An investigation by Chinese authorities into the activities of GlaxoSmithKline has allegedly turned up a bribery network that involves government officials , doctors , hospitals and at least 700 travel agencies . The U.K.-based GlaxoSmithKline , one of the world 's largest vaccine makers , is now attempting to distance itself from its China arm -- which has been accused of using hundreds of millions of dollars in bribes to encourage the use of GSK products and artificially boost prices . As Chinese authorities and GlaxoSmithKline reveal new information , here is an overview of the probe , the parties involved and the potential penalties . What is GlaxoSmithKline ? GlaxoSmithKline , headquartered in London , is one of the largest pharmaceutical companies in the world . The firm is known for its wide range of over-the-counter and prescription medicines and vaccines including its popular anti-depressant Paxil and diabetes drug Avandia . GSK , as the company is also known , says it employs some 97,000 people in more than 100 countries . In the last fiscal year , GSK reported more than $ 11.5 billion in pre-tax profits and ranked # 231 on the Fortune Global 500 . What are the accusations ? On July 11 , China 's national police agency accused GlaxoSmithKline of bribing government and medical officials in some of China 's biggest cities -- including the country 's financial hub of Shanghai and Hunan 's provincial capital Changsha -- to encourage the use of GSK medicines and to push prices higher . The bribes totaled nearly half a billion dollars , according to media reports . On July 22 , GSK executive Abbas Hussain admitted that some of the company 's senior executives in China appeared to have violated the law . Hussain , the company 's president of Europe , Japan , emerging markets and Asia-Pacific , had been dispatched to China to contain fallout from the alleged scandal . On July 24 , China 's state media reported that 39 hospital workers were being punished for taking more than $ 450,000 in kickbacks from pharmaceutical firms over a three-year period . Nine of the doctors involved had been suspended or had their licenses revoked , and a case involving a trade union official was referred to the judicial system . Who has been caught up in the scandal ? Chinese authorities have barred GSK China 's Vice President for Finance , British national Steve Nechelput , from leaving the country since late June . At least four Chinese executives have also been detained . Chinese state media have identified these executives as Vice-President of GSK China 's investment company Liang Hong , Vice-President and human resources director Zhang Guowei , GSK China 's legal affairs director Zhao Hongyan and the company 's business development manager Huang Hong . Chinese state television also broadcast an apparent confession by Liang Hong . It is unclear whether his statement was made under force or duress . Liang explained how conferences were faked in order for travel agencies to create receipts for services never performed . Funds were then used to pay off bribes encouraging the use of GSK products . How have drug prices been affected in China ? In Liang Hong 's alleged confession aired on Chinese state television , the executive explained that the bribes could have encouraged corrupt government and medical officials to raise prices 20-30 % . Liang added the cost for medication would be substantially inflated by the time it reached patients . How important is China to GSK ? In the company 's just-released second quarter earnings statement , GSK revealed net losses in Europe and Japan , with flat turnover in the United States in the first half of the year . The only regional growth occurred in emerging markets and the Asia Pacific -- of which China is core . As China 's investigation into GSK expands , the firm 's profits from the crucial emerging growth market are expected to take a hit . `` Clearly , we are likely to see some impact to our performance in China as a result of the current investigation , '' said GSK CEO Sir Andrew Witty , `` but it is too early to quantify the extent of this . '' Sine the bribery allegations first surfaced , GSK 's share price has slumped 3.5 % in London and 2.4 % on the New York Stock Exchange . What are the penalties if GSK is found guilty ? China 's investigation could expose the company to legal action in the U.K. , and possibly the United States , under laws relating to the bribery of foreign public officials . GlaxoSmithKline says it has informed the U.K. 's Serious Fraud Office about the bribery allegations but had not yet been asked to provide any further information . The agency , which investigates and prosecutes corruption cases , said last week that it could neither confirm nor deny an interest in the claims against GSK at this stage .
China accused GlaxoSmithKline of funneling $ 500bn to bribe gov't , medical companies . Money allegedly used to encourage use of GSK drugs , artificially boost prices . Chinese authorities have detained two Chinese GSK executives , one UK national . GSK is one of the world 's largest pharmaceutical companies , with 97,000 employees .