By OMOH GABRIEL, WITH AGENCY REPORT
GlaxoSmithKline has dropped a scheme to increase its stake in GSK Consumer Nigeria, its consumer healthcare business in the country, following opposition from minority shareholders.
According to Reuters, the decision to abandon a scheme that would have increased its indirect ownership in the unit to 75 per cent is a fresh setback for Britain’s biggest drug-maker, which is battling a corruption scandal in China.
The company said yesterday it had agreed to consult shareholders and the Securities and Exchange Commission, SEC, about the proposal, including whether it should be implemented by way of a tender offer.
Also yesterday GlaxoSmithKline said some of its executives in China appeared to have broken the law in a bribery scandal, as it promised changes in its business model that would lower the cost of medicine in the country.
GSK is the latest in a string of multinationals to be targeted by Chinese authorities over alleged corruption, price-fixing and quality controls.
Chinese police visited the Shanghai office of another British drugmaker, AstraZeneca, a company spokeswoman said yesterday.
They arrived on Friday and took away a sales representative for questioning, she said.
Health Minister, Li Bin maintained the pressure on the drugs industry by stating that her department would place people and companies guilty of bribery on a black list and punish them.
GSK’s head of emerging markets, Abbas Hussain, said his company had zero tolerance for employees who broke the law.
Hussain said: “Certain senior executives of GSK China, who know our systems well, appeared to have acted outside of our processes and controls, which breaches Chinese law”.
Hussain, sent to China last week to lead GSK’s response to the crisis, held a meeting with the Ministry of Public Security where he promised to review GSK’s business model.
He added that “Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients”.
Britain’s biggest drug-maker gave no details on the changes or the extent of price cuts – but the move addresses a key issue for Beijing, which launched a probe into pricing at 60 local and international drug firms earlier this month.
GSK supplies key products such as vaccines in China, as well as drugs for lung disease and cancer.
Chinese police, who have detained four Chinese executives from GSK, last week accused the firm of bribing officials and doctors to boost sales and raise drug prices by funneling up to 3 billion yuan ($489 million) to travel agencies.
Chinese officials also visited the Shanghai office of Belgian drug-maker UCB.
The latest visit to AstraZeneca shows authorities are spreading the net, although AstraZeneca described the case as a local police matter.
The spokeswoman said: “We believe that this investigation relates to an individual case and while we have not yet received an update from the Public Security Bureau, we have no reason to believe it’s related to any other investigations.”