A guard walks in the yard of the GlaxoSmithKline company at the Zhangjiang Innovation Park, Shanghai, on July 16, 2013. Photo: CFP

"The company on the one hand creates the illusion that it is regulating employees, but on the other hand, it pushes them into offering bribes," a recruitment director surnamed Guo, working for pharmaceutical giant GlaxoSmithKline's (GSK) human resources department in China, admitted on Saturday.

Recently, more details have been revealed about suspected serious economic violations by GSK China, currently being investigated by the authorities, after individuals involved in the case confessed to bribery and corruption, indicating that the case is far more complicated than police earlier believed.

Sales at all costs

Growth in drug sales was made the top priority of GSK China by Mark Reilly, the former head of GSK China, according to Huang Hong, 45, a high-ranking executive of GSK China.

Huang said that Reilly told her to set up the public relations team after he took charge of the China side of the business in 2009. The team, expanding to over 50 employees from 10 in 2009, was mainly responsible for maintaining good relationships with key clients, namely the heads and directors in charge of the pharmacy departments of almost every hospital around China.

These people can boost drug sales by including those drugs in hospital procurement lists, meaning they are eventually prescribed by hospital doctors.

"The annual sales growth goal set by the parent company in the UK in recent years was as high as 25 percent, 7 or 8 percentage points higher than the average standard of the whole industry," Huang said, adding that they could not reach the goal unless they adopted "abnormal means."

The company used various means, such as sponsoring key clients to participate in international conferences, designing training courses for hospitals, and supporting expert salons.

"We arranged sight-seeing procedures or gave expensive gifts to participants in our activities. Sometimes we paid them cash directly and called it transportation compensation," Huang said.

The public relations team also "visited" these clients regularly to maintain the relationship, and the frequency and "standard" of the visits differed according to the importance of the hospitals they belonged to.

The annual budget of GSK China's public relations team reached nearly 10 million yuan ($1.63 million). According to information from Vice President of GSK China Liang Hong and other sources, a fund was also set up to provide for the hundreds of millions of yuan required for bribery, which accounted for as much as 30 percent of drug prices.

For the company's nearly 3,000 sales representatives across China, the company used performance-based pay. Some representatives received a more than 400,000-yuan bonus for making sales above their quota last year, but those who failed to accomplish the task received less than several thousand yuan per month or even lost their jobs.

GSK China's strategies delivered results. In the past few years, their compound growth rate reached 25 percent, and the sales in 2012 increased to more than 7 billion yuan from 2 billion yuan in 2008.

Supervision for show

"If we were not backed by the company, we could not have achieved such rapid growth over the past four years," Huang said, also adding that the senior executives at GSK China were aware of the misconduct by their sales staff, but they chose to turn a blind eye.

According to Huang, all GSK China departments needed to provide any support required in order to reach the high sales goals. Huang said that although the company has supervision systems, auditing staff tended to ignore misdeeds.

The parent company also carries out internal audits of GSK China many times a year, and they even conducted a large-scale investigation over four months this year.

"When you investigate the receipts and expenses of a company, it always seems to be legal. High-level fraud is hard to detect. It is even harder to discover when the senior-level staff of a company are involved," a high-level executive of a transnational public accounting firm, whose name was not revealed, told Xinhua.

When sales representatives receive orientation training they receive 10,000 yuan in funding and a list of doctors around China, according to one of the suspects, a representative of the GSK Zhengzhou region surnamed Wang, who said they are given lists of doctors to contact.

"The finance and auditing departments sometimes points out our misbehaviors in phone calls, and taught us how to change it into what looks right," Wang said.

According to police statements, besides cooking the books, GSK China has also taken other measures to cover up its misconduct.

"The company always promotes compliance, asks employees to fill out all kinds of compliance forms, and demands they all learn compliance rules," Guo said.

Two kinds of corruption

"GSK China not only bribed hospital staff, but its senior executives also took bribes from other companies," police said.

The general manager of conference services provider Comfort Group M.I.C.E Services, surnamed Wang, admitted he offered a total of several million yuan in bribes to the director of the GSK China procurement department, surnamed Qiu, over the past four years, hoping to hold on to their business.

GSK China has been a key customer of Comfort Group, spending 300 million yuan on conferences every year.

"GSK China holds 600 or 700 conferences and meetings annually. The procurement department provides a priority list of suppliers for meetings whose budget is more than 300,000 yuan. Departments can choose suppliers themselves for those whose budget is lower. We update the priority list every two years after discussions with other departments. This is to avoid corruption by involving more departments," Qiu said.

According to the results of the investigation, some conferences of GSK China are used for money laundering and receiving cash, and some departments of GSK China retrieved a huge amount of cash by making false conferences and receipts. Authorities believe the cash was used to bribe officials and doctors, or went into the pockets of GSK staff.