July 31, 2020

Pharmaceutical company announces the conclusion of DOJ and SEC investigations

On July 29, 2020, GlaxoSmithKline PLC (GSK) disclosed in a securities filing that the US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) had terminated their investigations of GSK’s use of “third-party advisers” in China.  This comes over a year after the UK’s Serious Fraud Office (SFO) ended its investigation into GSK’s commercial practices in China in February of 2019.

According to GSK’s annual reports, US and UK enforcement authorities began investigating the company’s conduct in China in 2014 following a ruling by the Chinese government that GSK had “offered money or property to non-government personnel in order to obtain improper commercial gains.”  In 2016, GSK entered into a settlement with the SEC for books and records and internal controls violations resulting from improper payments made by a GSK subsidiary and a GSK joint venture.  According to the SEC order, these affiliated entities had provided gifts, entertainment, and other things of value to Chinese doctors in exchange for doctors writing more prescriptions for GSK products.  As part of the settlement, GSK agreed to the imposition of a $20 million civil penalty and a two-year period of self-monitor and reporting. 
In its 2017 annual report, GSK stated that the DOJ would not be taking any action with respect to the conduct that was part of the SEC settlement.  However, GSK added that the SEC, DOJ, and SFO were continuing to investigate GSK’s engagement of “third party advisers,” an issue that had been identified as part of the China investigation.  The July 2020 announcement means that, according to GSK, no action will be taken by the SEC or the DOJ with respect to this third party adviser issue.

Form 6-K | GSK Annual Report (2019) | GSK Annual Report (2017) | SEC Order (2016)