China accuses former GSK head of bribing doctors

According to police, Reilly and his colleagues disguised illegal revenue in the Chinese market by forging transactions between GSK China and several foreign arms of GSK, making the revenue look like funds used to purchase raw materials in China. They made every effort to cover up the illegal practice during regular checks by regulatory authorities. In terms of sales of prescription drugs and vaccines, police found that all pharmaceutical factories and departments of GSK China nationwide had been involved in commercial bribery.

Last July, police detained four senior executives of GSK China on suspicion of commercial bribery. Reilly was not among them.

Drug price inflation 

The investigation exposed how GSK inflated drug prices to accommodate bribery expenses and high profits. According to the police, in the most extreme case, the price on the Chinese market was seven times that in other countries.

A company document obtained by Xinhua showed that a box of Heptodin is priced 142 yuan by GSK China but only 18 yuan in South Korea, about 26 yuan in Canada and 30 yuan in the United Kingdom.

Police statement said GSK China intentionally inflated prices on the Chinese market by making false declarations to Chinese customs. Chen Hongbo, former vice president of GSK China, told the police that the price was further inflated when drugs were imported into China and packed in GSK's factories here. When a drug was sold to China, the factory price has already included profits and commissions. To avoid paying taxes in China, the company would divide production among GSK branches in different countries and pack them in China as the last step, according to Chen.

The actual cost of a box of Heptodin is 15.7 yuan. It is declared as 73 yuan at customs and priced at 142 yuan as factory price. The highest retail price is 207 yuan in China.

Through such practices, the company disguised profits as costs. Although revenue soared from 2009 to 2012, booked profits remained small. In 2012, it recorded a loss of 188 million yuan on a main business revenue of 6.98 billion yuan.

To sell such expensive drugs, high kickbacks to hospitals and doctors became a necessity.

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