18 July 2013

Pharmaceutical companies, whether American or European, are very keen on protecting their intellectual property. The integrity of their products is important to them. But as trading entities, market share is crucial. Marketing medicines has a checkered history. The industry now dresses itself in social responsibility and ethical respectability. The sector even purports to rigorously enforce codes of conduct. Its vast commitment to marketing, as high as US$90 billion annually, is twice what is spent on research and development. That funding enables novel initiatives to promote sales. It spends massively on lobbying and medical training. But it spends even more on capturing the hearts and minds of doctors – “whenever two or three doctors are gathered there in their midst is also a pharmaceutical salesman”.

GlaxoSmithKline, the second largest in the industry, has been uncovered corrupting the Chinese market. Earlier this year Chinese authorities began looking into a Shanghai travel agency that was rumored to have huge revenue but few bookings. This week the Public Security Ministry disclosed finding a conspiracy involving tens of millions of dollars, directed by senior executives at the British drug giant GlaxoSmithKline.

Investigators said that “…for years, high-ranking executives at the company’s China operations used travel agencies as money-laundering shops to funnel bribes to doctors, hospitals, medical associations, foundations and government officials. The payoffs, investigators said, helped bolster drug sales and allowed … GSK to sell its products for higher prices in China.”

The Public Security Ministry indicated that bribery, illustrated by GSK’s marketing strategy, is one of the main reasons why drug prices are at a falsely high level in China.

“That’s the way business works” a GSK manager reportedly confessed to the Chinese authorities.

The GSK corporate response was that allegations are “shameful” and would be a breach of internal systems and values.