The verdict is in: British pharma giant GlaxoSmithKline (GSK) will pay the biggest penalty levied on a company in China after being found guilty of bribing medical professionals there. A court in Hunan province said the company resorted to underhand practices to boost sales of its products. GSK will be fined £297m – a figure Chinese investigators say is equal to the bribes paid by GSK. Shares in GSK rose almost 1 per cent on the back of the news, as investors had worried the judgment would be worse.
In addition, five top-level executives were handed suspended prison sentences as part of the 15-month long investigation. Mark Reilly, GSK's former top executive in China, pleaded guilty to bribery-related charges after voluntarily returning to China to co-operate with the investigation last year. He was given a three-year prison sentence, suspended for four years and now faces deportation back to the UK. This compares with Peter Humphrey – a British private detective who gathered illegal information on behalf of GSK in China – who was jailed for two and half years last month. The court said the sentences of the five executives were suspended because they co-operated fully with authorities.
While GSK will hope to draw a line under the China matter, it could face further action in a number of other jurisdictions. The UK, Poland and Iraq have made similar allegations against the company, although GSK said it has overhauled its business practices in the wake of the Chinese scandal. City analysts widely agree that it will take time for GSK's Chinese operations to recover, as will sentiment for the shares in London.
In the meantime, the US Department of Justice and UK Serious Fraud Office are both investigating the drugmaker, and this record fine sends a warning to other foreign companies in China that they’re not immune from the anti-corruption drive President Xi Jinping is waging.
