China trade mission a bridge-mending opportunity for GSK?
This article was originally published in SRA
Sir Andrew Witty was among the prominent members of British Prime Minister David Cameron's huge trade mission to China this week, but it is not clear if or how the delegation and the GlaxoSmithKline CEO's presence may affect the ongoing corruption probe into the company in the country.
Sir Andrew was the sole representative from the pharmaceutical sector on the trade mission – the UK's largest ever to China
While Mr Cameron reportedly touched on GSK's problems in China in meetings with senior Chinese officials during the three-day trip, this was only in general terms as part of a push for a stable environment for foreign investment. His schedule included high-level talks with Chinese President Xi Jinping and Premier Li Keqiang. For its part, GSK was characterizing the participation of its CEO as a show of the firm's continued commitment to China, which presently accounts for around 4% of its global drugs and vaccines business.
The UK delegation on the trade mission included six government ministers and around 130 members in total from across multiple industries and business groups, with the emphasis on small and medium-sized enterprises.
The Chinese bribery allegations against GSK surfaced in July, when authorities announced they were investigating several local executives of the multinational in an affair allegedly involving around $489m in disguised irregular payments relating to product promotion1,2. Additional findings from the probe are expected by the end of the year.
No major new developments have surfaced recently from the ongoing investigation and no punitive actions have been confirmed, but there has been speculation that individual executives may face charges and the firm a possible fine. GSK has maintained all along that any proven misconduct would be in breach of its internal systems, and has been co-operating with the authorities.
In the meantime, the fallout has already hit the firm's business in China, which fell by 61% in the third quarter as promotional activities were reduced and doctors apparently became cautious over interactions with the company.
Early outcomes
Mr Cameron pushed strongly for an EU-China free trade deal during the visit, which otherwise sought to open up new opportunities for British businesses in China and to attract further Chinese investment into the UK.
Several healthcare alliances have already been announced, but in the areas of hospital management and investment and joint venture medical facilities rather than therapeutics. However, a memorandum of understanding to evaluate new treatments for dementia has been signed between IXICO and Beijing Union Medical and Pharmaceutical General Corp.
In other fields with implications for pharma, progress is expected on the "Patent Prosecution Highway" initiative, under which Chinese reviews of British patent applications already approved elsewhere would be speeded up.
References
1. GSK China: what next in the corruption probe?, Scrip Regulatory Affairs, 24 July 2013
2. GlaxoSmithKline, bribery and the China conundrum, Scrip Regulatory Affairs, 25 July 2013