Glaxo Awaits Details of China Probe 6 Days After Police Call

Six days after police in China began an investigation into GlaxoSmithKline Plc, the U.K.’s biggest drugmaker still has no details on the probe, a spokesman said.

Senior executives at Glaxo China are suspected of “economic crimes” and are being investigated by Changsha public security officials, the city’s police force said June 28 on its official blog, without elaborating.

Simon Steel, a Glaxo spokesman in London, repeated yesterday that the company is unclear of the precise nature or purpose of the investigation, which began June 27. “There is nothing further to add to that,” Steel said today in an e-mail.

State-run China Daily said today the probe raises concerns about ongoing corruption in the country’s drug industry, which is the world’s fastest-growing pharmaceutical market according to consulting firm IMS Health Inc. The situation may also signal a wider scope for investigations as China tries to rein in corruption.

“Historically the focus of the Chinese government had been on government officials receiving bribes,” said Kim Nemirow, a Hong Kong-based partner at law firm Ropes & Gray LLP. “More recently the scope has expanded to those individuals who are giving bribes to government officials.”

Chinese authorities have stepped up enforcement of bribery and corruption since President Xi Jinping took office last November, Nemirow said.

Open Secret

“It would be a wrong decision for any company to stop investing in or even leave China” due to the stricter regulations, said Qiagen NV (QGEN) Chief Financial Officer Roland Sackers in a Shanghai interview today. “Not just because of the sales growth, but also because of the skills of the scientists you can find here.”

Today’s China Daily article mentioned the case of Zheng Xiaoyu, the former head of China’s State Food and Drug Administration, who was executed in 2007 after his conviction for taking bribes and approving dangerous medicines.

At the time of Zheng’s execution, 38 multinational drugmakers announced their intention to resist commercial corruption. Yet, bribing of doctors by pharmaceutical companies is still an “open secret,” according to the newspaper, which cited unidentified people working in the industry.

A senior Glaxo finance executive in Shanghai and employees in Beijing were detained as part of a corruption investigation, the South China Morning Post said July 1, citing an unidentified person from Shanghai’s drug industry. Steel declined to comment yesterday on whether any staff have been arrested or detained.

To contact Bloomberg News staff for this story: Daryl Loo in Beijing at dloo7@bloomberg.net; Natasha Khan in Hong Kong at nkhan51@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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