#467 British pharmaceutical giant GlaxoSmithKline

British pharmaceutical giant GlaxoSmithKline - Operations Management

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Read the following case study and answer the questions below

British pharmaceutical giant GlaxoSmithKline (GSK) has been accused by Chinese police of a massive bribery network run with travel agencies that were used to funnel $450 million to doctors, hospitals, and officials since 2007.

An anonymous tipster sent emails and documents to a newspaper, which showed sales staff bribing doctors with speaking fees and lavish gifts like Rolex watches if they prescribed GSK’s products. GSK currently spends $82 million a year paying doctors to speak at or attend conferences. GSK is even accused of organizing fake conferences to account for the money.

The investigation against GSK was announced last week and four senior GSK executives are being held for "serious economic crimes" and the head of GSK’s operations in China recently left the country. His departure coincided with a number of investigations of the company's offices.

Five months after the Chinese investigation, GSK announced that it will stop paying doctors for promoting its drugs and stop having targets for its marketing staff -- a first for an industry battling scandals over its sales practices, and a challenge for other pharmaceutical companies to follow suit. Britain's biggest drugmaker also said it is addressing conflicts of interest that could put commercial interests ahead of the best outcome for patients.

In the United States, the industry's biggest market by far, many companies have run into conflicts over improper sales tactics and GSK reached a record $3-billion settlement with the U.S. government last year over charges that it provided misleading information on certain drugs. "I think other companies will follow suit, but one of the biggest problems is that the industry persists in regulating itself," he said. "The only way to properly control promotion is strong and enforced regulation by the state."

The decision to stop payments to doctors for speaking about medicines during meetings with other prescribers marks a big shift for a global industry that has always relied heavily on the influence of experts in promoting products.

 

1. Using two different CSR Approaches, explain how bribery has persisted for so long in the pharmaceuticals industry. Be sure to give examples from the case to illustrate your point.

 

2. Discuss Global Ethical Considerations that are required in pharmaceutical and medical organizations.

 

3. What are two important points about the anti-corruption/bribery laws that applies to GSK? Explain why paying bribes is unethical. Be sure to first explain the point and apply GSK case facts to it.

 

4. Discuss the main principles relevant to corporate governance in the public sector. What approach to corporate governance has been adopted by the GCC. Refer to the different practices in the GCC, MENA region and the rest of the world.

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Using two different CSR Approaches, explain how bribery has persisted for so long in the pharmaceutical industry. Be sure to give examples from the case to illustrate your point.

According to an article in Financier Worldwide, the rise of global bribery and corruption was noted by leading anti-corruption organizations, such as Transparency International. Transparency International surveyed 114,000 people in 107 countries and found that more than half of those interviewed claimed that in the last two years corruption has increased. The latest allegations of a suspected bribery scheme in the Chinese operations of GlaxoSmithKline served only to increase the emphasis.

Forbes claims Glaxo is a pioneer in prescription fraud and misconduct, with heavyweight from other industries close behind. In the past decade, whistleblowers and regulatory reports in the U.S. have revealed an infinite range of issues for various pharmaceutical firms in all facets of the industry. The first is the fraudulent "research" papers used to promote marketing and to continue the manufacture of tainted and faulty drugs. Thus, in relation to the previous statements in the textbook, we discover that GSK preached its ethical duty by supplying bribes for the selling of its goods and legal accountability by breaching the International Corrupt Practices Act of the United States and the United Kingdom Bribery Act.

Pharmaceutical companies are constantly pressurized to comply with a rising amount of regulations and legislation as anti-corruption is implemented. However, it can be difficult to ensure compliance, considering the large variety of jurisdictions in which multinational pharmaceutical companies operate. "David Debenham, a McMillan LLP associate, says that the pharmaceutical industry faces special challenges. "The life cycle of a drug has a variety of distinct phases and most of these are strongly controlled by the government. What can happen in the western private sector is part of the eastern public sector. In other parts of the world, what might be an appropriate practice of the private sector, since the consumer is a government employee or public entity.

With the growing pharmaceutical and medical device industries, the potential for bribery and corruption is growing, whether or not it is real. This is especially true as businesses grow into emerging markets, many of which are poorly rated as corruption indices. China in particular is becoming a region that is becoming very fertile, and many of the world's largest corporations are beginning to decline to the Chinese market. In Europe, a number of patents on its main products have expired. GlaxoSmithKline and AstraZeneca have seen their gains affected.