaceutical and healthcare giant, with turnover in third quarter 2013 alone of over 6.5billion. Headquartered in the UK, the company has offices in over 115 countries, with millions of people using its products every day. The company primarily develops and produces vaccines, as well as prescription drugs and over-the-counter medicine, and has three main business units: 1)pharmaceutical 2)vaccines, and 3) consumer healthcare.
while priding itself on being a good corporate citizen, providing products that allow people to live longer and better lives,
reports of disturbing behavior have emerged. In July 2013, government officials in China made allegations that GSK had bribed hospitals, doctors, and health officials, all in an effort to get them to prescribe the company's drugs to patients.
The alleged sums involved are substantial a reported $490 million.
As a result, four employees of GSK's operations in China, including a senior executive, were detained. The company reported that its finance director in China was barred from leaving the country but was not being held.
Almost immediately, GSK went into damage control mode, issuing a statement that said “ Certain senior executives of GSK China who know our systems well appear to have acted outside of our processes an controls, which breaches Chinese law.” The company to its credit, quickly acknowledged and admitted illegal behavior on the part of some of its employees, but it went to great lengths to stress that this was not how GSK operated and that these reported bribes were a deviation from normal operating procedures . Chinese police alleged that GSK employees transferred the bribe money to recipients through travel agencies and consulting firms, all in an attempt to hide the source and true nature of the funds
In defense of the pharmaceutical company, even Chinese officials acknowledged that the amount of subterfuge employees in the schemes showed the great lengths that the employees had to go to in order to evade and undermine GSK’s internal anti-bribery controls. And the company emphatically stated its desire to fully cooperate with and help the Chinese government get to the bottom of the corruption scandal.
A GSK executive said that the company will actively look at our business model to ensure we make a significant contribution to meeting the economic , healthcare, and environmental needs of china and
Its citizens.” It was not clear what the immediate, if any, strategic challenges would be for the company, or if any reorganization or rethink in strategy would be required
there are reports that GSK had the unfortunate bad luck of begin caught up in an overall crackdown by the Chinese government on
the pharmaceutical market in general. And the company has clearly stated that it had no prior knowledge of the alleged improper behavior and that safeguards were in (statements by investigators would appear to corroborate this).That said, the company realizes the gravity of the situation. During the drug scandal, sales in China dropped by 61percent.But the CEO of GSK was emphatic in his denials that the company would quit China any time soon. It can't. China is a vital component to the company's strategy, with the Chinese market expected to be the largest for pharmaceuticals by 2020. It is imperative that GSK convinces the Chinese government that its internal controls are rigorous and that the chances of something like this occurring again are highly unlikely.
Shortly after the allegation came to light, the CEO of GSK said that he was commissioning an independent review into the operation in China . It was announced that the law firm of Ropes & Gray was hired to conduct the review. Undoubtedly, GSK will incorporate any suggestions that the law firm comes up with for making its internal controls even more stringent