Crisis Management Report

Crisis Management of GlaxoSmithKline PLC’s China Bribery Case

Introduction:

GlaxoSmithKline PLC (GSK) found itself caught in the crosshairs, when the Chinese government began a high-profile probe into explosive allegations of bribery of doing out kickbacks to government officials, pharmaceutical industry associations and foundations, hospitals and doctors worth more than three million pounds. They reported that some of the techniques used included the issuance of fake VAT receipts and used travel agents to issue fake documents to gain cash, there are many suspects, the illegal behaviour continued over a long time and its scale is huge, according to ministry.

For years, notes Wolf, this approach worked, in an industry where incentives are regularly offered in return for doctors and pharmacies favouring certain drugs. “Then the government began to focus on what it would take to lower the cost of healthcare in China, and the spotlight fell on pharmaceuticals. Foreign pharmaceutical firms were the biggest, most politically convenient targets, and GSK had some unfortunate associations that made it the best target of all.”

“Chinese customers are willing to pay for this, particularly when it comes to medicines, where harmful local counterfeits are widespread,” says Jacqueline Ratcliffe, managing consultant at Regester Larkin Asia-Pacific. “When foreign companies are perceived to be dishonest or failing to deliver on quality, the feeling is one of betrayal and retribution follows swiftly, potentially threatening a company’s licence to operate.

The facts

June 28 2013: the police in Changsha City announced investigations into certain GSK investment executives for potential economic crimes.

July 11 2013: The Ministry of Public Security confirmed that it had led police departments in various cities to investigate GSK China’s executives for “serious economic crimes” including commercial bribery and embezzlement. Shortly thereafter, GSK pledged to fully cooperate...