China accuses GSK of bribery, raising prices and tax fraud

British drug giant GlaxoSmithKline (GSK) was today accused by the Chinese government of arbitrarily raising prices, bribery, and tax fraud.

China's ministry of Public Security said in the statement on its website that employees of GSK in China have confessed to bribing doctors, hospitals, government officials and others to prescribe its medicine order to increase drug sales.

The statement also accuses some GSK senior employees of accepting bribes through conference rebates and project fees. It also alleged the company used travel agencies to give false invoices to avoid VAT.

The allegation is another blow to the London-based company, which is already under investigation in one case by the Chinese police for economic crimes and in another case by regulators over suspected price fixing. (See: China launches probe on GSK over price fixing)

GSK has also launched a fresh inquiry into allegations that its employees in China paid bribes to doctors to prescribe the anti-wrinkle treatment drug Botox.

Earlier this week The Wall Street Journal had reported that internal GSK documents and emails reveal that the company's sales staff were instructed by local managers to use their personal email addresses to discuss marketing strategies related to Botox

The paper said that employee emails discuss rewarding doctors prescribing Botox with cash payments, credits that could be used to meet medical-education requirements and other rewards.

According to the report the investigation stems from the same anonymous whistle-blower who had earlier this year given GSK details on how high-level company employees had given doctors speaking fees, cash payments, dinners and all-expenses-paid trips between 2004 and 2010 for prescribing its products.

GSK later said that it had conducted an internal probe, but there was no evidence to prove the allegations.

In a separate case, China's National Development and Reforms Commission (NDRC), the country's economic planning agency, opened an investigation into pricing practices of 60 companies including GSK, Merck, Baxter Healthcare and Sandoz.

NDRC has also launched a probe on five foreign companies including Swiss nutrition giant Nestle, France's Danone Dumex, Abbott Laboratories and Mead Johnson Nutrition Co of the US and Dutch cooperative FrieslandCampina for allegedly violating competition laws by manipulating the prices of baby milk products.

In response, Nestle, Danone and Abbott said that they would cut prices of some of their infant milk formula products by 11 to 20 per cent.

China is one of the fastest-growing markets of GSK where it has major manufacturing and research facilities employing around 5,000 people. The company's China sales were up 17 per cent in 2012 at $1.2 billion compared to the previous year.

Probe into GSK and other drugmakers is the latest instance of growing cases of bribery and corruption charges against multinational corporations operating in China.