“GSK shares the desire of the Chinese authorities to root out corruption.” So declared GlaxoSmithKline, a British drugs giant, this week as it struggled to respond to a scandal in China. Four executives, all Chinese nationals, have been arrested on accusations of, among other things, paying nearly $500m in bribes to doctors and officials to boost sales of the firm’s treatments. Chinese state television broadcast an interview in which one of the arrested executives gave details of the alleged bribery scheme. Another executive, who is British, has been told not to leave China. GSK said it would co-operate with the investigation.Scandals involving the marketing of medicines are not just a Chinese phenomenon. Big Pharma’s business model for peddling its pricey pills, which includes inducements such as “educational” conferences at lavish resorts, has led to abuses even in countries with well-paid doctors and a strong rule of law. A year ago America’s Justice Department announced a $3 billion settlement with GSK, after prosecutors had accused the firm of illegal promotion of its drugs.In China, however, that seed falls on fertile soil. For a start, doctors are woefully underpaid. And perverse incentives in China’s official policies, says a report from the World Health Organisation, let hospitals and doctors make money from selling medicines. Never mind if patients really need all…
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The Economist: Business
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