(you can download the evidence from the publicly available site- Pacer- or from here – from Exhibit 25)Exhibit 25
There’s a case brewing in the US (that I have been following attentively), which I think could be one of the most scandalous cover-ups in Big Pharma history. The documents I am about to reveal (all publicly available and downloadable through the Pacer Website) are absolutely damning for GlaxoSmithKline. However the public must be warned because lives are at risk.
The case basically involves a whistle-blower called Thomas Reilly who has taken a wrongful termination case against GSK. Reilly was head of GSK’s Global IT systems (the computer systems that run GSK’s product manufacturing globally). In 2015- When Reilly tried to warn the CEO at the time- Andrew Witty- that there are serious problems, Witty seemed to brush him off (see excerpts below). If Thomas Reilly’s allegations of serious problems with GSK’s manufacturing are true (and I have no reason to believe that they are untrue, particularly considering the dozens of recalls – that I have documented- of their various products- over the years) then this essentially means that no GSK product can be trusted to be safe.
It also means that many millions of people globally, are at risk, of ingesting either a defective, contaminated, or just shoddily produced GSK product at any time. We are all at risk here, because we all need drugs/treatments from time to time, due to illness or injury etc, and GSK are one of the biggest suppliers of Pharmaceuticals/consumer health products in the world. Even those who work for GSK are at risk (they take meds too), and their family/friends etc are at risk also- because due to their dodgy manufacturing/defunct IT processes within their global supply chain- we simply do not know if a GSK product is ever safe or not (for a long, but not extensive, list – of GSK recalls- see this link)
Read from Exhibit 25 (page 4) – screen grab below.
And see how GSK’s Andrew Witty (CEO at the time- 2005) glibly and nonchalantly dismissed IT Expert (and GSK employee at the time) Thomas Reilly’s serious concerns about GSK’s global manufacturing/IT systems.
Bear in mind, that GSK have had many criminal investigations against them over the past decades, and that they have previously been fined (as a felon) in a 3 Billion lawsuit – instigated by the Department of Justice and Whistle-blower Greg Thorpe in 2012.
They were also fined in China in 2014 for similar damning corruption and fraud allegations.
GSK has a long history of breaking ethics/morals and harming consumers (see the Seroxat and Avandia debacles for a taste of how bad GSK treat users of their products).
We have no reason to trust them in any sense whatsoever. They have given us absolutely no reason to trust them- ever.
how many cases like this of bad batches of drugs/products slip through oversight and go unreported? how bad are GSK’s manufacturing processes? and how many people get harmed from using GSK products without even realizing it?
And why are the authorities allowing them to operate?
(if any journalists/whistle-blowers are interested in this scandal – please contact me by email)
I will cover more of these publicly available and downloadable documents over the coming days.
This is just the beginning of another GSK scandal; a scandal that illustrates how everyone (across the globe)is at risk of harm from a dodgy GSK product because of their defunct manufacturing cover up.
GSK is no stranger to scandal, and no stranger to harming people with dodgy meds, but the sheer scale of harm to consumers from this current massive cover-up is staggering.
Regular readers of this blog would be aware of the current lawsuit taken by Peter Humphrey, against GlaxoSmithKline.
See the gist of the story (and Peter’s original complaint) here–
“…A 42 page complaint was filed on November 15, 2016, by Peter Humphrey and his wife, Yu Yingzeng, in relation to GSK’s nefarious activities in China which saw the pair incarcerated for around 2 years in Chinese slum-like conditions prison cells.
The complaint delves deep into the whole sordid affair and alleges bribery on a huge scale, more importantly, the complaint alleges that GSK hired the services of Humphrey and Yu in efforts to smokescreen the corruption in China, corruption, according to the complaint, that they had known about for many years.
Furthermore, the 42 page document alleges that GSK’s CEO, Andrew Witty, lied to the media when he was asked about the corruption in China…”
In my opinion, Peter’s legal complaint is massively undermining, and embarrassing, for Glaxo. They will likely try everything in their power (and they have huge power) to discredit Humphrey and his case against them. Glaxo have a history of playing low and dirty in all their dealings, therefore we should expect nothing but the same from them when dealing with legal cases against them. Ethics, and fair play, are not in the GSK mindset.
However, I also think that GSK would be wise to settle this case well before court, because from scanning through the many pages of the complaint, saying it doesn’t look good for Glaxo would be a massive understatement.
What I find quite astounding also, about this case, is- GSK do not deny most of the (shocking) factual allegations against them, they merely try to discredit them by ignoring Peter and Yu’s suffering, and their own lies and crimes, by saying that Peter and Yu ‘knew the risks’.
However, how could Peter and Yu have known the risks when GSK were feeding them false information?
Furthermore, Glaxo are trying to force Peter and Yu to sue in a country (China) which (because of GSK’s deception/the basis of the lawsuit itself) they cannot enter (thanks to GSK).
GSK’s response, is (unsurprisingly) cynical, callous and uncaring, and surely must add to Peter and Yu’s distress.
Glaxo’s 242 page rebuttal of Peter’s original claim can be read here:
The basis of Glaxo’s argument to dismiss Peter’s complaint seems to hinge upon :
…..”Defendants’ motion on the merits rests primarily on the argument that Plaintiffs “sued the wrong entities.”…
In other words, Glaxo is trying to nullify Peter Humphrey’s complaint on the basis that GSK believe that the claimants (Peter and his wife Yu) should go back to China to to arbitrate their claims against Glaxo PLC, and they claim that they can’t be sued in the US for this case.
Ironically (and conveniently for GSK) even if Peter and Yu wanted to go back to China-they can’t- because GSK scapegoated them and set them up by hiring them (and deceiving them) about their China business dealings. It’s because of GSK’s unethical conduct in China that Peter and Yu ended up in prison in China. GSK have a lot to answer here, not just in terms of Peter and Yu’s case, but in the broader context of corruption within the company generally, and not to mention of course the various questions surrounding what exactly GSK knew of Mark Reilly’s bribery network, how was it funded? What did the senior execs know? etc etc.
If Peter’s case gets to court, the whole thing would blow wide open, and this is a gigantic stinking, criminal and unethical, can of worms about the company- that GSK will not be able to keep a lid on this time…
GSK is a global healthcare company with major locations in the US, and the UK, its China business is but a tiny part of its internationally spread-out business. GSK’s legal department is based out of the US too, so for GSK to attempt to nullify Peter’s claims on this basis, seems not only weak, and flimsy, but also pretty desperate.
Glaxo’s CEO Andrew Witty, might have to answer for GSK, and the China bribe scandal in a US court but for now it seems Witty is happy to cash in his chips, and jump ship (he’s retiring next month), so perhaps he’ll leave all these recent scandalous messes to the incoming CEO, Emma Walmsley? (it seems to be a GSK tradition by now doesn’t it?)
And maybe then, Walmsley will claim that GSK’s behavior in China was all part of ‘another era’, or some other such nonsense…
Parents of disabled children still fighting for compensation over swine flu vaccine
The DWP could be left with a £12m bill if it fails for a third time to overturn a ruling ordering it to pay £120,000 compensation to a 7-year-old who suffers from narcolepsy caused by the Swine Flu vaccine Pandemrix. (Photo by Jeff J Mitchell/Getty Images)
On 10 December 2009, seven-year-old John was given a vaccination called Pandemrix against the pandemic influenza A (H1N1), commonly known as Swine Flu. Four months later, following extensive hospital examination he was diagnosed with narcolepsy and cataplexy, neurological conditions that will affect him for the rest of his life.
Narcolepsy is a very rare and incurable autoimmune sleep disorder caused by the destruction of the part of the brain that produces hypocretin, a peptide that regulates sleep. Sufferers regularly experience episodes of drowsiness or excessive daytime sleepiness. Cataplexy is a condition characterised by sudden, profound muscle paralysis, the onset of which takes several seconds, and often results in the sufferer collapsing.
These conditions may also be associated with hallucinations, behavioural and mood disturbance, as well as nightmares. John, now 14, experiences all of these symptoms.
Although millions of people in the UK received Pandemrix without complications, the 2009-10 pandemic vaccine has been found to have caused an epidemic of narcolepsy in the UK and in other European countries in which it was used. About 1,500 people across Europe are thought to be affected, of which about 100 have so far been identified in the UK. John, not his real name, is one of them.
Last month, the High Court heard an appeal from the Department for Work and Pensions (DWP) against a test case decision forcing it to pay £120,000 vaccine injury compensation to John.
In January 2012 he applied to the DWP for compensation under the Vaccine Damages Payments Act 1979. The claim was initially refused on grounds of lack of a causal connection between the vaccine and John’s development of narcolepsy and cataplexy.
“What I expect of a decent, caring society is that when vaccination programmes are implemented, they come with an implicit agreement between state and citizen that ‘should’ anything go wrong, that citizen will be looked after by the rest of us.”
Matt O’Neill, Chair, Narcolepsy UK
A few months later, a medical advisor to the government’s Vaccine Damages Unit said that there was, in fact, likely to be a causal connection, but that John’s condition had improved and his level of disablement was less than 60 per cent – the threshold required to meet “severe” disability criteria for awarding compensation. He was denied payment.
On 11 February 2014, then Secretary of State for Work and Pensions Iain Duncan Smith reversed his refusal decision of two years earlier, accepting that the vaccine had caused John’s narcolepsy and cataplexy. However, Mr Duncan Smith refused to accept that John was severely disabled, and his application for payment was therefore refused.
After John appealed the decision to the First Tier Tribunal, the DWP was ordered in September 2014 to pay out as it found his narcolepsy to be severe. The DWP refused and appealed to the Upper Tribunal, arguing that only problems John had now could be taken into account and not the future impact of his condition.
It is the first time the Court of Appeal is considering a case of vaccine injury compensation under the UK statutory compensation scheme. Its decision will be binding on all future assessments of disability brought under the 1979 Act. Payments were then fixed at £10,000. Now they are £120,000 per person, so with around 100 victims seeking compensation under the Act, the DWP will be faced with a £12m bill if it loses.
Defining an individual as ’60 per cent disabled’
At Thursday’s hearing Sir Terence Etherton who, as Master of the Rolls, is the second most senior judge in England and Wales, Lord Justice Davis and Lord Justice Underhill listened to the government’s case. Adam Heppinstall, representing the Secretary of State, said the principal argument is that it was “wrong in law” for the Upper Tribunal to conclude that assessment of an individual’s disability under the statutory scheme require’s a decision maker to take into account that person’s likely future disablement in addition to his condition at the time of assessment.
“In this respect, the Upper Tribunal adopted a speculative approach, not called for by the legislation, which carries with it substantial problems and the risk of unfairness,” Mr Heppinstall said. “The Secretary of State calls for a more factual approach, in which only the present disablement can be taken into account.”
He told the court other grounds for appeal centred on how someone is assessed as “severely disabled” and that the case raises “fundamental issues” which go to the heart of how all claims under the 1979 Act should be assessed and decided by the Secretary of State.
George Peretz QC, representing John, told the court: “There is nothing ‘speculative’ about looking at the impact of that continuing disability on an 11 year old boy as he progresses into manhood, taking into account the additional opportunities and responsibilities which that transition in life brings with it.
“The Upper Tribunal adopted a speculative approach, not called for by the legislation, which carries with it substantial problems and the risk of unfairness. The Secretary of State calls for a more factual approach, in which only the present disablement can be taken into account.”
Adam Heppinstall, counsel, Secretary of State for Work and Pensions
“As the Upper Tribunal rightly pointed out, the fact that injuries such as loss of a hand are regarded as amounting to 100 per cent disablement, and that, amputation of one leg at the knee is to be regarded as 60 per cent disablement, may be useful in providing a broad framework or starting point in assessing whether John’s narcolepsy with cataplexy amounts to 60 per cent disablement.
“Such a check, for example, rules out any suggestion that 100 per cent disablement is akin to total quadriplegia or a persistent vegetative state or that 60 per cent disablement cannot be established where an individual is able to carry on a reasonable range of daily activities.”
Mr Peretz used the example of paralympian and double-amputee Oscar Pistorious, who is defined as “100 per cent disabled”, yet was still able to compete at the Olympic Games.
Sir Terence said that it was obviously an important matter – not just for John and his family, but for the 30 outstanding cases waiting on the result. The judges reserved their decision.
The GlaxoSmithKline boss kept his title and won praise for slashing prices in poor countries – but his executives rather let him down in China
Sunday 5 February 2017 07.00 GMT Last modified on Sunday 5 February 2017 12.26 GMT
So it’s farewell to Sir Andrew Witty, the boss of pharma group GlaxoSmithKline and one of the few businesses knights who hasn’t disgraced himself enough to have a campaign to strip him of his title.
He’s been on one of those long City goodbyes where he announces he’s off but then stays for a lap of honour, and this week is the final time we will hear Glaxo’s full-year results with Witty at the helm.
It may be a decent time to wean himself off the attractions of the boardroom, too. Analysts at Berenberg muse: “Outside of the HIV business, the rest of the pharmaceuticals business is not expected to deliver much growth. However, GSK does have a deep pipeline, albeit at relatively early stages of development.”
So what will Witty be remembered for? Well, in development circles it will surely be his lauded decision to slash GSK’s prices in the poorest countries to no more than 25% of the UK price.
Yet others may recollect different events, including the company getting whacked with a £1.9bn fine in the US in 2012, after admitting bribing doctors – plus that memorable scandal shortly afterwards involving a GSK executive in Asia, a sex tape and favours given to Chinese doctors for using GSK products. Witty described the latter as “a disappointment”.
SHANGHAI — Peter Humphrey was in the bathroom of his Shanghai apartment when the police kicked the door off its hinges and knocked him to the ground. Nearly two dozen officers stormed his home. They confiscated files, laptops and hard drives related to his work as a corporate investigator.
Mr. Humphrey and his wife, Yu Yingzeng, were taken to Building 803, a notoriously bleak criminal investigation center normally reserved for human smugglers, drug traffickers and political activists. Sleep-deprived and hungry, he was transferred later that day to a detention house, placed in a cage and strapped to an iron chair. Outside, three officers sat on a podium and demanded answers.
Mr. Humphrey knew the reason for the harsh interrogation. He and Ms. Yu had been working for GlaxoSmithKline, the British pharmaceutical maker under investigation in China for fraud and bribery.
The Glaxo case, which resulted in record penalties of nearly $500 million and a string of guilty pleas by executives, upended the power dynamic in China, unveiling an increasingly assertive government determined to tighten its grip over multinationals. In the three years since the arrests, the Chinese government, under President Xi Jinping, has unleashed the full force of the country’s authoritarian system, as part of a broader agenda of economic nationalism.
Driven by the quest for profits, many multinationals pushed the limits in China, lulled into a sense of complacency by lax officials who eagerly welcomed overseas money. Glaxo took it to the extreme, allowing corruption to fester.
When bribery accusations surfaced, the company followed the old playbook, missing the seismic changes reshaping the Chinese market. Rather than fess up, Glaxo tried to play down the issues and discredit its accusers — figuring officials wouldn’t pay attention.
Along the way, there were bribes of iPads, a mysterious sex tape and the corporate investigator, who gave his operations secret code names. The company’s missteps are laid bare in emails, confidential corporate documents and other evidence obtained by The New York Times, as well as in interviews with dozens of executives, regulators and lawyers involved in the case.
The aftershocks of the Glaxo case are still rippling through China. The authorities have unleashed a wave of investigations, putting global companies on the defensive. The government has intensified its scrutiny of Microsoft on antitrust matters this year, demanding more details about its business in China. And just two weeks ago, the authorities detained a group of China-based employees, including several Australian citizens, working for the Australian casino operator Crown Resorts, on suspicion of gambling-related crimes.
Companies are racing to find new strategies and avoid getting locked out of China, the world’s second-largest economy after the United States. Disney and Qualcomm are currying favor with Chinese leaders. Apple redid its taxes in China after getting fined. Some multinationals are training employees in how to deal with raids.
The crackdown has prompted a complete rethinking for Glaxo — and for much of the pharmaceutical industry. To appease the government, drug makers have promised to lower prices and overhaul sales practices.
“For a long time, there’d been this policy of going easy on foreign enterprises,” said Jerome A. Cohen, a longtime legal adviser to Western companies. “The government didn’t want to cause embarrassment or give outsiders the impression that China is plagued with corruption. But they’re not thinking like that anymore.”
The Glaxo case was fueled by missed clues, poor communication and a willful avoidance of the facts. For more than a year, the drug maker brushed aside repeated warnings from a whistle-blower about systemic fraud and corruption in its China operations.
The company’s internal controls were not robust enough to prevent the fraud, or even to find it. Internally, the whistle-blower allegations were dismissed as a “smear campaign,” according to a confidential company report obtained by The Times.
Glaxo just wanted to make its problems go away. It offered bribes to regulators. It retaliated against the suspected whistle-blower. It hired Mr. Humphrey and Ms. Yu to dig into the woman’s background, family and government ties, as a way to discredit her. And Glaxo may even have gone after the wrong person, documents and emails obtained by The Times suggest.
None of it mattered. The allegations were true.
Prosecutors charged the global drug giant with giving kickbacks to doctors and hospital workers who prescribed its medicines. In 2014 Glaxo paid a nearly $500 million fine, at the time the largest ever in China for a multinational. Five senior executives in China pleaded guilty, including the head of Glaxo’s Chinese operations, a British national, in a rare prosecution of a Western executive. With Glaxo embroiled in scandal, sales plummeted in China, the company’s fastest-growing market.
Glaxo has declined multiple requests for comment, referring instead to earlier statements. Glaxo “fully accepts the facts and evidence of the investigation, and the verdict of the Chinese judicial authorities,” one statement read. “GSK P.L.C. sincerely apologizes to the Chinese patients, doctors and hospitals, and to the Chinese government and the Chinese people.”
Mr. Humphrey and Ms. Yu, both in their late 50s at the time of their arrests, were punished too. The couple spent two years in prison for illegally obtaining government records on individuals.
Mr. Humphrey was crowded into a cell with a dozen other inmates. There were no beds or other furniture, just an open toilet and a neon light overhead. During his incarceration, Mr. Humphrey said, he suffered back pain, a hernia and a prostate problem that was later diagnosed as cancer.
“I was in a state of complete shock and breakdown,” said Mr. Humphrey, who was released along with his wife in July 2015. “I was physically broken down and mentally blown away. I didn’t sleep for 45 days.”
A Whistle-Blower Emerges
An anonymous 5,200-word email in January 2013 to the Glaxo board laid out a detailed map to a fraud in the Chinese operations.
Written in perfect English, the email was organized like a corporate memo. Under the header “Conference Trip Vacations for Doctors,” the whistle-blower wrote that medical professionals received all-expenses-paid trips under the guise of attending international conferences. The company covered the costs of airline tickets and hotel rooms, and handed out cash for meals and sightseeing excursions.
In a section labeled “GSK Falsified Its Books and Records to Conceal Its Illegal Marketing Practices in China,” the email explained how Glaxo was pitching drugs for unapproved uses. As an example, the whistle-blower said the drug Lamictal had been aggressively promoted as a treatment for bipolar disorder, even though it had been approved in China only for epilepsy.
Glaxo “almost killed one patient by illegally marketing its drug Lamictal,” said the email, which was obtained by The Times. “GSK China bought the patient’s silence for $9,000.”
The email was one of nearly two dozen that the whistle-blower sent over the course of 17 months to Chinese regulators, Glaxo executives and the company’s auditor, PricewaterhouseCoopers.
When the authorities pressed Glaxo, the company was dismissive. It failed to properly investigate the allegations. It didn’t beef up its internal controls. And it didn’t change its marketing practices.
The decision was calculated. In the decades since China began opening its economy, most multinationals had avoided scrutiny over bribery. China needed overseas companies to help develop its economy, by setting up manufacturing operations and creating jobs. The authorities were reluctant to jeopardize investment, so they took a softer approach to enforcement.
When companies did run into trouble, fines were tiny. The rare cases tended to be colored by politics. Seven years ago, the Chinese authorities detained executives from the global mining giant Rio Tinto on suspicion of stealing state secrets. The charges were eventually downgraded to bribery, and the company avoided punishment.
By the time Glaxo’s fraud bubbled to the surface, China had changed.
Over the last decade, China has emerged as an economic powerhouse, but it took off even more as the rest of the world slowed after the financial crisis. That gave China the upper hand with overseas companies, which were increasingly dependent on profits from the country’s growing consumer base.
The economic might coincided with the Communist Party’s increasingly nationalistic stance. The authorities in China, already undertaking a severe crackdown on Chinese companies, wanted to show that, like American regulators, they could also penalize and sanction global companies.
And it was no secret that big drug makers were violating the law in China.
Years earlier, the consulting firm Deloitte warned about rampant corruption in China’s pharmaceutical market. As Deloitte found, doctors and health care workers were poorly compensated, so they could easily be induced to write more prescriptions with offers of cash, gifts, vacations and other benefits. Big drug makers, eager for growth, willingly obliged.
“The remarkable thing is that China is a more hospitable environment to this type of corruption, because it’s a market where doctors and hospitals are heavily reliant on drug sales,” said Dali Yang, who teaches at the University of Chicago and has studied the industry. “They were like fish swimming in water.”
American investigators had punished several major drug companies for such behavior abroad. In 2012, Eli Lilly agreed to pay $29 million, and Pfizer $45 million, to settle allegations that included employees’ bribing doctors in China. In settling the cases, neither company admitted or denied the allegations.
That summer, Glaxo agreed to pay $3 billion in fines and pleaded guilty to criminal charges in the United States for marketing antidepressants for unapproved uses, failing to report safety data on a diabetes drug and paying kickbacks. The case was built off tips from several whistle-blowers.
After that, Glaxo’s chief executive, Andrew Witty, pledged, “We’re determined this is never going to happen again.”
But it did — in China.
In early 2013, Glaxo realized it couldn’t ignore the problems. The authorities were asking questions. The whistle-blower continued to send emails.
So the company tried another common gambit in China: bribing officials.
The company set up a special “crisis management” team in China and began offering money and gifts to regulators.
That strategy had worked in the past. A company, often using a middleman, would try to soothe officials and regulators, offering gifts and favors.
One government agency had received multiple emails from the whistle-blower, and Glaxo targeted multiple branches of the agency, according to state media reports. One executive tried to cozy up to a Shanghai investigator with an iPad and a dinner totaling $1,200, another Glaxo employee said in a statement to the police. When that executive asked for money to bribe the Beijing branch, Mark Reilly, the head of the company’s Chinese operations, gave the “go ahead.”
Another executive with Glaxo’s Chinese operations bribed regulators to focus on “unequal competition,” rather than a more punitive investigation into “commercial bribery.” The goal, that executive admitted in a statement, was to limit any potential fine to about $50,000. It didn’t work.
As pressure mounted, the case took a bizarre turn, setting Glaxo on a collision course with the government.
In March 2013, Glaxo’s chief executive and five other senior executives in the company’s London headquarters received an anonymous email with a media file. In it, a grainy video showed Mr. Reilly, the executive in China, engaged in a sexual act with a young Chinese woman.
The attached email alleged that Mr. Reilly, a British national who had helped manage the company’s China operation for four years, was complicit in a bribery scheme tied to a travel agency called China Comfort Travel, or C.C.T. According to the email, Glaxo funneled money through the travel agency to pay off doctors. The travel agency also supplied Mr. Reilly with women, as a way to secure that business.
“In order to acquire more business, C.C.T. bribed Mark Reilly, the general manager of GSK (China) with sex,” the email said. “Mark Reilly accepted this bribery and made C.C.T. get the maximized benefits in return.”
Glaxo later discovered that the video had been shot clandestinely, in the bedroom of Mr. Reilly’s apartment in Shanghai. Analysts working for the company said it had been edited to disguise the location.
Glaxo executives in London were shocked. They deemed the video a serious breach of privacy, involving a possible break-in at the home of a senior executive in China. Mr. Reilly moved to a more secure residence.
Like many global companies, Glaxo has a code of conduct that encourages employees to report fraud or wrongdoing without fear of retaliation by the company. In many countries, including China, the rights of whistle-blowers are protected by law.
Glaxo didn’t seem to care.
By the time the video surfaced, Glaxo already had its suspicions about the identity of the whistle-blower. Months earlier, the company had fired Vivian Shi, a 47-year-old executive handling government affairs in Glaxo’s Shanghai office. The official reason for Ms. Shi’s firing was falsifying travel expenses. In fact, she was dismissed because the company believed she was the whistle-blower, according to confidential corporate documents obtained by The Times.
Ms. Shi did not return multiple calls for comment.
After receiving the video, Glaxo took more aggressive action, seeking to discredit Ms. Shi, who had already left the company.
At that point, in the spring of 2013, the company turned to Mr. Humphrey, the investigator. He ran ChinaWhys, a small risk consultancy firm that advised global companies like Dell and Dow Chemical.
His firm was engaged in what he called “discreet investigations,” helping multinationals cope with difficult situations like counterfeiting and embezzlement. Short in stature, with a shock of white hair, Mr. Humphrey portrayed himself as a kind of modern-day Sherlock Holmes.
“He likes a good adventure and likes solving cases,” said his friend Stuart Lindley, who runs a financial services company in China. “But he was definitely aware that some of that stuff was risky.”
In April 2013, Mr. Reilly met with Mr. Humphrey at Glaxo’s glass office tower near People’s Square in central Shanghai. According to meeting notes obtained by The Times, they discussed the emails, the sex video and Ms. Shi, the suspected whistle-blower. Mr. Reilly told the investigator that she held a grudge against Glaxo.
At the meeting, Mr. Reilly asked the investigator to look into the break-in at his apartment. But he made clear that he also wanted to assess what power and influence Ms. Shi might have with the government.
Legal experts say Mr. Reilly should not have been put in charge.
“The executive so accused has an obvious conflict of interest in overseeing such an investigation,” said John Coates, a Harvard Law School professor. “Even if the executive were entirely innocent of the whistle-blower’s charge, giving that same executive the role of investigating the whistle-blower smacks of retaliation.”
Efforts to reach Mr. Reilly, who has since left the company, were unsuccessful.
Using the code name Project Scorpion, Mr. Humphrey and his staff spent the next six weeks working undercover, gathering evidence. They visited Lanson Place, the upscale apartment complex where Mr. Reilly lived when the sex tape was made. They created a dossier on the suspected whistle-blower, searching for motives and ties to high-ranking officials or regulators. They interviewed former co-workers, scrutinized her résumé and scoured the web for information about her father, a former health official.
Glaxo may have crossed a line in this regard, putting the company more sharply in the government’s sights.
As part of the investigation, Mr. Humphrey turned to a Chinese detective to acquire a copy of Ms. Shi’s household registration record, or hukou. The official document contained information about her husband and daughter. The authorities had warned private detectives about acquiring confidential government documents.
“This type of household information is supposed to be private,” said John Huang, a former government official who is now managing partner at McDermott, Will & Emery in Shanghai. “But people were buying and selling it.”
Glaxo got little payoff from the investigation.
On June 6, 2013, Mr. Humphrey delivered a 39-page report to Glaxo that said Ms. Shi was probably the whistle-blower and even had a “track record of staging similar attacks” at a previous job. But the report included no evidence linking her to the emails or the sex video, according to a draft obtained by The Times.
Glaxo’s strategy of bribery and discrediting ultimately failed.
With the Chinese government in the midst of a crackdown on corruption, the police carried out a series of raids on June 27, 2013. They seized files and laptops from multiple Glaxo offices and interrogated dozens of employees. In Shanghai, four senior executives were detained. Investigators also raided the offices of several travel agencies that had worked closely with Glaxo, including China Comfort Travel.
A week later, the police stormed Mr. Humphrey’s apartment in Shanghai. He and his wife were charged with violating privacy laws.
Mr. Humphrey declined to comment on the specifics of the Glaxo case. His son defended his work, saying Glaxo engaged him “under false pretenses.” “My father is an honorable and law-abiding man,” said the son, Harvard Humphrey.
When prosecutors announced the case against Glaxo in July 2013, several weeks after arrests began, their allegations closely mirrored those of the whistle-blower. They described an elaborate scheme to bribe doctors and workers at government-owned hospitals using cash that had been funneled through a network of 700 travel agencies and consulting firms.
“It’s like a criminal organization: There’s always a boss, and in this case GSK is the boss,” said Gao Feng, one of the lead investigators.
Glaxo said little about the developments until July 15, when several high-ranking executives confessed from prison on state-run television. After that, the company capitulated, issuing a blanket statement for its misdeeds: “These allegations are shameful and we regret this has occurred.”
Cleaning Up Corruption
Dressed in a dark suit and a blue tie, Mr. Reilly, the Glaxo executive, was led in handcuffs into a small courtroom in the city of Changsha, in central China, in September 2014. With security guards behind him, he stood alongside four other senior Glaxo executives as a judge read the charges.
“The defendant company GSKCI is guilty of bribing nongovernment personnel and will be fined 3 billion yuan,” the judge, Wu Jixiang, said sternly, referring to Glaxo’s Chinese name. The company and the executives, having confessed, were given relatively light sentences, the court said.
Mark Reilly was sentenced to three years in prison and ordered to be expelled from China.
After handing down that sentence, the judge turned to Mr. Reilly.
“Do you obey the court’s verdict? Do you appeal?” he asked.
Mr. Reilly said that he would not challenge the verdict. Because he was swiftly deported, he will not serve prison time in China.
Glaxo is still trying to clean up the mess.
In China, Glaxo has promised to overhaul its operations and has put in place stricter compliance procedures. The company has changed the way its sales force is compensated and has eliminated the use of outside travel agencies.
Glaxo has also tightened oversight of expenses and cash advances, areas central to the case. Employees must now send in photographs of the guests and food, to verify that the meetings took place.
And in August 2015, Glaxo tried to make amends by rehiring Ms. Shi, an acknowledgment that the company had erred in firing an employee suspected of being a whistle-blower.
But the decision also hinted at a more troubling admission — that Glaxo had targeted the wrong person. There are indications that Ms. Shi was not the whistle-blower, and that there may have been more than one person.
The emails sent to regulators were written in fluent English and came mostly from a Gmail account. The email with the sex video came from a local Chinese account and was written in poor English. The only similarity was the anonymity.
The Times sent emails to both accounts and got a response from just one, the person who had written the detailed emails to the Chinese authorities and Glaxo. “You have reached who you are looking for,” the person replied.
In a series of exchanges, the author denied being Ms. Shi, acting in concert with her or sending the video. The person said Glaxo had erroneously blamed Ms. Shi for the emails and never found the actual whistle-blower.
The Times was unable to verify the identity of the person, who described working in Shanghai but declined to come forward for fear of retribution.
“I didn’t reveal to GSK personnel that I was the whistle-blower because doing so would have placed me in potential physical jeopardy,” the whistle-blower wrote in an email to The Times. “You understand that criminals — you know that they were convicted later in Chinese courts — were in charge of GSK China at that time, and I truly believe that they would have harmed me in some fashion had they discovered my identity. ”
After a whistle-blower working for one of the world’s biggest pharmaceutical companies began sending anonymous tips about fraud and corruption inside its operation in China, authorities there moved in. They arrested top executives and corporate detectives the company had hired to track down the whistle-blower. Here is how the events transpired.
Credit Aly Song/Reuters
December 2011 A self-described whistle-blower working inside Glaxo sends an email to Chinese regulators, detailing fraud and corruption in the pharmaceutical maker’s Chinese operations. It is the first of about two dozen emails sent over a 17-month period.
April 2012 Glaxo executives in China begin hearing that a whistle-blower has been sending documents to Chinese regulators claiming widespread corruption at the company.
July 2012 The company pleads guilty in the United States to criminal charges for improper drug marketing and kickbacks to doctors. The company’s chief executive, Sir Andrew Witty, pledges that it “is never going to happen again.”
December 2012 Vivian Shi, the head of government affairs for Glaxo in China, is fired, supposedly for falsifying travel expenses. But the real reason, according to internal documents, is that Ms. Shi is suspected of being the whistle-blower.
January 2013 The whistle-blower sends a 5,200-word email to the Glaxo chairman, senior executives and the company’s outside auditor. The email, like the previous ones to authorities, describes a systemic fraud and bribery scheme. The allegations are dismissed by the company as a “smear campaign.”
“This illegality almost killed a person,” a whistle-blower wrote to Chinese regulators in January 2013.
March 2013 Top Glaxo executives in London receive another whistle-blower email, this time showing Mark Reilly, the head of the company’s operations in China, engaged in a sexual act in his apartment.
April 2013 Glaxo hires ChinaWhys, a private consulting firm run by Peter Humphrey and his wife, Yu Yingzeng, to investigate the suspected whistle-blower and a break-in at Mr. Reilly’s home. The investigation is code-named “Project Scorpion.”
June 2013 Mr. Humphrey presents the findings of his investigation to Glaxo. Although his report offers no evidence connecting Ms. Shi to the emails, he notes the suspected whistle-blower has a “track record of staging similar attacks.”
June 2013 The police carry out a series of coordinated raids on Glaxo offices throughout China, detaining four executives, including the country’s chief legal officer. Several travel agencies working closely with Glaxo are also raided.
July 15, 2013 At a news conference in Beijing, prosecutors accuse senior executives at Glaxo’s Chinese operations of running an elaborate scheme to bribe doctors and hospital workers, describing it as an “organized crime operation.”
July 16, 2013 Four Chinese executives at Glaxo confess on state television to the bribery and fraud scheme.
August 2014Mr. Humphrey and Ms. Yu are convicted of illegally obtaining government records about individuals during their corporate investigations, a charge they denied. They each served two years in prison.
Sept. 19, 2014 At a one-day trial held in secret, Mr. Reilly, the head of Glaxo’s Chinese operations, and other company executives plead guilty to fraud and bribery. Glaxo agrees to pay a $500 million fine. Mr. Reilly is deported from China.
Quite a nauseatingly sycophantic article from Mathew Herper from Forbes. No surprise there really, as I have noticed Herper’s style on GSK and Andrew Witty before, and I have to say- I was less than impressed before with Herper, and I am even more than less impressed now. This article would be more accurately described as ‘promotional material’ as opposed to real, authentic, impartial- journalism. There are a number of inconsistencies, inaccuracies and half truths here, of which I will blog about soon.
I am approaching my final blog post soon anyhow, so I will wrap up my thoughts in a final post about the narrative that GSK expect the public to swallow and the real story of GSK which I have followed, documented and blogged about for a number of years now. Personally ,I believe I am way more qualified to tell that story than Forbes. The obsequious, servile and adulatory perspective of Witty’s reign- which Mathew Herper of Forbes chose to display -is clearly nothing more than a glorified ego wank dressed up as a news article. It’s one lackey back slapping another (you scratch my back I’ll scratch yours kind of thing) and it’s obviously very sloppily strewn together. It seems that Herper probably thought all his Christmases came at once when the almighty Sir Witty chose him to write his farewell piece, and in doing so- Herper couldn’t help but lick Witty’s boots squeaky clean for it. Extremely disappointing from a patient’s perspective, particularly those who have been harmed by GSK meds over the years (of which there have been many thousands).
I have spent ten years blogging about GSK . I was harmed by one of their crappy dangerous meds (Seroxat). I have had direct contact with several whistle-blowers, some of whom Forbes and Herper haven’t even ever mentioned in any of their media. I have spent thousands of hours writing, researching and blogging about GSK. There is stuff on my blog which hasn’t even seen the light of day in the mainstream media and I doubt if Herper has even scratched the surface on the magnitude of GSK’s unethical shenanigans…
I will deconstruct Herpers’s absurd article on Witty’s tenure in a future post soon (It’s going to be a big post).
But for now here’s the ridiculous article from Forbes..
Perhaps some of my readers would care to spot the inconsistencies?
(leave a comment below if you like)
oh and the picture of Witty leaving the open door is just corny…
I cover science and medicine, and believe this is biology’s century.
This story appears in the October 4, 2016 issue of Forbes. Subscribe
Here’s how Sir Andrew Witty, who is due to end an eight-year tenure as the chief executive of British drug giant GlaxoSmithKline, would like to be remembered: in his shirtsleeves, in sub-Saharan Africa, meeting with impoverished villagers and then persuading first-world politicians of the need for drugs in the developing world. As the chief executive whose company developed a malaria vaccine and was first to test a vaccine for the Ebola virus. As the ethical exec who stopped paying doctors what were essentially bribes to talk up drugs. As the pharma boss who managed to stabilize a drug giant without a big, destructive merger.
“Honestly, I don’t regret a single decision,” says Witty, 52. “Someone smarter than me probably could have done it better. But I think it was the right direction for us to go in.”
History might remember a different Glaxo: the company whose revenues are flat since Witty took over and whose shares have underperformed its peers. The company accused of bribery in a half-dozen countries. The firm that in July 2012 pleaded guilty to civil and criminal charges in the U.S. for marketing in illegal ways drugs like Paxil for depression and Avandia for diabetes, and agreed to pay $3 billion in fines, the largest such settlement ever. After that bruising Witty did something pharma chief executives almost never do. He apologized. “On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made,” he said in a prepared statement.
What kind of mistakes? For one, prosecutors alleged that a decade before Witty took command Glaxo paid Drew Pinsky, who parlayed a radio show giving teenagers sex advice into the celebrity persona of “Dr. Drew,” $275,000 for two months to talk about antidepressants and sex. Dr. Drew gave an interview where he segued from talking about a woman who said she had 60 orgasms in a row to saying how Glaxo’s Wellbutrin was better for the libido than other antidepressants. Pinsky didn’t disclose at the time that Glaxo was paying him; no charges were brought against Pinsky. Similar shenanigans occurred with Avandia and Paxil, which was marketed to adolescents even though it wasn’t approved for them.
The maddening problem for pharmaceutical chief executives is that their tenures will be judged on the results of decisions made decades before they took command. Most of the scandals of Witty’s term predated him, but so did many successes: Glaxo’s malaria vaccine has been in the works for 30 years. These immutable links to the past, and to the future, weigh heavily on Witty as he looks to help choose his successor. “To have an industry with a 20-year product life cycle, but only to think one year ahead, is destined for disaster,” Witty says. “Your strategy needs to be consistent with that time frame. That’s what we tried to do.”
Witty has made some big moves of his own that will help determine whether future Glaxo chiefs succeed. In 2014 he made a deal with Novartis that traded GlaxoSmithKline’s marketed cancer drugs for Novartis’ vaccine and consumer businesses and a $16 billion cash payment. Most other big pharma companies are depending heavily on new cancer treatments, which cost $100,000 and up for a course of treatment. Witty thinks the future of such drugs is at risk because society will not continue to pay for them. In the short run that has hurt him, as insurers in the U.S. have been willing to pony up. He has also focused on countries in Asia and Africa whose pharmaceutical markets are just emerging.
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The share price certainly doesn’t reflect a turnaround. But profits are up, and in the second quarter of this year new-product sales doubled to $1.5 billion, 17% of revenue. Glaxo is forecasting earnings growth of at least 11% for the year.
“His predecessor left an awful lot of issues for him to deal with, an awful lot of settlements that they just kicked into the long grass,” says Richard Buxton, the chief executive of Old Mutual Global Investors, the mutual fund. “I think whoever succeeds him will preside over a better set of outcomes for shareholders.”
GlaxoSmithKline, which is based in London, was formed on Jan. 1, 2001 by the $76 billion merger of Glaxo Wellcome, the maker of Wellbutrin (depression) and Imitrex (migraines), and SmithKline Beecham, which made Avandia (diabetes) and Paxil (depression). Both companies had storied histories that involved breakthrough drugs, including AIDS drugs and antibiotics. But they were having trouble coming up with enough new hits.
Soon after the merger closed, the controversies began. Critics alleged that SmithKline had failed to publish studies that showed Paxil might increase the risk of suicidal thoughts in adolescents, while publishing studies that showed there was no danger. In 2004 New York attorney general Eliot Spitzer sued the company; the suit was eventually settled when Glaxo agreed to publish on the Internet summary results of its future drug studies.
Then came Avandia. In 2007 Steven Nissen, chairman of cardiology at the Cleveland Clinic, published a paper in the New England Journal of Medicine arguing that Avandia, GlaxoSmithKline’s blockbuster diabetes drug, caused heart attacks. The FDA eventually said no new patients should start taking the drug, ultimately erasing $3 billion of annual sales.
The response from Witty’s predecessor, J.P. Garnier, was tone-deaf at best. “My wish for the media is to be more sophisticated when they report scientific news,” he said in 2008. He predicted that he would be “vindicated” by the FDA. Later that year, when a BBC interviewer repeatedly asked him about the Paxil controversy, he hung up while on the air.
Witty became chief executive in May 2008. He was a 23-year Glaxo lifer, a marketer who had done stints running part of Glaxo’s African businesses before taking over as president of European operations. His first goal, it seemed, was to rehabilitate Glaxo’s image. A series of profiles in newspapers and magazines presented him as concerned about the developing world. In 2009 the Daily Telegraph called him “the friendly face of big pharma.”
But Witty had problems that couldn’t be solved with good press or a friendly face. Patents on GlaxoSmithKline’s top drugs were expiring, meaning that generic competition was going to eat away at sales. Between 2006 and 2009 medicines such as Lamictal for bipolar disorder, Zofran for nausea, Valtrex for herpes and Flonase for allergies went generic, removing billions of dollars from Glaxo’s top line. With the loss of Avandia it all added up to roughly a quarter of the company’s sales.
One way to replace those sales would have been to invent new drugs. Glaxo spends $4.5 billion a year on research and development. Witty doubled down on a strategy put in place by his predecessors: splitting the company’s 10,000-plus R&D staffers into dozens of largely autonomous units that theoretically could function with the agility of biotechnology companies.
Back in 2010 Witty was excited about three potential hits. One was a vaccine to prevent lung cancer from recurring. It failed in 2014. Another was a new type of drug to prevent heart attacks. That medicine failed, too, in 2014. Even if it had succeeded, medical journals revealed a side effect that might have torpedoed the drug: It made an unpleasant scent emanate from many patients’ bodies. The third was a diabetes medicine, Tanzeum, that did reach the market, but behind rival meds from AstraZeneca and Novo Nordisk.
Despite those failures GlaxoSmithKline has gotten 13 drugs through the FDA during Witty’s tenure, more than any company except Johnson & Johnson, according to the InnoThink Center for Research in Biomedical Innovation. But many didn’t amount to much.
Analysts had expected Benlysta, a lupus drug approved in 2011, to generate as much as $5 billion in sales, and in 2012 GlaxoSmithKline spent $3 billion to buy Human Genome Sciences, which had invented the drug. Yet the market just wasn’t there. Sales in 2015 were $350 million, though they grew at a 33% clip. Cervarix, a vaccine, targeted two strains of the human papilloma virus (HPV), which causes cervical cancer. Merck’s rival Gardasil targeted four HPV strains, including two strains that cause genital warts. Sales of Cervarix were $135 million, compared with $1.9 billion for Gardasil.
Five of Glaxo’s new drugs were for cancer. In 2014 the company’s cancer-drug sales rose 20% to nearly $2 billion. But Witty struck an offer with Joseph Jimenez, the chief executive of Novartis, to sell these marketed drugs, though he made sure to keep the early-stage cancer medicines Glaxo was developing. In return he got Novartis’ vaccine division, including three promising meningitis vaccines, and created a joint venture in consumer health, which included brands like Sensodyne toothpaste and Theraflu for flu symptoms. Many investors thought he was crazy to get out of cancer. But Witty also negotiated a $16 billion cash payment from Novartis, which he says was more than his internal estimates said the cancer drugs would ever be worth. He still insists that by being willing to be unfashionable he got the better part of the deal.
While Witty was trying to make up for lost sales from patent expirations, he was busy with another task: trying to get past the ethical messes that had gotten GlaxoSmithKline in trouble before he took over.
One problem, he decided, was the way the drug industry traditionally paid sales representatives: It incentivized them to push the ethical and legal envelope. The reps were paid based on whether they could get doctors in their territories to prescribe more of a given drug. These incentives, Witty decided, led representatives to do things like pay doctors to speak when they weren’t experts, give away free trips and meals, and use sales pitches that were not in line with language approved by the Food & Drug Administration. Now the reps, Witty says, are measured on technical knowledge and customer service. He considers this change one of the proudest achievements of his career.
But Glaxo is a huge company with 100,000 employees, and its ethical problems didn’t end just because Witty was trying to fix things. In 2013 the Chinese government announced that it was investigating Glaxo for bribery, saying the company had funneled illegal payments to doctors and government officials in order to boost sales. Witty remembers realizing over a period of days how serious the allegations were. It was “distressing,” he says. “It was so counter to everything we were trying to do.” A year later Glaxo was found guilty of bribery in China and ordered to pay nearly $500 million.
In 2013 Witty announced that Glaxo would no longer offer any payments to physicians for speaking or other services. He denies the decision had anything to do with China. At the time, Glaxo, like other companies, was routinely offering U.S. physicians large sums of money–sometimes in the six figures–to give speeches promoting its drugs. Sometimes the practice bordered on institutionalized bribery, as drug reps paid doctors to give speeches as a reward for prescribing medicine. In other cases drug companies would pick only doctors who liked their products, creating an echo chamber in which it seemed like physicians were unanimous in supporting a particular drug.
Witty claims that getting rid of this tried-and-true practice has caused “a complete transformation” of Glaxo’s marketing. “We’d say, ‘Thursday night would you please come to the Holiday Inn, have a chicken dinner, listen to a doctor talking about something?’ ” Witty says. ” ‘Great.’ What if that Thursday night wasn’t convenient for you? What if you’ve got kids?” Now, he says, digital tools mean that Glaxo can engage physicians with questions on their own terms. “ If you want to talk to us at 3 a.m.,” he says, “we’re there at 3 a.m.”
Witty also embraced the idea that Glaxo should publish all its data. Drug companies typically publish only their most positive studies, making medicines seem safer and more effective than they actually are. One analysis of clinical trials for 12 different antidepressants found that only one of 38 positive studies wasn’t published; of 36 negative studies, 3 were published in a way that was accurate, 22 were not published and 11 were published in a misleading way that made the results appear positive when they were not.
Witty insisted Glaxo make public the results of all 1,700 studies the company had conducted since 2000. This was well above and beyond what Glaxo’s settlement with Eliot Spitzer forced it to do. In 2013 he signed a pledge with a group called AllTrials, which required further promises to make data public, to try to push the rest of the industry to follow. The man behind AllTrials, a U.K. doctor and newspaper columnist named Ben Goldacre, had written a book called Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients and had been skeptical about Witty’s previous attempts at transparency. But the day Glaxo took the pledge he was gushing, blogging that Glaxo’s commitment was “excellent and amazing.”
In 2014 Glaxo started its Ebola trial. The next year it received European approval for Mosquirix, the malaria vaccine it had developed with funding from the Bill & Melinda Gates Foundation. Next, the malaria vaccine will be evaluated by the World Health Organization. Witty, who spent years in malaria-ridden sub-Saharan Africa, says one of the most emotional moments of his career happened when he got initial data that showed the vaccine could cut infection rates by nearly half (a number since revised downward).
It would be nice if Witty’s focus on improving the world were also making Glaxo run on all cylinders. But it’s not that simple, and right now there is one big question facing the company: What will happen as generic competition emerges for its top-selling product, Advair, an inhaler for asthma and COPD?
In 2013 Advair generated more than $4 billion, but sales have already fallen 30% as U.S. insurers have switched to other products and managed to negotiate lower prices. Next year the first generic competitor should emerge in the U.S. As more generics are approved, analysts at Jefferies estimate, sales will fall by 90% by 2020. The better Witty’s successor can do at slowing this decline–perhaps by competing with the generics on price–the less nervous shareholders will be.
Glaxo’s heirs to Advair–new inhalers called Breo Ellipta and Anoro Ellipta–could generate $2 billion in sales by 2020, Jefferies says. But ultimately growth will depend on new drugs. One promising entrant is Tivicay, an HIV drug that competes with Isentress, Merck’s $1.5 billion pill. Jefferies forecasts Tivicay will be at least as big within five years. Another promising product is Shingrix, a shingles vaccine that is more effective than Merck’s Zostavax, which has annual sales of $749 million. Glaxo’s consumer health business, Jefferies forecasts, could increase 25% to $12 billion over the next four and a half years.
Of course, managing all of this will fall not to Witty but to his replacement. Internal candidates include Emma Walmsley, the head of consumer business, and Abbas Hussain, who is in charge of Glaxo’s global pharmaceutical division. The board could want an outsider. Whoever gets the job, Witty seems more than ready to pass the baton.
“Is everything right?” he asks. “No. Did we make mistakes? Yes. Did things go wrong? Yes. But it hasn’t put us off trying to improve. And I hope whoever takes over will continue trying to improve. Because there’s still plenty of things to keep improving.
The high-profile fund manager tells Sky News a “fresh pair of eyes” is needed to replace Sir Andrew Witty at GSK.
10:58, UK, Thursday 17March 2016
Sir Andrew Witty poses after being honoured with a knighthood
By Mark Kleinman, City Editor
Britain’s biggest drugs-maker, GlaxoSmithKline (GSK), has been told to ignore internal candidates in its search for a new boss as shareholders intensify demands for a radical overhaul of the company.
Speaking exclusively to Sky News, Neil Woodford, the City’ s best-known fund manager, said that GSK needed “a fresh pair of eyes” to replace Sir Andrew Witty, who will step down next year.
“I have a strong preference for an external candidate,” the head of investments at Woodford Investment Management said on Thursday.
Mr Woodford’s demands will put pressure on Sir Philip Hampton, GSK’s new chairman, to appoint an executive from elsewhere in the pharmaceuticals industry to succeed Sir Andrew.
That would come as a blow to possible internal candidates such as Emma Walmsley, who runs GSK’s consumer products division, and Abbas Hussain, president of its global pharmaceuticals unit.
Sky News revealed last autumn that Mr Woodford was seeking a break-up of the £69bn company, which owns brands such as Nicorette and Horlicks.
He believes the group would be far more valuable if it separated its HIV business ViiV, its consumer healthcare division and Stiefel, its dermatology division, from its core medicines and vaccines arm.
The City has grown frustrated at GSK’s lacklustre share price performance, with the stock down about 10% over the last 12 months as investors wait to see whether a pipeline of promising new products will deliver.
Under Sir Andrew, its chief executive since 2008, GSK has signalled a shift away from highly priced prescription drugs in favour of vaccines and consumer products.
Analysts at Deutsche Bank said the announcement about Sir Andrew’s retirement was unlikely to signal material strategic changes at GSK.
GlaxoSmithKline CEO Andrew Witty to Retire in March 2017
March 17, 2016 — 7:12 AM GMT
Updated on March 17, 2016 — 12:10 PM GMT
Board will search for CEO candidate inside, outside drugmaker
Chairman Hampton also plans `board refreshment’ this year
GlaxoSmithKline Plc Chairman Phil Hampton began an overhaul of the biggest U.K. drugmaker by launching a search for Chief Executive Officer Andrew Witty’s successor and replacing a third of the board as he seeks to pacify some disgruntled investors.
Witty, 51, will retire next March, after almost a decade at the helm, the London-based company said in a statement on Thursday. Glaxo also plans what Hampton termed a “board refreshment” as directors Deryck Maughan, Stephanie Burns, Daniel Podolsky and Hans Wijers won’t stand for re-election at the annual meeting in May.
Photographer: Simon Dawson/Bloomberg
Witty, once hailed as one of the pharmaceutical industry’s most visionary managers, has faced criticism for Glaxo’s lagging share performance, sluggish sales and a pipeline lacking promising medicines. A bribery scandal in China that led to a $489 million fine last year also tarnished his image, which he had built with initiatives to develop the world’s first malaria vaccine and reform the way medicines are marketed to doctors.
“Glaxo needs a shakeup at the top,” said Gareth Powell, a portfolio manager at Polar Capital LLP in London whose holdings include Glaxo shares. “There’s a lack of truly innovative products, and that’s what they need to sort out.”
Last year, Witty oversaw the biggest reorganization since the merger that created Glaxo 15 years ago. He sold the company’s cancer drugs to Novartis AG in exchange for the Swiss firm’s vaccines business and cash. The companies also formed a joint venture, controlled by Glaxo, to sell consumer health products.
Glaxo shares fell 1.3 percent to 1,394 pence at 12:07 p.m. in London trading. The stock has returned an average of 10 percent a year over the past five years, compared with a 17 percent average annual return for the Bloomberg Europe Pharmaceutical Index.
“By next year, I will have been CEO for nearly ten years and I believe this will be the right time for a new leader to take over,” Witty said in the statement. He began leading Britain’s largest drugmaker in 2008 after more than 20 years at the company, including postings in the U.S., Asia and Africa.
Both internal and external candidates will be considered for the role. Glaxo investor Neil Woodford said he would like to see someone from outside the company take the top job. One of that person’s first tasks may be to slash the dividend, investors said.
Potential candidates include Emma Walmsley, head of Glaxo’s consumer-health division, and Abbas Hussain, president of its drug business, according to reports in U.K. media. Chief Financial Officer Simon Dingemans and Roger Connor, who oversees global manufacturing and supplies, may also be considered as internal successors. David Epstein, head of Novartis’s pharmaceutical unit, may also be approached, the reports said.
Witty’s views have diverged from those of his peers. He has avoided large-scale acquisitions that have consumed others such as Pfizer Inc. and Teva Pharmaceutical Industries Ltd. And in 2011, he started a program called Patient First that eliminated the link between sales targets and bonuses for Glaxo’s U.S. marketing team, following allegations of illegally promoting drugs. Few drugmakers followed his lead.
Glaxo’s sales declined to 23.9 billion pounds ($34.2 billion) last year from a peak of 28.4 billion pounds the year after Witty joined. Core earnings per share will probably surge this year, the company has said, after two years of declines.
“The decision will allow him to step aside at a high point following the company’s expected return to double-digit earnings growth in 2016,” Richard Parkes, an analyst at Deutsche Bank AG in London, wrote in a note to clients.
One bright spot has been Glaxo’s portfolio of HIV medicines, which the company considered spinning off in an IPO before opting to keep it. The British drugmaker also has one of the broadest drug pipelines in the industry, with more than 70 new medicines in development (though many are early-stage drugs that won’t deliver sales anytime soon), according to a Bloomberg Intelligence pipeline analysis.
A breakup of the company, favored by some investors including Woodford, might not generate that much value, according to an analysis by Bloomberg Intelligence analyst Sam Fazeli. Separating the drugs, vaccines and consumer-health units will probably increase Glaxo’s enterprise value of 83 billion pounds ($118 billion) by 10 percent or less, he estimated.
“….This article and others did not come as a surprise to me but came rather as validation. I was personally trampled over by Lord and the most senior of GSK corporate executives then tossed aside in a heap.
While the matters I raised were unrelated to financial misconduct, they were in many ways as serious if not more serious.
They included blatant violations of the Corporate Integrity Agreement and many downstream internal/external compliance obligations. Those unresolved matters also present very serious risk to the best interest of shareholder as well as public safety. Lies run a sprint while the truth runs a marathon… “
I don’t know if these allegations (which the individual here has drawn attention to) will ever see the public light of day, as many GSK crimes often get hushed up quite quickly, nullified, or swept under the carpet.
However it will be interesting to see what might bear fruit in this case…
From the experiences of the whistle-blowers I have had contact with over the years (and there have been several), it seems that GSK is mainly concerned with undermining, containing, or squashing whistle-blowers (and their allegations of unethical behavior) as opposed to supporting them..
The article/thesis on GSK’s China Bribe Scandal is well worth reading in it’s entirety, however here is a good excerpt:
“...One of the clear lessons from the GSK matter is that serious allegations of bribery and corruption require a serious corporate response. Not, as GSK did in their best Inspector Clouseau imitation, failing to find the nose on their face.
I was particularly focused on GSK’s response to at least two separate reports from an anonymous whistleblower (brilliantly monikered as GSK Whistleblower of allegations of bribery and corruption going on in the company’s China business unit.
Further, and more nefariously, is GSK’s documented treatment of and history with internal whistleblowers. One can certainly remember GSK whistleblower Cheryl Eckard. Graeme Wearden reported that Eckard was fired by the company “after repeatedly complaining to GSK’s management that some drugs made at Cidra were being produced in a non sterile environment, that the factory’s water system was contaminated with micro organisms, and that other medicines were being made in the wrong doses.”
She later was awarded $96MM as her share of the settlement of a Federal Claims Act whistleblower lawsuit. Eckard was quoted as saying, “It’s difficult to survive this financially, emotionally, you lose all your friends, because all your friends are people you have at work. You really do have to understand that it’s a very difficult process but very well worth it.”
So to think that GSK may simply have been SHOCKED, SHOCKED, that allegations of corruption were brought by an internal whistleblower may well be within..”
Worthy of note also is a recent comment by (presumably) Greg Thorpe (the first whistle-blower to file against GSK which resulted in a 3 billion dollar fine in 2012).
“…..After I did the best I could to nail GSK with a DOJ that reduced my complaint by about 400 %, and gave them a 3 billion dollar gift….they soon announced they were going to concentrate on ” other” foreign countries. I told them then that their former US
Model of kickbacks, fraud and off label marketing may slow down here in the US, but they would be doing the same overseas. If we only knew everything they did in the various countries in totality….it would be a real story.
I predicted it, and all they have been caught on NOW….Is the tip of the iceberg, trust me. This company is evil, imagine what they are doing in the third world….they let millions die in Africa of HIV, because a years wages were one day of treatment. …then years later…nearing generic competition, they finally come forward with great fanfare, because it was worth pennies per pill…after 10 years of gouging and millions of deaths So YEAH Brits., let’s Knight Andrew Witty, killer sociopath, involved in the US corruption also and hidden by the DOJ.
Anyone want the story, beginning in 2001 ? Nobody would believe it…my phone and computer were tapped, I was treated like a second class citizen, or criminal by the DOJ in the Holder regime…as a whistlblower.
A gag order on me for 10 years, supposed to be 6 months under the FCA. The story is incredible, nobody will come forward. If they do there will be repercussions, stay tuned…”
GlaxoSmithKline is gearing up to begin a formal search for its next chief executive as Sir Andrew Witty’s eight-year tenure enters its final stages.
Sir Philip Hampton, chairman, has already consulted large shareholders about the succession on an informal basis, according to people involved in the discussions, and it is understood that a more intensive process will take place in coming months.
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Sir Andrew, one of the longest-serving chief executives among FTSE 100 companies, is not expected to depart before 2017 and he will be involved in the search for his successor.
The lengthy timetable shows how Sir Philip, who was elected chairman last year, has resisted pressure from some shareholders for a more immediate change of leadership in favour of an orderly transition.
Sir Andrew’s job has often looked in peril over the past three years as a sharp downturn in GSK’s sales and profits coincided with a damaging corruption scandal in China.
However, the outlook has improved in recent months, with earnings forecast to grow by a double-digit percentage this year. GSK is the only large European pharma group whose shares have risen in 2016 to date, although they remain down from three years ago.
Egon Zehnder, the blue-chip headhunter which already works on a retainer for GSK, will advise on the search.
GSK has declined to comment.
Internal candidates are likely to include Abbas Hussain, head of the mainstay pharmaceuticals business, and Emma Walmsley, who runs the consumer healthcare unit, which is responsible for brands such as Aquafresh toothpaste and Panadol painkillers.
Others likely to be considered include Simon Dingemans, chief financial officer and a former Goldman Sachs banker, and Roger Connor, head of global manufacturing and supply chains.
However, some investors want GSK to look at external candidates after the poor shareholder returns of recent years. These could include people such as David Epstein, head of pharmaceuticals at Novartis.
The process is expected to be more low-key than the race to succeed Jean-Pierre Garnier in 2007, when Sir Andrew was pitted against two other internal rivals, Chris Viehbacher and David Stout, in a high-profile contest.
Sir Andrew, who joined GSK as a trainee in 1985, will be hoping that a return to growth this year — fuelled by strong performance by the group’s HIV drugs unit — will allow him to depart with his reputation repaired from recent setbacks.
The looming change of leadership will again raise questions over the future shape of GSK as some shareholders, led by Neil Woodford, the UK fund manager, push for a break-up of its medicines-to-mouthwash business model.
Sir Andrew has argued that this diversified structure is the best way to deliver steady growth and hedge against the risks of drug development. But Mr Woodford believes a more focused approach would deliver higher returns.