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British GSK executive accused of widespread China drug bribery

BEIJING -- Chinese police Wednesday accused a British executive of drugmaker GlaxoSmithKline (GSK) of leading a sprawling scheme to bribe doctors and hospitals to use its products.

The announcement was the first time a foreign employee in China of British-based GSK was accused in the investigation announced last July. It highlighted the widespread use of payments to doctors and hospitals by sellers of drugs and medical equipment in a state-run and poorly funded health system that Chinese leaders have promised to improve.

The executive, Mark Reilly, is accused of operating a “massive bribery network,” said a police official, Gao Feng, at a news conference. He said the case had been handed over to prosecutors.

Beginning in January 2009, Reilly was accused of ordering his sales team to pay doctors, hospital officials and health institutions to use GSK's products, said Gao, deputy director of the Ministry of Public Security's economic crimes unit. He said that resulted in “illegal revenue” of billions of yuan (hundreds of millions of dollars).

Gao said that as far as he knew, Reilly still was in China, but he had no details of his status. He said dozens of other people also were implicated but he gave no names or other details.

Reilly is GSK's senior vice president of pharmaceuticals for China and Hong Kong and former general manager for China.

Police previously identified four Chinese employees of GSK who they said confessed to bribery.

A second foreign drugmaker, AstraZeneca, said in July that police in Shanghai were investigating one of its salespeople. The company has given no information since then.

Chinese state media have publicized the investigations of GSK and AstraZeneca. But economists who study Chinese health care say such payments are more widely used by China's domestic drug manufacturers.

Doctors and hospitals routinely accept informal payments from patients and suppliers of medical goods to top up low salaries and cover gaps in budgets.

Hospitals also raise money by adding surcharges to drug prices and assigning employees sales quotas. That can also distort treatment by encouraging overuse of expensive drugs or procedures.

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In this July 24, 2013 photo, a Chinese flag is hoisted in front of a GlaxoSmithKline building in Shanghai, China. Police accused a British executive of drug maker GlaxoSmithKline with bribery on Wednesday, May 14. (AP)

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