‘Reformed’ GSK blunders into a fresh cloud of accusations

The Serious Fraud Office is the latest law enforcement body to investigate the company

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The Independent Online

The first thing many drivers see when taking the M4 into London is GlaxoSmithKline’s towering offices greeting those coming from Heathrow, arriving in Britain to the sight of its largest drug maker.

But a thick cloud of scandal has recently come to enshroud Britain’s biggest pharmaceuticals firm as the Serious Fraud Office (SFO) looks into the company’s dealings.

The SFO and Glaxo have both remained tight-lipped over the content and length of the former’s investigation, launched in full yesterday. However its timing, just two weeks after Chinese police announced that they had charged the former British boss of Glaxo’s China business Mark Reilly and other colleagues with corruption, offers a possible clue to the inquiry’s trigger.

Chinese officials charged Mr Reilly after allegedly finding evidence of an elaborate scheme to bribe doctors and hospitals. China first accused Glaxo last July of funnelling up to 3bn renminbi (£288m) in bribes to encourage doctors to use its medicines.

Allegations have surfaced in other countries since then and Glaxo is investigating claims that bribes were paid to doctors in Poland, Iraq, Jordan and Lebanon. The company has only just recovered from admitting corporate misconduct and receiving a $3bn (£1.8bn) fine in 2012 after it emerged its sales reps in the US had been encouraging  doctors to prescribe its Paxil and Wellbutrin antidepressants to children without regulators’ approval.

Glaxo was found to have lavished hospitality on those who agreed to write extra prescriptions, including trips to Bermuda, Jamaica and California and sports matches. It had also previously been found to have hidden information regarding the side-effects and risks of Paxil. 

Glaxo, whose chief executive is Sir Andrew Witty, has made efforts to clean up its practices. In December, it revealed plans to revamp its sales methods to put it ahead of the rest of the industry – stripping away onerous individual sales targets, which it is believed had put pressure on its sales staff, and stopping the sponsoring of doctors to attend medical conferences. The company had also made some steps forward, inking a tie-up with Swiss rival Novartis to create a consumer healthcare powerhouse last month and receiving approval for new HIV and respiratory drugs last year.

Alistair Campbell, an analyst at Berenberg, said: “The bribery allegations have to be intensely frustrating for GSK management. They have been facing up to allegations for quite some time and it was portraying itself as a different, structurally reformed company. The vast majority of staff are doubtless operating under strict guidelines and extremely compliant.”

Mr Campbell added that the Chinese charges must be seen in context. “China is a very difficult country to operate in and very hard for any company to comply with best practice.”

The potential impact of the SFO investigation remains to be seen at a time in which the industry is under scrutiny. One white-collar crime lawyer told The Independent: “One interesting consequence is that under EU law, if the company is found guilty of criminal charges it could be barred from European contracts. But in terms of reputational damage, have investigations in Rolls-Royce and Siemens affected their image? Not really.”

Glaxo shares fell 1.6 per cent to 1,608.5p.