UK drug-maker GlaxoSmithKline is said to be considering pulling out of the Chinese market, set to be the second biggest pharmaceutical sector in the world, because of the Chinese authorities’ ongoing criminal investigation against the company.
GSK is said to have ‘serious concerns’ about its future in the country, The Telegraph report, citing a source close to the company.
The ongoing investigation, which in July resulted in four GSK China employees being detained, could leave the company facing a £2bn fine, as well as severance of ties with major hospitals in the country.
Chinese authorities and GSK are currently involved in ongoing negotiations to decide how to resolve allegations that GSK paid millions in kickbacks to Chinese doctors through bogus travel agencies in order to win market share.
However, other sources are reported by the newspaper to have suggested GSK could be using the threat of withdrawal to negotiate down a fine.
The source told The Telegraph: "They are sending out a message to scare everyone, but I heard GSK were thinking of leaving because of the huge fine."
According to the source Chinese doctors have severed links with the company as they are afraid of being discredited by association.
GSK is believed to have invested more than £320m in its Shanghai research and development base and in six manufacturing facilities.
Although an exit is not thought to be simple, it has been suggested that the company could close down its sales operations and use a third-party agent, which would mean smaller profit margins and less control over distribution.
A spokesman for GSK told the paper that the company was ‘absolutely committed to co-operating with the Chinese authorities in their investigation and working with them to achieve an appropriate resolution’.
GSK continue to state that they had no knowledge of the wrongdoing despite Chinese authorities saying they believe the alleged offences were co-ordinated at company level and not by individual employees.
According to Reuters, a general manager for GSK’s business operations in China and one of the detained executives said the company had set goals for annual sales growth as high as 25%, which is seven to eight percentage points above the average growth rate for the industry.
Image: GSK’s headquarters in the UK. Photo: courtesy of Maxwell Hamilton.