CEO Andrew Witty says top GSK leaders did not know of China problems, committed to 'rooting out' bad actors

GlaxoSmithKline chief executive Andrew Witty at the drugmaker's new home at the Philadelphia Navy Yard. (Akira Suwa / Staff Photographer)

GlaxoSmithKline chief executive officer Andrew Witty said Wednesday that the head office in London was not aware of the activity of some of the company's executives in China, who have been accused of using travel agencies to pay off doctors and other health-care providers to increase sales of medicine.

In a conference call with reporters following the release of the GSK's second quarter financial results, Witty said the most recent China problem - and he said there were two distinct ones - allegedly involved some executives "defrauding" the company and the Chinese health care system.

"To see these allegations about people working for GSK is, as we've said, shameful," Witty said. "For me, personally, they are deeply disappointing. These allegations are totally contrary to our values. Outside and inside the company, people rightly expect us to operate with integrity. To be crystal clear, we have zero tolerance for this kind of behavior. We are absolutely committed to rooting out corruption."

GSK has more than 100,000 worldwide employees. About 1300 employees work out of the Philadelphia Navy Yard and others are in facilities in the suburbs of Pennsylvania and New Jersey.

In an earlier episode, a whistleblower reported problems with the company's China operations, though Witty said those were examined and not substantiated.

Recent reports from China-based correspondents for several news organizations suggest that executives from other major drug companies have been questioned in recent days.

Wednesday morning, Reuters reported that China's official Xinhua news agency said the government was trying to tackle "rampant" malpractice in the pharmaceutical sector, including corruption. Xinhua said 1,000 doctors, nurses and administrators at 73 hospitals in Zhangzhou city in the southeastern province of Fujian had been found taking kickbacks.

"It will not be surprising if more pharmaceutical companies and hospitals, domestic or international, are to be involved in probes in the days to come," Xinhua said in an English-language commentary without naming any firms or hospitals, according to Reuters. "Big international firms should shoulder (their) due responsibilities to bid farewell to malpractice, setting a good example and serving as a wake-up call for domestic pharmaceutical companies."

Drug companies, like other manufacturers, hope to sell products to China's 1.3 billion people, many of whom are making more money than they once did, but also developing chronic diseases (heart disease, diabetes, respiratory problems) at the rates seen in the United States and Europe. Like with those other industries, the drug market is often based on relationships between companies and government officials.

Witty said GSK is committed to working in China and beyond complying with whatever rules the government imposes, it will have to continually look at how the business operations need to change.

"It is clear to me that we are at an inflection point in what the Chinese marketplace is likely to look like in the future," Witty said, "not the least because of the Chinese government's desire to ensure its health-care system keeps up with the evolution of the country and the growing wealth across the country."

GSK's second-quarter financial statement is here.