[3] According to lawyer Leon Liu, by 2014 China aimed to reform the healthcare sector and the pharmaceutical industry to control costs; this complemented the general anti-corruption drive.
[3] Growing economic nationalism and state assertiveness put multinational enterprises operating in China under greater scrutiny.
[6] Afterwards, GSK entered a five-year agreement with the United States Department of Health and Human Services to reform its compensation policy which tied bonuses to sales targets and providing perverse incentives for misconduct.
The company promised to implement a new policy by 2015, which would include financial penalties for existing and former employees found to have engaged in major misconduct.
The head office failed to detect the misconduct in GSK China leading to the scandal, with involved executives circumventing corporate controls.
[9] Between December 2011 and April 2012, Chinese regulators received 24 anonymous tips originating from within GSK China about the company's operations.
The tips described instances of fraud, corruption, and illicit practices including improper marketing techniques and kickbacks to healthcare professionals.
It bribed regulators to investigate the misconduct as "unequal competition", a lesser offense to "commercial bribery", and limit the potential fine to $50,000.
[5] In March 2013, GSK head office executives - including Andrew Witty, the chief executive officer - received an email from "gskwhistleblower"[11] alleging that Mark Reilly, head of GSK China, was using travel agency China Comfort Travel to funnel money to doctors; in return the agency supplied Reilly with women for sex.
[5] In April 2013,[10] GSK hired ChinaWhys, a small risk consultancy firm also serving Dell and Dow Chemical, to investigate the whistleblower and the break-in of Reilly's residence.
Humphrey's investigation Shi's personal life included illegally acquiring, but commonly sold, confidential documents.
Humphrey's report to GSK in early June identified Shi as the likely whistleblower, but provided no evidence linking her to the emails or the video.
The task force gathered evidence for GSK's bribery in ten plus Chinese provinces including Beijing, Shanghai, Liaoning, Xinjiang in a year-long period.
[12] 4 executives were arrested in Shanghai, including Mike Reilly, the company's China head and protagonist of the sex tape.
In a police press, head of China's fraud unit Gao Feng said GSK was the boss in the bribery networks.
[19][20] According to Gao Feng, head of the economic crimes investigation unit at China's Public Security Ministry, GSK transferred 3 billion yuan to over 700 travel agencies and consultancies during a 6-year period, through which the company bribed doctors, hospitals, officials and medical associations.
[20] GSK's Lamivudine was priced at 142 RMB in mainland China, while it only cost 18RMB, 26RMB, 30RMB to buy the drug in Korea, Canada and Britain respectively.
The police told media that during 2009–12, GSK China's revenues of main business were ¥397.8m, ¥486.2m, ¥552.9m, ¥697.5m, but profits were merely ¥11m, ¥-4.7m, ¥6.0m, ¥-18.8m, which was owing to the company's transfer pricing strategy.
[24] According to Xinhua, the trial at Changsha Intermediate People’s Court was not public as requested by GSK who wanted to keep business secrets.
[26] A source told China Business Networks that the sales group for hepatitis drugs, which was related to the company's bribery plans, was downsized after the scandal.
The company still faced investigation by UK's Serious Fraud Office and US department of justice, due to the laws against overseas corruption in the two countries where GSK was listed.
[27][28] The legal suits in China forced the company to make a statement in December 2013, where changes in incentive programs, including cancelling individual sales targets and related bonus, were put forwards and expected to be enforced since 2014.
[33] GSK's case occurred during the backdrop of Xi Jinping's anti-corruption campaign, which was believed to be focused on eliminating political opponents rather than stamping out corruption.
[34] Ben Cavender, an associate principal at China Market Research Group, said that the GSK's case could be part of the greater trend of fighting against corruption, where foreign firms were advised to carefully obey the law.
A senior research director in Shanghai admitted money-involving new cooperation between international pharmaceutical firms and Chinese academics and hospitals were suspended in 2013.
In 2009, the country amended the criminal law to prohibit illegal transfer or trade of personal data and punish anyone who wants to buy or sell them.
[40] GSK China identified and terminated more than 110 employees which it had "dismissed as a result of a crackdown on illegal expenses" during the period preceding the scandal.
The Office's director said,[46][47][2] "After an extensive and careful examination, I have concluded that there is either insufficient evidence to provide a realistic prospect of conviction or it is not in the public interest to bring a prosecution in these cases.
"As GSK bribery in China was a breach of US's Foreign Corrupt Practices Act during 2010–13, the Securities and Exchange Commission launched an investigation into the company.
In September 2016, GSK agreed to pay a civil penalty of $20 million to settle the case, but it did not admit or deny the allegations.