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GSK Bribery Scandal In China

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1. GSK has featured its robust ethics and compliance program, even a “3rd Party Code of Conduct” for suppliers. What went wrong? What are the main external and internal factors that encouraged the GSK bribery scandal in China? Which, in your opinion, are more important? Explain your position.

The External and Internal Factors of GSK Bribery Scandal In China Although, China has been undertaking major reforms on health care since 1978, more than 30 years later, this country still doesn’t have a universal health care system. Government employees received inexpensive coverage for themselves and their families, however, those who work in the private sectors often received no coverage at all. China government covered only thirty percent of the health care expenditures, and the rest were paid individually, or by social institutions. This condition worsen by the reality that salaries of 2.3 million doctors in China were very low compared to other professions. They were also banned from taking on side jobs to support their incomes.

Some hospitals tried to take advantage from these unfortunate circumstances by placing additional costs on drug sales and promising commissions for their staff doctors when a specific amount of drugs were sold out. The bribery practices believed to be a common thing among hospital staffs and China’s domestic manufacturers. The irony, China is a big market for pharmaceutical industry. In 2012, this country was the largest pharmaceutical market in the world, and estimated to become the second largest drug market in the world in 2016. People in China gained greater knowledge of health care services as their disposable income and living standard increased.

2. Assess GSK’s response so far. Are the initiatives that GSK has implemented to address the bribery problems sufficient or would you suggest further actions? If you were Mark Reilly what would you have done? Explain.

3. Do you think that GSK has been treated unfairly? Was GSK really at fault or was it just unfortunate to have gotten caught given the perception that companies have to resort to bribing to win contracts? Explain.

4. How can we avoid similar situations and how can we reconcile local expectations of questionable payments with the U. S. Foreign Corrupt Practices Act or the U.K. Bribery Act? What do you recommend? Explain your position.

5. What strategic and operational lessons can we take from your analysis? Conclusions and Lessons Learned: What strategic and operational lessons can the CEO learn from your analysis?

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