May 29, 2014

GlaxoSmithKline under Investigation in the UK

GSKBy Marlene Koury

GlaxoSmithKline (“GSK”) revealed on Tuesday that the UK Serious Fraud Office (“SFO”) opened a formal criminal investigation into its commercial practices. GSK issued a statement saying that it is “committed to operating its business to the highest ethical standards and will continue to cooperate fully with the SFO.” Neither GSK nor the SFO provided any further details about the practices being investigated.

The SFO’s investigation follows a series of bribery investigations in other countries, including last year’s scandal in China, in which GSK was accused of paying hundreds of millions in bribes to government officials, doctors, and hospitals to boost sales of its drugs. In September of last year, the US Department of Justice reportedly began investigating whether GSK violated the Foreign Corrupt Practices Act in China, which prohibits bribing officials in foreign countries. And in April, GSK said it was launching its own investigation into bribery accusations in many jurisdictions, including Lebanon, Jordan, Iraq and Poland, where allegations of bribery similar to those in China have been raised.

After the wave of bribery allegations worldwide, GSK has made an effort to clean up its act this year. GSK recently announced that it was changing its compensation system. GSK stated that “bonuses for sales professionals will no longer be based on individual achievement of sales targets… instead, all customer facing employees will be evaluated according to their technical knowledge, quality of service, and adherence to the company values….” It also plans to cut payments to doctors by “end[ing] direct payments to healthcare professionals for speaking engagements or attendance at medical conferences.”

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