* British finance chief banned from leaving since end-June
* Nechelput still working, has not been arrested or detained
* GSK has hired Ernst & Young to review its China operations
* Numerous pharmaceutical rivals say not been contacted by
By Ben Hirschler
LONDON, July 17 Chinese authorities
investigating the alleged bribery of doctors and officials by
GlaxoSmithKline have stopped the drugmaker's head of
finance for China, a British citizen, from leaving the country,
a company spokesman said on Wednesday.
The travel restriction on Steve Nechelput was imposed at the
end of June, but he has continued to work and remains free to
move around China. Nechelput has not been questioned, arrested
or detained by police, the spokesman said.
GSK has hired auditors Ernst & Young to carry out an
independent review of its systems in China in the wake of the
scandal, according to a person familiar with the situation.
It has also sent internal auditors to China as part of an
effort to get to the bottom of what happened, the source added.
On Monday, Chinese police accused GSK of bribing officials
and doctors to boost sales and raise the price of its medicines
in China. They said GSK transferred up to 3 billion yuan ($489
million) to 700 travel agencies and consultancies over six years
to facilitate the bribes.
Britain's biggest drugmaker said it was deeply concerned by
the developments, which it called "shameful".
The action against Nechelput underscores the pressure on
GSK, which has come attack in Chinese state media this week.
The British Foreign Ministry said it stood ready to provide
consular assistance to Nechelput.
Asked if London was concerned about the travel restriction,
a spokesman said: "If there's an inquiry under way then that's a
matter for the Chinese authorities."
Nechelput's boss Mark Reilly, GSK's general manager for
China, left the country for Britain on July 5 to attend what a
separate source familiar with the situation said were routine
Police have detained four senior Chinese executives from
GSK, including vice president and operations manager Liang Hong,
who told state television this week he had funnelled money
through travel agencies by arranging conferences, some of which
were never held. That money was then used to pay bribes.
With investigations focused on malpractice by a certain
number of GSK's Chinese employees, one industry insider said it
was likely China wanted Nechelput to remain in the country to
provide financial information, if needed, as inquiries progress.
As a British company, GSK could also face prosecution under
Britain's Bribery Act, which came into force in 2011.
The Wall Street Journal, citing people familiar with the
matter, said the UK Serious Fraud Office (SFO) was reviewing the
bribery allegations GSK faces in China. An SFO spokeswoman
declined to confirm or deny the report.
CULTURE OF PAYMENTS
China has long been known for a culture in which drug
companies make payments to doctors, since physicians rely on
rewards for writing prescriptions to offset meagre salaries.
Those practices, however, are increasingly at odds with a
crackdown on corruption under President Xi Jinping, leaving
companies struggling to toe the line while not losing business
in a highly competitive market.
Similar money transfers to those seen at GSK had been made
by other multinational pharmaceutical companies in China, Gao
Feng, head of the economic crimes investigation unit at the
Ministry of Public Security, said on Monday.
He did not name any other foreign companies.
When asked, the following major drugmakers said they had not
been contacted by Chinese authorities in connection with similar
bribery allegations: Novartis, Roche, Abbott
, Eli Lilly, Bayer, Novo Nordisk
, Takeda, Astellas, AbbVie,
Merck & Co, Johnson & Johnson and Pfizer
China is increasingly important for big drug groups, which
rely on growth in emerging markets to offset slower sales in
Western countries where many former top-selling medicines have
lost patent protection.
IMS Health, which tracks pharmaceutical industry trends,
expects China to overtake Japan as the world's second-biggest
drugs market behind the United States by 2016.
But the industry has come under the spotlight from Chinese
China announced a nationwide crackdown on the sale of
illegal medicine on Wednesday and said it would tighten industry
The State Food and Drug Administration said the six-month
campaign would also target illegal online drug sales and the
sale of fake traditional Chinese medicine. It gave no details on
possible changes to regulation.
Separately, GSK said its chief executive Andrew Witty was
stepping down from his role on the board of the UK government's
department for business at the end of 2013, as had been planned.
"His decision is not related in any way to the current
issues the company is facing in China," GSK said.