China takes down Glaxo

Bernie Sanders slammed Eli Lilly stock after the former presidential candidate and Vermont Senator asked “why has the price of Humalog insulin gone up 700% in 20 years? It’s simple. The drug industry’s greed”, sending LLY stock to 7 month lows.

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.

http://www.nytimes.com/2016/11/02/business/international/china-rules-glaxo-bribes-sex-tape-whistleblower-cautionary-tale.html

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