April 1, 2023

China Details Allegations Against Glaxo

GlaxoSmithKline, which has been hit in recent weeks by a bribery and corruption scandal at its China unit, late Thursday named Hervé Gisserot, one of the company’s top executives in Europe, to replace Mark Reilly as the head of its operations in the country. Mr. Reilly left China for London after the company’s offices were raided by the police in late June.

Mr. Reilly is not believed to be a target of the bribery investigation and is expected to remain at the company and help it investigate the situation in China, people familiar with the case said.

On Friday, new details in the case were presented in interviews published by Xinhua, the official state-run news agency in China.

According to those reports, several Glaxo employees were alleged to have confessed to bribing doctors with gifts, travel, lecture fees and cash bonuses to persuade them to prescribe more of the company’s drugs. In some cases, the Glaxo employees said, no conference or lecture had ever taken place, but doctors were compensated.

One 35-year-old Glaxo employee told Xinhua she regularly visited doctors offices to offer assistance and even “to meet their sexual desires,” according to the report.

The government has said it has detained four Chinese-born senior executives from Glaxo’s China operations. And in the city of Zhengzhou, in Henan Province, 18 more Glaxo employees have been held.

Although no formal charges have been filed against Glaxo or its employees, the scandal has been a huge embarrassment for the company in one of its fastest-growing markets.

Glaxo’s top executives in London have apologized and pledged to cooperate with Chinese investigators.

And during a conference call after the company released its earnings Tuesday, its chief executive, Andrew Witty, called the accusations against his company’s China operations “deeply disappointing.”

Glaxo also said that Steve Nechelput, a British national and the company’s head of finance in China, was no longer being barred by the authorities from leaving the country.

The scandal appears to be part of a broader crackdown on bribery and corruption in China. The Chinese government has sent investigators to other global pharmaceutical firms. Officials have also begun to review drug pricing policies and question doctors and hospital employees about whether they have accepted bribes.

In Glaxo’s case, the government accused the company of using travel agencies to help funnel bribes to doctors, hospitals and government officials. The company was also accused of committing tax fraud and defrauding consumers with artificially high drug prices.

In interviews with the state-run news media, Glaxo sales representatives said they had been trained in how to increase drug sales by bribing and entertaining doctors and that some of this was done through the use of fake invoices.

One hospital employee told Xinhua that a Glaxo representative, identified only by the surname Wang, offered bribes for business.

“After we got familiar, Wang visited me during festivals, treated me to dinner and bought me gifts,” the hospital employee said. “When our department held events, Wang also paid the bill.”

Article source: http://www.nytimes.com/2013/07/27/business/global/china-details-allegations-against-glaxo.html?partner=rss&emc=rss

Drug Research in China Falls Under a Cloud

The confidential document from November 2011, obtained by The New York Times, suggests that Glaxo’s problems may go beyond the sales practices that are currently at the center of a bribery and corruption scandal in China. They may extend to its Shanghai research and development center, which develops neurology drugs for Glaxo.

The failings, some experts said, underscore the problems that can arise when major drug companies export their scientific development to emerging markets like China.

Since 2006, 13 of the top 20 global drug makers have set up research and development centers in China, according to a report by McKinsey Company. “It’s cheaper to do research there,” said Eric G. Campbell, a professor of health care policy at Harvard Medical School. However, “I have absolutely no doubt that with cheaper research comes greater risk.”

Auditors found that researchers did not report the results of animal studies in a drug that was already being tested in humans, a breach that one medical ethicist described as a “mortal sin” in the world of drug research. They also concluded that workers at the research center did not properly monitor clinical trials and paid hospitals in ways that could be seen as bribery.

Last year, Glaxo said, a more favorable audit found the concerns had been addressed. But several outside experts said the problems outlined in the initial audit were grave and painted a picture of an organization that failed to keep tabs on a crucial research center as it expanded both in size and scope. And it indicates that the problems there were more extensive than were reported in June, when the company fired the head of research and development in China after discovering that an article he helped write in the journal Nature Medicine contained misrepresented data.

In a statement, Glaxo said it was committed to conducting “robust” audits of its business practices, and in this instance, “the process worked exactly as intended.” It added, “Patient safety is paramount and the audit reports do not show that this was compromised.”

Glaxo’s research and development center opened in 2007 with lofty ambitions not only to help the company’s drugs get approved in China, but also to serve as one of its primary research hubs. The center grew quickly, expanding from one employee in 2007 to 460 in 2011, according to the audit. But as it grew, supervisors did not always ensure that the work done there was of high quality, auditors found.

One of the most troubling lapses — a problem the report labeled “critical” — involved a drug known as ozanezumab, which was being developed to treat patients with multiple sclerosis and Lou Gehrig’s disease.

The report revealed that the drug’s project leader belatedly learned the results of three studies of ozanezumab in mice. During their investigation, auditors came across six studies whose results had not been reported, even though early trials in humans were already under way.

Reporting such information is crucial, ethicists said, because animal studies can identify safety risks and are among the main factors drug companies use to decide whether to pursue human trials.

“If that’s true, it’s a mortal sin in research requirements,” said Arthur L. Caplan, the head of the division of medical ethics at NYU Langone Medical Center. He served as the chairman of an advisory committee on bioethics at Glaxo from 2005 to 2008. “No one could approve human trials without having that information available, scientifically or ethically. That’s kind of a Rock-of-Gibraltar-sized ethics violation.”

The auditors said the results did not affect patient safety, but warned of the high stakes involved, saying participants could be exposed “to unnecessary risk or no benefit to the disease state.”

Glaxo said that “when the full range of data from all the studies was reviewed, GSK determined that the efficacy would not be strong enough to continue,” and it terminated a trial of ozanezumab in multiple sclerosis patients. It is still studying the drug in people with Lou Gehrig’s disease, or amyotrophic lateral sclerosis, according to the company.

In the follow-up audit, auditors said senior managers at the Chinese research unit had “embedded a compliance culture that was not evident during the prior audit,” and did not find any issues of concern, according to an executive summary of the report that was provided by Glaxo.

Outside ethics experts said the report raised questions about whether patient safety was adequately protected.

Auditors found that Glaxo employees failed to record whether research participants had signed new consent forms during the course of clinical trials. They also did not document whether participants were taking the planned dosage of drugs, or whether they followed up when they learned that participants were not following a clinical trial’s protocol.

David Barboza contributed reporting.

Article source: http://www.nytimes.com/2013/07/23/business/global/drug-research-in-china-falls-under-a-cloud.html?partner=rss&emc=rss

Glaxo Says Executives May Have Broken Chinese Law

The statement, released after three top Glaxo executives met with Chinese investigators, came amid signs that other drug makers could also come under scrutiny from the Chinese authorities.

On Monday, the British-Swedish drug company AstraZeneca said one of its employees had been questioned by the police in Shanghai. The company released a statement saying that the police had visited the company and had questions about a sales representative.

“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,” the statement added.

Over the weekend, the drug makers Merck and Roche acknowledged that they had used the same small Shanghai travel agency that investigators say worked with Glaxo to bribe doctors, hospitals and government officials.

Glaxo has been under intense scrutiny for the past few weeks after investigators raided offices in China and detained four senior executives on suspicion of bribery and tax fraud.

In the statement Monday, Abbas Hussain, a Glaxo executive, said: “Certain senior executives of GSK China who know our systems well appear to have acted outside of our processes and controls, which breaches Chinese law. We have zero tolerance for any behavior of this nature.”

His statement, which came after a meeting with China’s Ministry of Public Security, or national police, continued: “I want to make it very clear that we share the desire of the Chinese authorities to root out corruption wherever it exists. We will continue to work together with the MPS and we will take all necessary actions required as this investigation progresses.”

Andrew Witty, the company’s chief executive, sent three top executives to China last weekend to meet with the government. They included Mr. Hussain, who apologized in a meeting with an official from the Ministry of Public Security.

The apology and statement that its executives may have broken the law is a sharp reversal for the company. A few weeks ago, executives at Glaxo said that this year they conducted an internal investigation into allegations of bribery and fraud in the China operations and found no evidence of wrongdoing.

The police in Shanghai have also detained Peter Humphrey, a British fraud investigator who had done some contract work for Glaxo, according to a person familiar with his case. But it was unclear whether the police were holding him in connection with the investigation into Glaxo or on a separate matter.

Article source: http://www.nytimes.com/2013/07/23/business/global/glaxo-says-executives-may-have-broken-chinese-law.html?partner=rss&emc=rss

Files Suggest a Graft Case in China May Expand

The agency appeared to be using fake contracts and travel invoices to help executives at the British pharmaceutical giant GlaxoSmithKline bribe doctors, hospitals, foundations and government officials, Chinese authorities said.

Soon after, the police shut Shanghai Linjiang International Travel Agency and detained its boss, Weng Jianyong. Four Chinese-born Glaxo executives were also held on suspicions of bribery and tax fraud.

But documents obtained by The New York Times show that in the last three years at least six other global pharmaceutical companies, including Merck, Novartis, Roche and Sanofi, used the same travel agency to make arrangements for events and conferences.

The records included invoices for hotel bookings, travel visas and airline tickets to Chinese cities, and to Australia, Italy, Japan, Korea and the United States. One of the drug companies appears to have used the travel agency to make a $2,500 grant to the Cancer Foundation of China.

The documents contain no indication of wrongdoing. But they suggest that big drug makers other than Glaxo could come under scrutiny as the Chinese government widens its investigation into fraud and corruption in the nation’s fast-growing market for pharmaceutical products. Chinese authorities did not respond to requests for interviews.

Over the weekend, Merck and Roche acknowledged using Shanghai Linjiang International Travel Agency. But they gave few other details about the nature of the relationship.

A spokeswoman in China for Merck would say only that the American company stopped using the travel agency in 2011, when Merck introduced a new procurement system.

Roche said it had worked with various agencies in China for business travel or organizing events, including Shanghai Linjiang International Travel Agency.

“Once allegations of illegal behavior by this agency on behalf of other parties were made public, we made an internal decision to immediately stop working with this agency, and we have begun to review the documentation of our previous interactions with them,” Roche said in a statement on Saturday. “This review is currently ongoing.”

A spokesman for Novartis said by e-mail that the company could not confirm or deny whether it had used the agency. Sanofi did not respond to repeated requests for an interview.

The scandal has battered the reputation of GlaxoSmithKline, which is also known as GSK. At a news conference last week, investigators likened the British drug maker to a boss in a criminal organization. They said it used the travel agency to bribe officials in hopes of illegally increasing drug sales and raising the prices of its products in China.

GlaxoSmithKline has said that what the government says its staff engaged in was “shameful,” and at odds with its policies. It pledged to cooperate with investigators. Over the weekend, the company’s chief executive, Andrew Witty, who is based in London, dispatched three top executives to China to deal with the scandal. On Sunday, one of the Glaxo executives met with investigators and apologized, according to Xinhua, the state-run news agency.

Meanwhile, the company’s China finance chief, Steve Nechelput, a British national, has been barred by Chinese authorities from leaving the country, though a person familiar with his case says he is not a target of the investigation.

According to the authorities, Glaxo has used 700 travel and consulting firms and spent nearly $500 million on conferences since 2007. Some travel agencies helped Glaxo executives commit fraud, the government asserts. But investigators have named just one: Shanghai Linjiang International Travel Agency.

The government said the Linjiang agency did very little booking on its own and mostly acted as a “money platform” that allowed Glaxo to create a huge slush fund. 

Lynn Zhang and Yiyi Dong contributed research.

Article source: http://www.nytimes.com/2013/07/22/business/global/files-suggest-a-graft-case-in-china-may-expand.html?partner=rss&emc=rss

Drug Makers, in Shift, Join Fight Against Doping

Now, a growing number of pharmaceutical companies are trying to prevent their drugs from experiencing the same fate by joining with antidoping officials to develop tests to detect the illegal use of their drugs among athletes.

Two major drug makers, Roche and GlaxoSmithKline, have begun evaluating every new drug candidate for its potential to be abused by athletes and have agreed to share information about those products with the World Anti-Doping Agency, known as WADA, which polices drug use in international sports. Several other smaller companies have provided proprietary information about specific drugs. A conference in Paris in November dedicated to the topic drew 250 participants.

The development reflects a significant shift from the days when drug makers paid little attention to how their products could be abused by athletes, said David Howman, the director general of the antidoping agency. In the past, drug makers “felt that any publicity in relation to antidoping control would be negative,” he said. “But what they discovered is the opposite happened.”

Instead of shying away from such stories, Roche and Glaxo have promoted their involvement as an example of good corporate citizenship. Last year, Glaxo went so far as to sponsor the testing laboratories for the London Games, the first time in Olympic history that an antidoping laboratory had a named corporate sponsor.

Pauline Williams, who leads the team at Glaxo that runs the antidoping initiative, said the cooperation with WADA grew out of that sponsorship. “What the London 2012 involvement led to was a real pride and willingness, and a positive attitude toward this continued engagement,” she said. Since the start of the program, the company said it has shared information about four of its projects, and development of a test for one drug is under way.

Antidoping officials have long sought information from drug companies. For instance, Amgen, which developed EPO, helped develop a test for Aranesp, another of its drugs that has been used in doping, in advance of the 2002 Salt Lake Olympics. But such arrangements were ad hoc and fairly simple, said Olivier Rabin, the antidoping agency’s science director. “It was almost more by chance when it was happening,” he said.

Relationships between antidoping officials and pharmaceutical companies have sometimes been tense. In 2006, Amgen was criticized for sponsoring the Tour of California at a time when EPO abuse was rampant among cyclists. Although the company said it had sponsored the race to raise awareness about doping, it was later revealed that the organizers had failed to test for EPO, short for erythropoietin, a synthetic hormone that, like Aranesp, stimulates the production of red blood cells.

“They were associated with some things in the past which we felt were probably inappropriate,” Mr. Howman said. “What we had to do was start the conversation from scratch, and say let’s see how we can work together.”

Steven Elliott, the Amgen scientist who invented Aranesp, said the misperceptions went both ways. He said some believed, wrongly, that biotechnology companies were developing drugs that could be misused by athletes as a way to increase sales. “There was this uneasiness about that,” said Mr. Elliott, who recently retired but continues to work as a liaison between biotechnology companies and the antidoping agency. “There had to be this realization that it was a win-win for both sides.”

Antidoping officials began to work more closely with drug makers after 2004, when Dr. Rabin heard that athletes were talking about a new version of EPO, called CERA, that was being developed by Roche, and asked the company for help.

“We were shocked when they first contacted us,” recalled Barbara Leishman, who oversees the antidoping program there. She said company scientists had not realized that athletes were following the drug’s development so closely. “This is not the sort of thing we like to hear about our compounds.”

Roche then worked with the antidoping agency to develop a blood test for the new drug, turning over proprietary compounds, called reagents, that would help officials test for their drug. Because of the complex nature of the drug, which mimics the body’s own hormones, and the development of the test, the project took years.

In 2009, blood samples from six athletes taken during the Beijing Olympics tested positive for CERA. Other drug makers took note of the media attention Roche received for the collaboration, Mr. Howman said. “Once there’s a foot in the water, then you can follow and walk right in,” he said.

Roche broadened its agreement with WADA, expanding the project to screen all of its drugs in development. Glaxo followed suit and around the same time, two major industry groups representing biotechnology and pharmaceutical companies adopted policies encouraging their members to cooperate.

Halting the abuse of new prescription drugs is only part of the antidoping picture. Athletes today are believed to use a variety of methods to gain an advantage, from transfusing their own blood to taking tiny quantities of tried-and-true doping agents. And some performance-enhancing drugs gain life in illicit laboratories, as was the case with “the clear,” the designer steroid developed in the Bay Area Laboratory Co-operative that toppled star athletes like Marion Jones.

Still, pharmaceutical companies have an important role to play given how complex new drugs have become, and how athletes are increasingly using substances that closely mimic the body’s natural processes, officials said.

“Developing detection methods to show that the substance taken in a synthetic form is different than your natural substance is more challenging,” said Matthew Fedoruk, the science director for the United States Anti-Doping Agency.

Many pharmaceutical companies already have the tools to create a doping test for their products because the Food and Drug Administration and other regulatory bodies require them to show how the drug passes through the body. During the development process, the companies design reagents to help identify the drug. Amgen and other companies, like the biotechnology company Affymax — which makes a competing anemia drug called Omontys — have given WADA some of these reagents for use in developing tests.

Still, Dr. Rabin and others said some companies needed persuading and did not return his calls. In those cases, he said, he uses peer pressure, reminding them that other companies are also participating.

“We know the progress of their drugs, and we know that at some point collaboration will naturally come,” he said. “We are a bit stubborn.”

Article source: http://www.nytimes.com/2013/02/19/business/drug-makers-increasingly-join-fight-against-doping.html?partner=rss&emc=rss

DealBook: Glaxo to Buy Human Genome Sciences for $3 Billion

A technician at work in a Human Genome Sciences laboratory in Rockville, Md.Marshall Clarke/Human Genome Sciences, via Reuters A technician at work in a Human Genome Sciences laboratory in Rockville, Md.

10:00 a.m. | Updated with news announcement

GlaxoSmithKline of Britain said on Monday that it would buy the biopharmaceutical company Human Genome Sciences on friendly terms for about $3 billion, ending a long hostile takeover campaign.

The friendly deal between the two ends Human Genome’s efforts to find an alternative buyer for the company. It also ends months of jockeying between the two drug companies, who are partners in developing the lupus drug Benlysta.

Biopharmaceutical companies like Human Genome have been in demand by acquirers in recent years. Bigger drug makers have been seeking to restock their product pipelines with new offerings as older treatments lose patent protection. Two weeks ago, Bristol-Myers Squibb agreed to a $7 billion deal to buy Amylin Pharmaceuticals, which has been developing a new drug to treat diabetes.

Under the terms of the deal, GlaxoSmithKline is paying $14.25 a share in cash, or nearly double where Human Genome Science’s shares were trading before news of the Glaxo’s initial offer was disclosed.

In April, GlaxoSmithKline first proposed to pay $13 a share to acquire Human Genome, 81 percent above its closing share price the day before the bid was announced. The British drug maker was seeking to take advantage of a steep drop in Human Genome’s share price in the last 12 months, a decline driven in part by high marketing costs for Benlysta.

But Human Genome swiftly rejected the bid as insufficient and instead put itself up for sale, inviting GlaxoSmithKline to participate in the auction process. Human Genome also put up defenses like a shareholder rights plan aimed at thwarting a hostile takeover bid.

Still, GlaxoSmithKline decided to take its bid directly to Human Genome’s shareholders and had extended that offer several times.

Last week, Human Genome and GlaxoSmithKline began talks about a potential friendly transaction, a person briefed on the talks said. On Monday, Glaxo said the boards of both companies had approved the deal.

Some analysts and investors have said that GlaxoSmithKline was the natural buyer of Human Genome. The two split profits from sales of Benlysta, and are working together on two other treatments, for heart disease and for diabetes.

The lupus drug received approval from the Food and Drug Administration, making it the first new treatment for the disease in about 50 years. But sales have been slow and have fallen far short of expectations.

Human Genome’s heart disease drug, darapladib, has also been seen as a potentially promising new product, though it is still in clinical trials.

Any other drug maker would have needed to either buy out GlaxoSmithKline’s 50 percent stake in Benlysta and the other treatments, or content itself with sharing proceeds from sales of the drugs.

Investors had long expected GlaxoSmithKline to raise its offer price above $13 a share. Human Genome’s shares had traded above that level since the proposal was first announced, closing on Friday at $13.58.

GlaxoSmithKline was advised by Lazard, Morgan Stanley and the law firms Cleary Gottlieb Steen Hamilton and Wachtell, Lipton, Rosen Katz. Human Genome was advised by Goldman Sachs, Credit Suisse and the law firms Skadden, Arps, Slate, Meagher Flom and DLA Piper.

Article source: http://dealbook.nytimes.com/2012/07/15/glaxosmithkline-in-talks-to-buy-human-genome/?partner=rss&emc=rss