Glaxo’s China Bribery Backlash
GlaxoSmithKline (NYSE:GSK) reported earnings on Wednesday that showed the pharmaceutical company has been hit hard by its bribery scandal in China earlier this year and increasing competition from generic versions of its medicines. Sales in China were down 61 percent for the quarter.
On the earnings conference call, CEO Andrew Witty said that Glaxo is “totally committed to China” and there are no chances of the company pulling out of the country. The scandal erupted earlier this summer, after Chinese authorities discovered that GlaxoSmithKline’s senior staff in the country funneled $489 million in cash through 700 travel agencies by creating fake events and expenses, usingthe leftover funds to bribe doctors with cash and sexual favors in exchange for prescribing the company’s drugs.
Although Witty apologized for the scandal, agreeing to lower drug prices in the country in return for Glaxo’s Chinese missteps, the infractions have damaged the pharmaceutical company’s reputation in the country — doctors are now shunning Glaxo’s sales representatives, Reuters reports. While China only accounts for a small portion of the pharmaceutical giant’s sales, the country is seen as an important research base in Witty’s plans to reduce research and development costs.