Spooked by probes, pharma execs think of leaving China

Jun 14 2014, 00:11 IST
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SummaryChina's crackdown on corruption in the pharmaceutical sector has frightened foreign executives so much that some fear they could be jailed and have asked their lawyers if they should leave the country for six months.

China's crackdown on corruption in the pharmaceutical sector has frightened foreign executives so much that some fear they could be jailed and have asked their lawyers if they should leave the country for six months. Others are thinking of going for good.

While the crackdown has been building for a year, Chinese police shocked the foreign business community a month ago when they filed corruption charges against Mark Reilly, former China head of British drugmaker GlaxoSmithKline Plc. The Briton, who has been barred from leaving China, could face decades in prison.

Even before then, executives were getting worried about a wave of visits from police and regulators to their offices as well as articles in Chinese media alleging corrupt practices against many global drugmakers.

The charges against Reilly had prompted some senior executives to look at all contingencies, several legal and industry sources said.

“Many of our clients are asking about personal liabilities and insurance, with executives asking if they are put in jail what will happen to their families and how the company will provide protection for them,” said John Huang, Shanghai-based co-founder and managing partner at law firm MWE China.

Police said a year-long investigation found GSK made billions of yuan from schemes to bribe doctors and hospitals. Two senior Chinese executives were also charged.

Britain's biggest drugmaker has said the accusations were “deeply concerning” and that it had zero tolerance for bribery. Reilly has not been reachable for comment while his lawyer has declined to talk to the media. Reilly's whereabouts are unknown.

Global drugmakers contacted by Reuters declined to comment about the crackdown and how it was affecting executive morale in the world's third-largest pharmaceutical market.

But Huang and two pharmaceutical executives said some managers were reconsidering the legal risks involved in holding any position where they were responsible for some of the thousands of marketing and sales staff that global firms employ across China.

Investigators have focused on those staff and how they deal with poorly paid doctors and administrators in public hospitals, the biggest buyers of medicine in China.

The crackdown, which shows no sign of abating, coincides with a wider campaign by President Xi Jinping against corporate and official graft.

Lawyers said some executives and in-house counsel had sought legal advice about leaving China to avoid getting caught up in any future probes. Some top managers were actively pursuing career options outside China, said one source.

Others were contemplating a more temporary escape until

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