The Chinese police have revealed more details about suspected economic violations by GlaxoSmithKline (GSK) China, the Xinhua News Agency reported Tuesday.
The British pharmaceutical giant has been under investigation since early July for suspected bribery and tax-related violations, which has pushed up drug prices.
More individuals involved have admitted some details of the suspected transgressions. As the investigation is moving on, it is becoming clear that it was organized by GSK China rather than being the behavior of individual salespeople.
Huang Hong, 45, a high-ranking executive of GSK China, said the parent company had assigned annual growth goals as high as 25 percent in recent years, 7 to 8 percentage points more than the average growth rate of the industry.
One of Huang's main responsibilities is to maintain a benign relationship with key clients, directors of almost all major hospitals across the country and heads of their medicine procurement bodies.
Every team for big customers has almost 10 million yuan ($1.63 million) of "public relations funds" to keep close ties with key staff in major hospitals, Huang said. He added that the company's public relations team has also ballooned to nearly 50 employees from 10 in 2009, when Mark Reilly was appointed head of GSK China, and it was him who put drug sales as top priority.
In order to boost sales, the company employed a salary policy closely linked to sales volume. Of the 3,000 representatives, those who sold more than the quota would be rewarded while those who cannot reach the required target would end up losing out on several thousand yuan every month.
The company's code of conduct states that every employee should abide by the country's laws and prohibits any cash transfers to doctors or government officials. However, the real situation is that representatives appear to have achieved their quotas by breaking those rules and the company has never punished any law breakers, instead they offered prizes.
When investigated, the company passed the buck to the sales force, but the police investigation has found that GSK China went through the motions in internal auditing so as not to discover these violations.
Huang admitted that the growth rate of sales could not be so robust only by the efforts of the salespeople themselves if there was no dubious behavior.