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What goes on in China stays in China?

GSK is under the spotlight in the increasingly transparent world of compliance, says Reuben Guttman

Pharma is under observation Averand

WASHINGTON, DC -- It turns out that Glaxo-Smith Kline is under investigation by Chinese officials for bribery. No surprise here. Last year the giant pharmaceutical company paid three billion dollars to resolve claims of marketing derelictions with the United States government and various states including allegations of kickbacks which are, by some accounts, a form of bribery. Whether GSK has taken its "fast and loose marketing show" on the road and whether the Chinese will gather the evidence to prove impropriety remains to be determined.
What is clear is that Chinese compliance enforcement officials are taking a hard look at big Pharma as they should. Big Pharma's improprieties in China are not just a problem for the Chinese market. Today China is a major venue for drug trials that may ultimately determine pharmaceutical indications in countries including the US and the UK.Keeping the industry honest in Asia is a matter that has effects transcending geographic boundaries.
Under the radar
Companies like Pfizer, Abbott and Novartis -which are in the Chinese market- should heed a warning from GSK's China plight. Each of these companies has paid fines in the United States for alleged illegal marketing efforts including kickbacks. No doubt that since being caught in the US, common sense would dictate that they have made efforts to stay under the radar screen of US regulators and even whistleblowers who can  -- under US law -- be handsomely rewarded with bounties.  Of course if they have gambled on the notion that "what goes on in China stays in China" they have gambled imprudently.
Market forces drive compliance agenda
For multi nationals, the Chinese GSK investigation is yet another reminder that market forces - which transcend geographic boundaries - drive compliance enforcement agendas - to some degree have global similarity. Earlier this year, for example, officials from the Shanghai prosecutors office sat down with professors from Emory University Law School's Center for Advocacy and Dispute Resolution to discuss strategies for the investigation of insider trading cases.
Interestingly, three years ago Emory Law School -- based in Atlanta, Georgia-- developed a case file for use in its second year law student trial program which trains students on the prosecution of a foreign corrupt practices case which involves bribery of public officials in China by a multi-national drug maker. For Emory Law's staff at the Center for Advocacy and Dispute Resolution, the case was not hard to create as the paradigm for illicit Pharma behaviour was a matter of record made public by a swath of US government settlements with drug makers under the US False Claims Act.
Did Chinese officials, as did the Professors at Emory Law, follow the trail of US regulators? Perhaps; but what is more certain is that the investigation by Chinese officials of GSK may just be the starting point.

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23 July 2013

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