GSK's Reilly assisting anti-bribery authorities in China

By Ben Hirschler

LONDON, Oct (KOSDAQ: 039200.KQ - news) 16 (Reuters) - Mark Reilly, GlaxoSmithKline (Other OTC: GLAXF - news) 's former head of operations in China, is helping anti-corruption officials in the country who are investigating allegations of extensive bribery by the drugmaker.

One person familiar with the situation said Reilly had been requested to remain in China while the investigations proceeded and was happy to do so.

Both GSK and the British Embassy in Beijing said on Wednesday that Reilly had not been detained by Chinese authorities. An embassy spokesman said it was in regular contact with him and was providing consular assistance.

Reilly was replaced as GSK's China head on July 25 after Chinese police accused the drugmaker of funnelling up to 3 billion yuan ($490 million) to travel agencies to facilitate bribes to doctors and officials.

GSK said at the time that he would continue to help lead its response to the bribery investigation.

"Mark is working closely with the Chinese authorities to conduct a thorough investigation and voluntarily returned to China to help them," a GSK spokesman said.

"Several weeks ago he met with the Chinese authorities in Changsha to provide them with information and assistance. At no point was he detained. Mark remains in China to help further with the investigation should it be required."

A number of Chinese employees of GSK have been detained, including four senior members of the local management team. But the authorities have not detained any foreign nationals working for the drugmaker.

The police allegations against GSK, laid out in detail on July 15, sent shockwaves through the industry and cast doubt over GSK's ability to ensure compliance standards in fast-growing markets like China.

The crackdown reflects a growing determination by Chinese authorities to stamp out corporate bribery and corruption, which can drive up prices for consumers.

GSK has admitted that some Chinese executives appeared to have broken the law and has said it plans to change its business model to lower the cost of medicines in the country.

Several other international drugmakers, including Sanofi (NasdaqGM: GCVRZ - news) , Novartis (Berlin: NOT.BE - news) , AstraZeneca (NYSE: AZN - news) , Eli Lilly and Bayer (LSE: 0P6S.L - news) have also been visited by Chinese officials - and the episode has hit sales in the Chinese pharmaceutical market.

Analysts at Deutsche Bank (LSE: 0H7D.L - news) said on Tuesday that the anti-bribery campaign was likely to last for some time, impacting both multinational and domestic drug companies.

GSK will report third-quarter results on Oct. 23, when the scale of the impact of the affair on its business in China is expected to be revealed.