Just last month, Chinese police charged three employees of GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) in an elaborate bribery scheme that drove up prices in its fast-growing China market and accused the drug-maker of receiving over $150 million in illegal revenues. While former China chief Mark Reilly has not been detained, the two Chinese executives — Mr. Zhang, the company’s human resources director, and Mr. Zhao, the head of the legal affairs department — are being held in China and are expected to face prosecution.
GlaxoSmithKline’s unlawful marketing of three drugs
The three drugs that the company is accused of unlawfully marketing are asthma medication Advair and anti-depressants Paxil and Wellbutrin. While the company hasn’t admitted any wrongdoing it has agreed to settle the accusations with California receiving the biggest payout at around $7.1 million.
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“This settlement requires GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) to pay a significant penalty and imposes strong new rules designed to prevent future misrepresentations of GSK products,” California Attorney General Kamala D. Harris said in a news release.
“We don’t feel like this is who we are today,” GSK spokesperson Mary Rhys told the BBC.
“These are historic matters – they relate back to the federal government settlement in 2012 so some of these events are as long ago as 14 years,” she added while pointing out that the company had already set aside money to cover the cost of the agreement.
In addition to the cash payout, GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) must also extend its Patient First Program until 2019. That program prohibits the company from offering financial incentives to its sales force, and the company is also prohibited from paying doctors to speak about GSK’s drugs or attend conferences.
“This settlement requires GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) to pay a significant penalty and imposes strong new rules designed to prevent future misrepresentations of GSK products,” said California attorney general Kamala Harris in a statement.
This isn’t the last of the problems that GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) faces. In addition to the investigation in China, GSK is also facing a criminal investigation by the UK’s Serious Fraud Office.While one of the largest companies in the UK insists these practices are already in place, many believe that GSK will still see its dirty laundry aired based on past business dealings.