2nd UPDATE: GlaxoSmithKline Says Some Senior Executives Acted Against Chinese Law

(Adds authorities visiting AstraZeneca offices, background)

By Laurie Burkitt and Jeanne Whalen

GlaxoSmithKline PLC (GSK.LN, GSK), under investigation in China for alleged bribery, said some of its senior executives appeared to have violated Chinese law, adding to the company's troubles in a growing controversy that has shaken its management.

Separately, rival drug maker AstraZeneca PLC (AZN.LN, AZN) said authorities from Shanghai's Public Security Bureau visited the company's offices on Friday and took an employee in for questioning. The employee, a Chinese national, has not yet returned to AstraZeneca for work, the company said.

AstraZeneca, which said the probe relates to a sales representative, said it has "no reason to believe" that the visit is "related to any other investigations." The company added that it "adheres to high ethical standards in the pharmaceutical industry, and does not tolerate any illegal or unethical conduct."

Glaxo's statement added weight to China's allegations that the company engaged in bribery.

A senior Glaxo executive said in a statement that "certain senior executives of GSK China who know our systems well, appear to have acted outside of our processes and controls which breaches Chinese law. We have zero tolerance for any behavior of this nature." GSK China is Glaxo's Chinese unit.

Abbas Hussain, the London-based president of Glaxo's business in Europe, Japan, emerging markets and Asia Pacific, made the remarks after meeting over the weekend with China's Ministry of Public Security, which is leading the investigation. Glaxo Chief Executive Andrew Witty sent Mr. Hussain to China last week to lead the company's response to probe, which is investigating allegations that Glaxo bribed doctors, hospitals and government officials in order to sell more drugs at higher prices.

Mr. Hussain said Glaxo supports China's action against corruption and will fully cooperate with authorities in an ongoing investigation.

In the brief statement, Mr. Hussain said Glaxo will reevaluate its business model and reduce its prices for Chinese consumers, ensuring its medicines are more affordable to Chinese patients. Some industry watchers have speculated China's high-profile bribery probe might be partly aimed at pressuring Glaxo and other companies to reduce the prices of their drugs. Many also say that the company is being held up to send a signal to pharmaceutical industry that bribery will not be accepted in the Chinese market.

China's Ministry of Public Security said in a statement Monday that Glaxo's executives in China pushed up prices to increase sales, "seriously disrupting the market" and "violating vital interests of the majority of patients in China."

The statement said Glaxo's executives have apologized, and responsible parties of Glaxo should "bear obligations" and cooperate with police investigations. It also said officials hope Glaxo will resume normal production and business in China as soon as possible.

Health care expenses and drug pricing are highly sensitive issues in China. The country's regulators have in recent years set strict price restrictions on pharmaceuticals, and earlier this month launched an industry-wide survey to determine which drugs prices are most burdensome for Chinese patients. In January regulators implemented price cuts of 20% on more than 400 drugs used for respiratory diseases and pain relief medications, affecting pricing for domestic and foreign companies, such as Pfizer Inc. (PFE) and Novartis AG (NOVN.VX, NVS).

China's probe has caused upheaval among Glaxo's senior management in China. The company's finance chief there, British national Steve Nechelput, has been barred from leaving the country, Glaxo said last week. Authorities also have detained four of Glaxo's high-level Chinese executives over allegations that they "severely violated" Chinese law.

Glaxo has said it is deeply "concerned and disappointed by these serious allegations of fraudulent behavior and ethical misconduct." It said the company "has zero tolerance for any behavior of this nature."

Legal experts say Glaxo will likely face a fine from Chinese authorities. Officials have not outlined future actions they plan to take in the investigation. China's Ministry of Public Security did not respond to requests for information Monday.

Multinational companies frequently find themselves in the spotlight in China, with some offering apologies to maintain good relationships with authorities and a hold on one of the world's most valuable growth markets.

-Yang Jie contributed to this article.

Write to Laurie Burkitt at [e-mail] and Jeanne Whalen at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires