REFILE-Drugmaker GSK investigates alleged bribery in Iraq

Mon Apr 7, 2014 3:03am EDT

* GSK says investigating alleged "improper conduct" in Iraq

* Allegations relate to small number of staff in country

* Iraq issue follows claims of extensive corruption in China (Fixes typo in first paragraph)

By Ben Hirschler

LONDON, April 6 (Reuters) - Drugmaker GlaxoSmithKline , already facing corruption accusations in China, is now investigating allegations of bribery in Iraq, the British company said on Sunday.

The latest controversy centres on claims that the company hired government-employed physicians and pharmacists in Iraq as paid sales representatives to improperly boost use of its products.

"We are investigating allegations of improper conduct in our Iraq business. We have zero tolerance for unethical or illegal behaviour," a company spokesman said.

The investigations are ongoing.

GSK employs fewer than 60 people in its pharmaceuticals operation in Iraq and the allegations relate to a small number of individuals in the country, the spokesman added.

Britain's biggest drugmaker was accused by Chinese authorities in July of funnelling up to 3 billion yuan ($483 million) to doctors and officials to encourage them to use its medicines in a case that rocked the pharmaceuticals industry.

GSK sales in China, where the company has a staff of around 7,000, plunged in the wake of the scandal and it has recently dismissed some employees in the country and withheld bonuses from others as it seeks to root out wrongdoing.

While a number of major drugmakers have faced investigations into their overseas practices under the U.S. Foreign Corrupt Practices Act (FCPA), GSK's problems in China have been unusual in being spearheaded by local Chinese officials.

GSK has previously described the Chinese corruption allegations as "shameful" and the company recently took steps to tighten procedures, including a move to stop the practice of paying doctors to speak on its behalf.

The latest allegations concerning Iraq were first reported by the Wall Street Journal, which said it had reviewed emails from a person familiar with GSK's Middle East operations citing alleged corrupt practices in Iraq, including continuing issues and alleged misconduct dating from last year and 2012.

One of the emails said the malpractices appeared to violate both the FCPA and the British Bribery Act, both of which prohibit bribery of foreign officials.

GSK said that operating in emerging markets was "challenging", given the issues that many countries face in funding their healthcare systems, but the spokesman said the firm remained committed to providing medicines in multiple markets.

Building up business in developing economies is an important plank of GSK's growth strategy and Chief Executive Andrew Witty has described himself as an "extreme bull" on emerging market prospects.

Last week, the drugmaker announced plans to invest up to 130 million pounds ($216 million) in Africa. It has also recently built up stakes in local operations in India and Indonesia.

($1 = 0.6028 British Pounds) (Editing by Eric Walsh)

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