By Laurie Burkitt
BEIJING-- GlaxoSmithKline PLC is cutting employees in China,
said a person familiar with the matter, as the U.K. drug company
grapples with Beijing's accusations that it bribed doctors and
officials to help sales.
Glaxo has terminated employees in China in recent months
following increased monitoring of employee expense claims, the
person said. It isn't clear how many employees have been let go.
Previously, Glaxo has said it employs about 7,000 people in
China.
In a statement Friday, Glaxo said it regularly monitors employee
expenses globally but has increased monitoring since the Chinese
government launched a probe of the company. "Where we have found
potential issues, we are thoroughly reviewing them and have
withheld incentive payments where appropriate," the statement
said.
It added that Glaxo has continued to pay base salaries and that
the company will be paying regular bonuses to employees who pass
monitoring.
Chinese officials alleged last year that Glaxo employees held
fake conferences and funneled the money for expenses as bribes for
doctors, hospital administrators and government officials to
prescribe more drugs. Often the funds were funneled through travel
agencies, officials alleged. China's Ministry of Public Security
said in July that the company improperly transferred 3 billion
Chinese yuan ($489 million) through travel agencies since 2007.
Glaxo has said some senior executives may have violated Chinese
laws and the company is cooperating with Chinese authorities in its
investigation.
The probe marked a setback for the big drug maker in a market
long seen as promising by the pharmaceutical industry. China
represents a modest 2% of Glaxo's total global drug sales, though
it has been an important source of sales growth for the company in
recent years.
Sales in China fell 29% in the fourth quarter from a year
earlier, while third-quarter sales fell 61%. Glaxo didn't break out
further sales data for those periods. The company said China sales
in the fourth quarter of 2012 rose 17% to GBP759 million, or $1.26
billion at current exchange rates, up from the same period a year
earlier.
The company named last July a new head of its China operations,
Herve Gisserot, succeeding its former China chief executive, Mark
Reilly.
The company has moved to tighten its operations globally amid
greater scrutiny from governments and regulators all over the
world. Glaxo announced in December a new global policy to stop
paying doctors to attend medical meetings or to speak about its
drugs and the diseases treated by its medicines. Such payments,
often for attendance at far-off meetings in exotic vacation resorts
or to influential physicians who can sway industry decisions, have
been a vital part of pharmaceutical marketing.
Glaxo agreed in 2012 to pay $3 billion and plead guilty to
criminal charges in the U.S. that it illegally promoted drugs and
withheld drug-safety data from regulators in the country. The deal
was the largest health-care fraud settlement in U.S. history and
led Glaxo to end its practice of paying U.S. salespeople based in
part on how many prescriptions the doctors they sold to wrote--a
practice the Justice Department said led to irresponsible
marketing.
Write to Laurie Burkitt at laurie.burkitt@wsj.com
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