Glaxo Probes Complaint on China Sales of Botox

GlaxoSmithKline Plc is investigating a complaint about how employees in China sell the Botox wrinkle treatment to doctors, adding to the U.K.’s drugmaker woes in the country as Chinese police probe allegations of corruption.

The same whistle-blower who made previous accusations about corruption at Glaxo in China apparently is behind the Botox complaint, Simon Steel, a company spokesman in London, said in an e-mail today. The whistle-blower says salespeople gave doctors cash and perks for prescribing the product, the Wall Street Journal reported today, citing internal documents and e-mails it reviewed.

“We are investigating these new claims,” Steel wrote. “However, our inquiries to date have found no evidence of bribery or corruption in relation to our sales and marketing of therapeutic Botox in China.”

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. 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. Glaxo will cooperate with the investigation, Steel said July 1.

Share Price

Glaxo rose 1 percent to close at 1,729.50 pence in London. The stock has returned 33 percent this year, outperforming the 20 percent return for the Bloomberg Europe Pharmaceutical Index.

“To have an impact on the share price, you’d have to speak about several hundred million dollars or pounds in fines, and I doubt that that will be the case,” Fabian Wenner, analyst with Kepler Cheuvreux in Zurich, said in an interview.

Glaxo’s sales in China make up just under 3.5 percent of the company’s global pharmaceutical revenues and are less profitable than its Western businesses, Mark Clark, an analyst at Deutsche Bank AG in London, said by e-mail.

“China is really not a big needle mover in terms of earnings for Glaxo, even if emerging markets as a whole are an important sales growth driver,” he said.

Russian Sniper

E-mails and documents discuss a marketing strategy for Botox that targeted 48 doctors and planned to reward them with cash or educational credits, based on the number of prescriptions made, the Journal reported today. The strategy was called “Vasily,” borrowing its name from Vasily Zaytsev, a noted Russian sniper during World War II, the report said, citing a 2013 PowerPoint presentation.

“We have investigated the specific claim on the so-called Vasily program,” Steel wrote. “Our investigation has found that while the proposal didn’t contain anything untoward, the program was never implemented.”

A four-month investigation of the same tipster’s previous allegations turned up no evidence of wrongdoing, the company said June 13. The whistle-blower alleged Glaxo’s sales staff in China bribed doctors to prescribe medication, in some cases for unauthorized uses, between 2004 and 2010, the Wall Street Journal reported last month.

Glaxo licenses from Allergan Inc. the right to sell Botox in China and Japan.

— With assistance by Daryl Loo

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