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Glaxo in China: Crackdown or shakedown?

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GlaxoSmithKline acknowledged recently that several of the British pharmaceutical firm’s executives in China may have broken the law in its efforts to boost sales and profits in the country. As part of a wide-ranging bribery inquiry, Beijing has accused Glaxo of using a network of travel agencies and consulting outfits to funnel nearly $500 million to Chinese doctors and hospitals. This isn’t the first time that a major pharmaceutical company has been accused of corruption in China — US firms Eli Lilly and Pfizer have faced similar accusations over the past year — but what stands out here is that it’s the Chinese authorities who are investigating.

The current charges seem to reflect seriousness on the part of China’s new leadership to root out corruption throughout the country’s health care sector. Glaxo isn’t likely to be the last foreign company ensnared — the British firm AstraZeneca announced last month its executives, too, had met with officials at the Public Security Bureau in Shanghai. Still to be seen, however, is what’s motivating the crackdown. Drug makers have faced increasing pressure by Beijing to cut prices and share intellectual property, but neither aim should be accomplished through prosecuting bribery. The true test will be if corruption by Chinese government officials and drug makers receives equal scrutiny.

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