GSK hit with €380m corruption fine in China

A Chinese court has fined British pharmaceuticals firm GlaxoSmithKline three billion yuan (€380 million) for paying bribes, the biggest fine ever imposed in China and evidence of a tougher business climate for foreign firms.

The record penalty follows allegations the drug giant ordered staff to bribe doctors and hospital officials to use GSK products, using up to three billion yuan channelled through travel agencies.

The sentence was handed down after a one-day trial behind closed doors in Changsha.

GSK China had “resorted to bribery to boost sales of its medical products and sought benefits in an unfair manner,” ran a statement from the court, carried on the state news agency Xinhua.

“[GSK] bribed, in various forms, people working in medical institutions across the country, and the amount of money involved was huge. Five senior executives actively organised, pushed forward and implemented sales with bribery,” it said.

The court also sentenced Mark Reilly, GSK's former country manager, to three years in jail, suspended for four years, and expelled him from China. Other GSK executives were also given suspended jail sentences.

Chinese authorities first announced they were investigating GSK in July last year. During the investigation, GSK was sent a secretly-filmed sex tape of Mr Reilly.

The probe has caused shockwaves among the foreign business community, with foreign managers anxious they could face charges and have sought advice whether they should temporarily leave the country, or even for good.

The GSK scandal the biggest to hit a foreign company in China since the Rio Tinto affair in 2009, which led to four executives, including Australian Stern Hu, being jailed for between seven and 14 years.

Glaxo is the maker of the world's top-selling drug, the asthma treatment Seretide.

GSK said it had “published a statement of apology to the Chinese government and its people.”

GSK chief executive Sir Andrew Witty described the investigation as a “deeply disappointing matter for GSK.”

“We have and will continue to learn from this. GSK has been in China for close to a hundred years and we remain fully committed to the country and its people. We will also continue to invest directly in the country to support the government’s health care reform agenda and long-term plans for economic growth,” said Witty.

The sentence comes as overseas carmakers and technology companies are facing anti-trust probes.

Last week, there were heavy fines for Japanese component manufacturers and German carmaker Audi for breaching Chinese anti-trust laws.