Clamping down on corporate bribery

The GSK case has sparked widening concern across China's pharmaceutical sector. The industry has been subject to various reforms of late in an attempt to control the high cost of medicines. Liang admitted that the bribes would be reflected in higher medicine prices. A product that cost only 30 yuan ($4.89) to make could end up setting patients back 300 yuan ($48.94), he said.

Today, China is increasingly important for big drug groups, which rely on growth in emerging markets to offset slower sales in Western countries. GSK sold $1.15 billion worth of pharmaceuticals and vaccines in China in 2012, up 17 percent from 2011. It represents around 3.5 percent of the group's total. IMS Health, a multinational firm that tracks pharmaceutical industry trends, expects China to overtake Japan as the world's second biggest drugs market behind the United States by 2016.

Commercial bribery

The Chinese government has repeatedly made clear that it firmly opposes all types of commercial bribery on both Chinese and foreign sides. To stem the practice, the government recently announced that it has begun probing the pricing methods of another 60 pharmaceutical firms, including units of GSK, Merck & Co, and Astellas Pharma.

Foreign firms have been subject to intense scrutiny by the Chinese Government for bribery. In a high-profile case in 2010, four Chinese senior executives from the Australian mining giant Rio Tinto were jailed for accepting bribes and stealing commercial secrets that undermined China's steel industry.

In March 2011, IBM was charged with providing improper cash payments, gifts, and travel and entertainment to government officials in China and South Korea in order to secure sales of products. IBM later agreed to pay $10 million to settle the case. In 2008, Siemens agreed to pay $1.3 billion to settle charges that it bribed officials in China and other countries to win contracts. Other multinationals such as Morgan Stanley, Wal-Mart, Carrefour, Lucent Technologies and Avery Dennison, were also entangled in bribery across China.

"The country provides many preferential policies toward foreign companies in order to attract foreign direct investment; however, it conducts weak supervision and regulation on these companies," said Xu Lingni, a healthcare analyst at CIC Industry Research.

However, Cheng Baoku, a professor with the Law School of Tianjin-based Nankai University, notes that currently in China, commercial bribery is not a legal concept. It is generally considered an illegal means of offering an inducement, usually money or other valuable items, to a purchasing agent to enter into a transaction.

"In the past few years, China has taken great efforts to combat commercial bribery. But an increasing number of covert bribery channels have presented difficulties for authorities to detect such crime," Cheng said. He cites the GSK case as an example of indirect bribery through the use of travel agencies, a method he calls "outsourcing."

Shang Bin, Director of Tianjin Wisely Law Office, believes that bribery through outsourcing isn't necessarily so seamless. "The most covert part of outsourcing lies in the third party who completes the bribery transaction. It's this third party that is prone to detection," he said.

Shang said in an interview with Xinhua News Agency that the function of an outsourcing agency is to channel the briber's money through its own account to the final recipient. The law states that every financial transaction must leave a paper trail, which leaves no room for a broker to make fake accounts. "This is the key to discovering GSK's crimes," Shang said.

Cheng agrees, saying that uncovering these outsourcing agencies is the key to tackling commercial bribery. He suggests the government establish a whistle-blowing system for third parties to come clean.

"By establishing such a channel, we can uncover more corruption in future."