AstraZeneca Executive Detained as Police Raid Shanghai HQ

July 23, 2013

23 Jul (THE INDEPENDENT) – Police are investigating AstraZeneca’s work in China and have detained one of the drug maker’s executives, just a week after its rival GlaxoSmithKline first faced allegations of a multimillion-pound bribery scandal. Astra is the latest British drug maker to become ensnared in a police investigation of sales in the fast-growing Chinese market, although the company said that the police who visited its Shanghai headquarters and took away an employee for questioning on Friday gave

“no reason to believe it’s related to any other investigations”.

imagesCAZ6GUXSAstra said officials from the Shanghai Public Security Bureau, Huangpu branch, attended its offices “regarding a local police matter focused on a sales representative”.  The drug maker added that it was

committed to acting with integrity at all times and in all of our operations and interactions around the world”.

China is a crucial market for Astra, which has struggled with plunging revenues in its Western markets as key drugs fall out of patent. While its sales fell 15 per cent to $28bn (£18bn) last year, and profits before tax were down 35 per cent to $7.7bn, it enjoyed a 20 per cent increase in sales in China, which hit $1.3bn. It employs about 5,000 in the country and has spent the past two years building the most expensive factory it has ever built, costing $200m, in Jiangsu province.

Now Astra  has become the second Western big pharma company in as many weeks to have its sales team puts under the spotlight in China. Last week Gao Feng, the country’s head of economic crime investigation at the Ministry of Public Security, accused Glaxo of being a “criminal godfather” and “ringleader” in a bribery scandal involving payments of 3bn yuan (£320m) to doctors and hospitals over the past six years.

Police have arrested four GSK managers, put several more under house arrest, and banned the company’s finance director in China from leaving the country.

In a televised “confession” Liang Hong, GSK’s vice-president of operations in China, admitted bribery.

GSK is alleged to have worked with Chinese travel agencies to host conferences for as many as 2,000 people, with the events budgeted to cost more than 10m yuan. Glaxo executives are said to have inflated those costs, then creamed off some of the excess cash to pay bribes to doctors and middlemen.

Initially a Glaxo spokesman said the company had no idea why its Chinese offices were raided, and earlier this month said:

We’re still unclear about the precise nature of this investigation.”

But yesterday the company set out plans to slash drug prices in China and pledged to

“root out corruption wherever it exists”.

Abbas Hussain, GSK’s head of emerging markets, who was sent over to China by the chief executive, Sir Andrew Witty, last week, held a meeting with the Ministry of Public Security. He said:

Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls, which breaches Chinese law.”

GlaxoSmithKline said it had been liaising with the UK’s Serious Fraud Office about the Chinese corruption claims, and Sir Andrew is expected to announce an “in-house” inquiry into the allegations at the drug maker’s results tomorrow.

Mr Hussain added yesterday that GSK was “taking this situation extremely seriously” and said the company had already decided on “proposed changes to our operational model [that would trigger] price reductions, ensuring our medicines are more affordable to Chinese patients”.

The investigation has widened beyond GSK, with the Belgian drug maker UCB saying last week that it had also been visited by Chinese authorities.

The New York Times also reported that it had seen documents showing that at least six other international pharmaceutical companies, including Merck, Novartis, Roche and Sanofi, had used the same travel agency as GSK to make bookings for events and conferences.

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