GSK says some of its China executives might have acted in ways which breach Chinese law

Drugmaker GlaxoSmithKline said Monday morning after another meeting with officials from the Chinese Ministry of Public Security that, "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."

GSK is based in London, but has operations in Philadelphia's Navy Yard and in surrounding towns in Pennsylvania and New Jersey.

Chinese officials have said that some China-based GSK executives routed money through travel agencies to pay off doctors and other healthcare personnel to sell more medicine.

China, like many countries, are looking for ways to control skyrocketing health-care costs. Drug companies, like other industries that hope to sell products to China's 1.3 billion people, are watching the GSK case to see how China is going to handle relations with such companies.

GSK is scheduled to release second-quarter financial results on Wednesday. Chief executive Andrew Witty, who has tried to repair the company's reputation after multiple problems in the early 2000s, usually speaks to Wall Street analysts and reporters when the quarterly results are announced. He is scheduled to do so Wednesday and will likely discuss the situation.

After the most recent meeting with Chinese officials, GSK's Abbas Hussain, who is president of the drugmaker's Eastern Europe, Japan, Emerging Markets & Asia Pacific division, issued this statement:

“We have had a very constructive meeting with the Ministry of Public Security, and we are very grateful for their time. GSK is taking this situation extremely seriously and that is why we are here.

“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. We have zero tolerance for any behavior of this nature.

“I want to make it very clear that we share the desire of the Chinese authorities to root out corruption wherever it exists. We will continue to work together with the MPS and we will take all necessary actions required as this investigation progresses.

“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. We will actively look at our business model to ensure we make a significant contribution to meeting the economic, healthcare and environmental needs of China and its citizens.

“In addition, savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients."

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