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The Sundaytimes Sri Lanka

Drug company cheats and whistleblowing

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The global business world was rocked this week after a hefty US$3 billion fine was imposed on pharmaceutical major GlaxoSmithKline Plc (GSK), maker of popular pain killer Panadol, who pleaded guilty to cheating and criminal charges over the marketing of three drugs.
It was the largest case of healthcare fraud in US history. Other reports said Hong Kong has asked the company to recall popular drug, Augmentin from the market as it was found to contain ‘plasticizers’.

The British drug-maker pleaded guilty to breaking US laws in the development and marketing of Paxil, an antidepressant, to patients under age 18 when it was approved for adults only, and for promoting Wellbutrin, another drug, for weight loss and treatment of sexual dysfunction, uses it was not approved for, foreign news reports said.

“GSK pleaded guilty to deceiving the public by distributing a misleading medical journal article. Moreover, the company accepted that it had gone to extreme lengths to promote the drugs, providing doctors with meals and spa treatments that amounted to illegal kickbacks, prosecutors said,” the reports said.

However one of the most significant parts of the settlement is that about $250 million (of the fine), will go to four whistleblowers, Greg Thorpe, Blair Hamrick, Thomas Gerahty and Matthew Burke, who worked for GSK and faced financial hardship after they reported the company’s misconduct nine years ago, the reports said.

This is a reminder of the various efforts in recent times in Sri Lanka to enforce a spirit and culture of whistleblowing. The most recent effort was by audit and consultancy firm KPMG which launched a hot line to help nail corporate fraud by encouraging whistleblowers. Many multilateral agencies and multinational corporations, facing increasing pressure from ethnically-conscious consumers and pressure groups, are bringing whistleblowing provisions in their governance codes, encouraging stakeholders to provide tips on alleged corruption and fraud by individuals. Where does Sri Lanka stand in this new field of civic conscious, society-driven investigations and probes? Without a doubt very little progress would be made given the power of corporates, directors and their nexus with powerful governments and also opposition politicians.

In the Sri Lankan context, the whistleblowing culture even if it takes off would be of a confidential and unnamed nature. Given the climate of intimidation, harassment and loss of job, no one is going to stick his or her neck on the block to expose a company fraud, unless there are powerful laws – far beyond the reach of powerful businessmen and politicians – that would protect them not only from their professions but also any threat to their lives. Confidentially and being able to ‘squeal’ without revealing one’s identity will be success of a whistleblowing culture here.

Key areas where whistleblowing needs to be encouraged and a culture initiated is in the banking, non-banking and the stock market by regulators like the Central Bank (CB) and the Securities & Exchange Commission (SEC). The crash of Golden Key which led to many other finance companies crumbling like ninepins may have been avoided if someone blew the whistle on the fraud. Customers and minority shareholders must have access to this mechanism to blow the whistle on corrupt activity if it involves criminal activity. White collar crime is growing and rampant but Sri Lanka is still a long way from dealing with these kinds of crimes, if one is to take the stock market as an example.

The crisis at the SEC last year is well known and the pressure brought on officials and the chairperson by powerful business interests. The same appears to be happening under the new regime at the SEC led by former parliamentarian Thilak Karunaratne where powerfully influential interested parties once again are attempting to intervene in investigations and cases already filed against companies. Another matter of concern in recent times is the growing numbers of listed companies that are transferring their (listed) assets to unlisted firms, an issue that shareholders have raised in the case of Watawala Plantations, Carsons and Distilleries.

The stock market itself has slumped, recording the lowest ever turnovers since the war ended in May 2009. Small retail investors are avoiding the market reluctant to sell their stocks as share prices slide. On the flipside, the market has once again seen foreigners playing a big role, which is a positive sign as they see a lot of value in this market.

It remains to be seen when the market, in the doldrums for more than a year, will take off and be restored to reasonable levels in terms of the indices and turnovers which once averaged over Rs 700 million per day, sank to a new low of Rs 90 million earlier this week before recovering to Rs 300 million. As public and corporate sleeze and fraud deepen the pockets of the fraudsters with economic and personal wealth growing, a whistleblowing culture should be a sine qua non for a transparent, ethical and corrupt-free economy that would also help attract large-scale foreign investments.

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