Sunday, September 21, 2014

Pharma giant GSK pays $500 Million bribery fine in China, avoids FCPA

The Times reports that China's bribery investigation of the British pharmaceutical global giant Glaxo Smith Kline has ended with a quick trial, a $500 million fine, expulsion of its in-country manager, and a public apology by the company. Although similar sums have been extracted for marketing abuses in the U.S., it is an eye-catching figure for China.
Such a large fine is not explicitly authorized in the PRC's criminal law against bribery.  But in the year 2000 the Supreme People's Court issued regulations regarding use of fines in criminal casesArticle 2 provides that fines should be assessed according to the circumstances, including the unlawful gains realized, the harm done,
Article 2.  The People's Courts according to the circumstances of the crime,  the amount of the unlawful gain, the degree of harm it causes, and making an overall assessment of the criminal offender's ability to pay,  shall impose a fine according to law .  If the criminal law does not explicitly state a standard amount of fine, the amount of the fine cannot be less than 1,000 RMB. (trans. - GWC)
Another interesting aspect of the remedy is the public apology to the "people of china". (below) The company admits only paying bribes to "non-governmental" persons like hospitals and doctors.  Given the extent of  state institutions there is a plea bargained element there, avoiding a GSK admission of violation of the U.S. Foreign Corrupt Practices Act. - gwc
by Keith Bradsher and Chris Bucklen // NY Times  September 19, 204
 "Chinese authorities accused Glaxo of bribing hospitals and doctors, channeling illicit kickbacks through travel agenciesand pharmaceutical industry associations — a scheme that brought the company higher drug prices and illegal revenue of more than $150 million. In a rare move, authorities also prosecuted the foreign-born executive who ran Glaxo’s Chinese unit.After a one-day trial held in secrecy, the court sentenced Glaxo’s British former country manager, Mark Reilly, and four other company managers to potential prison terms of up to four years. The sentences were suspended, allowing the defendants to avoid incarceration if they stay out of trouble, according to Xinhua. The verdict indicated that Mr. Reilly could be promptly deported. The report said they had pleaded guilty and would not appeal."
GSK plc Statement of Apology to the People of China

Following a comprehensive investigation by the Chinese judicial authorities, GSK China Investment Co. Ltd (GSKCI) has been identified according to Chinese law to have offered money or property to non-government personnel in order to obtain improper commercial gains, and has been found guilty of bribing non-government personnel. GSK plc fully accepts the facts and evidence of the investigation, and the verdict of the Chinese judicial authorities. Furthermore, GSK plc sincerely apologises to the Chinese patients, doctors and hospitals, and to the Chinese Government and the Chinese people. GSK plc deeply regrets the damage caused. GSK plc also apologises for the harm caused to individuals who were illegally investigated by GSKCI.

The illegal activities of GSKCI are a clear breach of GSK plc’s governance and compliance procedures; and are wholly contrary to the values and standards we expect from our employees. It is deeply disappointing that these issues were not identified and addressed. GSK plc has reflected deeply and learned from its mistakes, has taken steps to comprehensively rectify the issues identified at the operations of GSKCI, and must work hard to regain the trust of the Chinese people. Today, GSK plc makes a further commitment to the Chinese government and people that GSKCI will take tangible actions to establish itself as a model for reform in China’s healthcare industry: by continuing to invest in China and supporting China's scientific development; and by further development of innovative new medicines and vaccines for diseases prevalent in China. GSKCI will also increase access to its products in both city and rural areas of China through greater expansion of production and through price flexibility.
This long-term development strategy of GSK plc will promote the future health and well-being of the Chinese people, and positively contribute to China’s economic and social development.

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