The Chinese Government’s investigation of alleged large-scale bribery by British-based pharmaceutical giant GlaxoSmithKline (GSK) reflects widespread corruption in the industry, experts said.

Some commentators see GSK as being caught up in an “anti-corruption storm,” as President Xi Jinping spearheads a major propaganda campaign against corrupt practices.

Police detained four senior Chinese executives and 16 others on charges linked to bribery and tax issues involving the company.

The suspects include two vice presidents of GSK China, a legal director and a business development manager, the official Xinhua news agency said.

GSK was reportedly accused of transferring some 3 billion yuan (490 million) to 700 travel agents over six years to pay for perks given to doctors and other hospital staff.

“Bribery is a widespread practice among all pharmaceutical companies, foreign as well as Chinese ones,” Zhang Lufa, an expert on China’s medical reforms at Shanghai’s Jiaotong University, told dpa.

Abbas Hussain, international President for GSK, said “certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls, which breaches Chinese law,” Hussain said. “We have zero tolerance for any behaviour of this nature.” Police suspected GSK employees “offered large bribes to officials, medical industry associations and foundations, hospitals and doctors, in a bid to boost sales in China,” the Global Times newspaper said.

Some senior executives from GSK China “colluded with other enterprises to push up drug prices, expand sales and gain an unfair advantage,” the newspaper quoted police as saying.

The GSK case was “a lesson for bribery culprits,” it said in a separate commentary.

“It’s notable that some foreign-investment companies have engaged in very serious, brazen bribery in China,” the commentary said.

“It was simply a matter of time before their illegal actions came to light,” it said. “GSK’s boosting of sales through bribes is almost semi-public knowledge, so there is no surprise that it was caught up in an anti-corruption storm.” President Xi Jinping has made tackling corruption a top priority since he was appointed leader of the ruling Communist Party in November.

Zhang said GSK was probably targeted partly because of the reported scale of its bribery, and partly because of problems with the travel agents.

It also seemed to be partly “by accident” that GSK was picked, as an apparent target to warn other foreign companies, he said.

“It’s not as if they bribed too massively and other [pharmaceutical companies] didn’t do the same,” Zhang said.

The China Daily newspaper quoted Li Lin, a lawyer specializing in corporate crime, as saying GSK’s quick cooperation should help its position.

“It is not a single case of commercial bribery in China,” Li was quoted as saying. “Sectors like healthcare and education are the worst areas for bribery crimes in China due to the huge economic profits.” China Daily said the Government had widened its investigation of alleged illegal practices by foreign pharmaceutical firms since it began the probe of GSK.

It said officials visited the Chinese offices of Belgian drug-maker UCB last week, but there were no details about why they were there.

Rampant corruption in the healthcare system stemmed partly from hospitals’ “great power” coupled with their low incomes through official channels, Zhang said.

“Hospitals need much money to develop, but the Government didn’t invest enough money so they have to earn it through the market,” he said.

Up to 80 per cent of medicines in China rely totally on hospitals for sales, he said.

“Which medicine will be used? How much should be used? It all depends on doctors and hospitals. That’s the root cause of the bribery,” Zhang said.

Hussain said GSK “shares the desire of the Chinese authorities to root out corruption wherever it exists.”

“We fully support the efforts of the Chinese authorities in their reforms of the medical sector and stand ready to work with them to make the changes for the benefit of patients in China,” he said.

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