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Chinese Police Say Glaxo Practices Come From Unit: Xinhua

Sept. 3 (Bloomberg) -- GlaxoSmithKline Plc’s China unit crafted suspect business practices to meet revenue goals and then blamed individual sales representatives after police began an investigation, Xinhua reported, citing the police.

The company’s policies require employees to follow the law and prohibits cash transfers to doctors or government officials, China’s official news agency reported today. Glaxo’s China unit “went through the motions in internal auditing so as not to discover these violations,” Xinhua said.

The U.K.’s biggest drugmaker is being investigated over allegations it used cash and sexual favors to bribe doctors and health officials to promote sales of its medicines. A government crackdown against corruption has extended to other foreign drugmakers and local hospitals since China announced the Glaxo probe. Glaxo said it’s fully cooperating with the investigation.

“We remain deeply concerned by the allegations of fraudulent behavior and ethical misconduct in our China business,” London-based Glaxo said in an e-mailed statement. “The issues identified would be a clear breach of our corporate values and we have zero tolerance for any behavior of this nature.”

Growth Goals

The parent company assigned annual growth goals that exceeded industry averages, Xinhua said, citing Huang Hong. Huang, a business development manager with Glaxo, was among the four executives who were detained on suspicion of economic crimes. Salary was tied to sales volume, according to the report.

Teams dealing with big customers had almost 10 million yuan ($1.65 million) of “public relations funds” to keep close ties with key staff in major hospitals, Xinhua said.

Glaxo, which made about 1 billion pounds ($1.56 billion) of revenue in China last year, is reviewing how it operates there, Abbas Hussain, head of emerging markets, said in July after meeting with government officials in Beijing.

To contact the reporter on this story: 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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