In
the spring of 2013, investigations began into accusations that GSK China
employees had spent over £320 million on bribes to hospital staff in China to
boost sales. By July, four members of senior management in GSK China were taken
into the police custody for the investigation and 20 staff were questioned. Xinhua reported that GSK China stopped
all their business meetings with hospitals, as a result of pressure from the
media.1
In
October 2013, Xinhua, China Daily and Phoenix – three major Chinese news agencies – reported that the
popularity of GSK China and its products had declined dramatically. Due to the
negative image of GSK China, doctors shunned GSK products. GSK China drug sales
slumped 61% in the third quarter of 2013 compared to 2012, including its
top-selling drugs Seretide (56% decrease) and Hepsera (76% decrease).
Meanwhile, GSK’s competitors such as Roche and Novartis enjoyed a significant
increase in the drug sales in the third and fourth quarters of 2013.2
Popular
news site Sohu dedicated a large page
to the GSK scandal titled “GSK China performed bribery recklessly and without
all conventional restraints”.3 The general population in China have
long been unhappy about the high price of the foreign drugs and voiced their
anger after the scandal broke. Many felt that such bribery caused the extremely
high drug prices, making the cost appear unethical and unnecessary.4
“The
prices of the foreign drugs are generally very high and the price is not
regulated by the Chinese government like the other national companies in the
sector, this makes national companies very unhappy.” Said by Professor John
(Jiang-nan) Cai – the director of CEIBS centre for Healthcare Policy and
Management.5
Following
GSK’s departure from RDPAC (R&D based Pharmaceutical Association
Committee), the mistrust of GSK China became even greater with many news
organisations reporting that GSK would follow in Google’s footsteps by leaving
China entirely to avoid fines. As a result of this uncertainty, many hospitals
have continued avoiding buying GSK products resulting in significant damage to
GSK China’s sales.
According
to the IMS health data, the Chinese drug market will become the second largest
in the world by 2020.6 All the foreign pharmaceutical companies are
fighting to gain market share so any setback like this can have significant
long term consequences. Furthermore, with GSK having invested £3 billion in the
Chinese market since the 1980s, pulling out now would be akin to cutting off
their nose to spite their face.7
Following
the scandal, GSK has promised to close the loop-holes through which it had
bribed doctors. This act has been praised by some in the media, while others
pointed out GSK will probably go back to its old tricks once the media lose
interest in this matter. The market has not been so fickle, however, with Q4
sales still down 18% against 2012.8
There
is a view in China that all foreign pharmaceutical companies are deceitful and
untrustworthy. If GSK were to re-brand itself as an honest organisation with
long-term commitment to China by taking responsibility and establishing
initiatives such as student scholarships and investment in subsidised
healthcare for the poor, it could gain significant market share versus its
competitors for decades to come.
References
