July 16, 2013

GlaxoSmithKline Plc’s (GSK) sales in China jumped 20 percent to about 1 billion pounds ($1.5 billion) last year, almost quadruple the pace of growth across its emerging markets. Police say bribes and sexual favors spurred the gain.

The drugmaker now faces allegations of economic crimes involving 3 billion yuan ($489 million) of spurious travel and meeting expenses, and trade in sexual favors, the Public Security Ministry said yesterday. The allegations are “shameful” and would be a breach of the company’s systems and values, Glaxo said in a statement.

Prior to a police probe that began last month, Glaxo embarked on a strategy that tripled its Chinese sales force to more than 4,000 people in three years as the U.K.’s largest drugmaker sought a bigger share of the market. As that expansion was ramping up, Chief Executive Officer Andrew Witty told analysts on a February 2010 conference call that controlling Glaxo’s operations in China was “not a trivial proposition.”

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