UCB Visited by Chinese Authorities Amid Glaxo Probe

UCB SA’s (UCB) Chinese operations were visited by local authorities following the government’s probe of GlaxoSmithKline Plc (GSK) over allegations of economic crimes.

All drugmakers are receiving visits, and the Brussels-based company has “nothing to report,” France Nivelle, a UCB spokeswoman, said yesterday in an interview. “It’s business as usual,” Nivelle said. Reuters had reported the visit earlier.

A Shanghai travel agency was temporarily closed as Chinese authorities examine its role as part of a probe into suspected economic crimes at London-based Glaxo’s business there, the Xinhua news agency reported.

Shanghai Linjiang International Travel Agency shut to enable the investigation of its involvement in the Glaxo case, Xinhua said, citing the Shanghai Municipal Tourism Administration.

State broadcaster China Central Television aired a prime-time segment on July 16 detailing how executives at the U.K.’s largest drugmaker used a travel agency to funnel bribes to government officials.

The CCTV report featured Liang Hong, operations manager for Glaxo China, explaining how executives passed bribes to drug regulators, pricing officials at the National Development and Reform Commission and hospital officials. Liang is among the four Glaxo executives in police custody, CCTV reported.

Photographer: Paul O'Driscoll/Bloomberg

The exterior of UCB SA headquarters is seen in Brussels. Close

The exterior of UCB SA headquarters is seen in Brussels.

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Photographer: Paul O'Driscoll/Bloomberg

The exterior of UCB SA headquarters is seen in Brussels.

The allegations are “shameful” and would be a breach of internal systems and values, Glaxo said in a statement.

UCB fell 0.8 percent to 42.80 euros at 10:10 a.m. in Brussels.

Independent Audit

Glaxo hired Ernst & Young LLP to conduct an independent audit, the Financial Times reported. Terence Ng, a Hong Kong-based media relations manager at the auditor, declined to comment on the report.

Glaxo faces a review from the U.K.’s Serious Fraud Office, the Wall Street Journal reported, citing people familiar with the matter. Susan Givens, a spokeswoman for the fraud office, declined to comment on the report. Garry Daniels, a Singapore-based spokesman at Glaxo, declined to comment.

Glaxo’s finance chief in China, Steve Nechelput, is unable to leave China. The travel restriction was imposed at the end of June, Simon Steel, a Glaxo spokesman in London, said July 17 by phone. Nechelput hasn’t been questioned or arrested and isn’t being detained, Steel said. The British embassy is providing the British national with consular assistance, John Gallagher, a Beijing-based spokesman, said by phone.

Glaxo has had four of its senior executives detained amid an investigation involving 3 billion yuan ($489 million) of spurious travel and meeting expenses, and trade in sexual favors, China’s Public Security Ministry said July 15.

Executive’s Departure

Mark Reilly, who has led the London-based company’s business in China since 2009, left the country on June 27 after his colleagues were detained, the ministry said.

Reilly returned to the U.K. on a routine, planned business trip and has been working from Glaxo’s headquarters on the response to the probe, a person with knowledge of the matter said July 15. The person, who asked not to be identified because he wasn’t authorized to speak on the subject, declined to say when or whether Reilly will return to China.

“This could be the government killing the chicken to scare the monkeys, using the GSK case to send a signal to pharmaceutical companies to say ‘maybe it’s time to stop this type of practices,’” said Yanzhong Huang, senior fellow for global health at the Council on Foreign Relations in New York and author of the book, Governing Health in Contemporary China.

Industry Crackdown

Efforts to clean up the nation’s $350 billion health-care industry have gained prominence since police said last month they were investigating Glaxo for suspected economic crimes. On July 17, the China Food and Drug Administration said it will “severely crack down” on fake medications, forged documents and bribery.

Recent investigations have so far implicated Glaxo, though other foreign companies may also be involved, Gao Feng, head of the economic crimes investigations unit of China’s Public Security Ministry, told reporters at a July 15 briefing.

At least four multinational drugmakers are facing probes by local anti-corruption units in China, according to Wendy Wysong, the head of anti-corruption practice in the Asia-Pacific region at law firm Clifford Chance. No other foreign drug company apart from Glaxo has been named so far by Chinese authorities in connection with the investigation.

Other Drugmakers

Novartis AG (NOVN), Europe’s biggest drugmaker by sales, and Germany’s Bayer AG (BAYN) said they haven’t been approached in China by the authorities in connection with any misconduct. Merck & Co. (MRK), the second-biggest U.S. drugmaker, said it hasn’t been contacted by the Ministry of Public Security. Roche Holding AG said it’s not aware of any anti-corruption probes in China against the Basel, Switzerland-based company.

Sanofi, France’s biggest drugmaker, declined to comment on whether it’s had any contact with China’s government in relation to bribery probes, or whether the Glaxo investigation could have any implications for its business in China.

AstraZeneca Plc (AZN), the biggest U.K. drugmaker after Glaxo, said in its 2012 annual report that it is investigating indications of inappropriate conduct in countries that include China. The company has no update yet, Esra Erkal-Paler, a spokeswoman, said in an e-mail.

To contact Bloomberg News staff for this story: Albertina Torsoli in Paris at atorsoli@bloomberg.net; Natasha Khan in Hong Kong at nkhan51@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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