The ongoing saga of the Chinese Ministry of Public Security’s investigations into large-scale bribery and tax-related offences by senior executives of the Chinese division of GSK must surely be causing sleepless nights, if not nightmares, among the management of other Big Pharma companies.
The more cynical might suggest that this action by the Chinese authorities is an attempt to sully the reputation of a major supplier of branded pharmaceuticals in a market where these command a higher degree of public confidence than locally manufactured equivalents, especially as it comes at a time when the Chinese government is aiming to make medicines cheaper and more widely available to the poorer rural population.
But with China poised to overtake Japan as the world’s second largest pharmaceutical market by 2016, its importance to pharma companies looking to offset slower sales in mature markets cannot be underestimated.
GSK has affirmed its desire to co-operate fully with the investigation, pledging to act swiftly should any evidence of wrongdoing be forthcoming. It is also undertaking a rigorous review of its compliance procedures in China.
But it is only 12 months since GSK was fined $3bn for fraud offences in the US, so the company might be expected to be particularly vigilant when it comes to promoting its medicines. However, monitoring operations in an emerging market with a very different business culture brings its own set of challenges.
In the wake of recent scandals involving counterfeit and contaminated products, the Chinese authorities have been under international pressure to tighten up on regulations and crack down hard on offenders. And if some of the largest and best-known multinationals are caught out in the process, then they must take the consequences, providing the investigations are transparent and the judgement sound.
There is a very fine line between not seeing what is going on and turning a blind eye.