GSK accused of introducing discriminatory business policy

July 11, 2017
GSK accused of introducing discriminatory business policy

GlaxoSmithKline Export Ltd (GSK) is facing growing public outcry and complaints following its recent strategic business decisions to unilaterally terminate agreements with four local Ghanaian pharmaceutical distributors.

This bizarre move by the British multinational pharmaceutical company has the potential of creating unfair competition and a monopoly for a wholly foreign-owned Wholesaler in the all-important healthcare market to the detriment of the poor patient.

In a letter sent in May this year, GSK terminated its existing distributorship agreements with the four local Ghanaian owned pharmaceutical companies and simultaneously appointed a wholly owned Indian company - Worldwide Healthcare Ltd. (WHL), as the sole distributor of its pharmaceutical products in the country.

Prior to this termination, the local Ghanaian companies collectively accounted for 85 percent of GSK's pharmaceutical business in Ghana, with WHL handling just 15 per cent. When pressed for reasons for their decision, GSK could only say it had nothing to do with performance or breach of the contract terms, insisting that it is essentially a strategic business decision.

This is what makes their decision very bizarre and smacks of arrogance beyond belief considering their global reputation and the trust between GSK and the Ghanaian partners built over the 3 decades of doing business in the country. It shows complete disregard for the people who helped build their business to the current thriving state.

These local companies had borne and mitigated all the risk inherent in doing business in Ghana which includes but not limited to high cost of borrowing, foreign exchange losses due to the perennial Cedi depreciation over the years, and delayed or non-payment of goods sold especially under the NHIA. They have also shared their market intelligence with GSK sometimes at their own disadvantage. It is a well-known fact that these multinationals, GSK inclusive have been reluctant to set up legal entities in Ghana for fear of losing their capital as a result of  the above risks!

This sad state of affairs leaves the affected local pharmaceutical companies, namely Ernest Chemists Ltd, Unicom Chemists Ltd, Gokals Laborex and Parkerstein Ltd in dire straits since they were totally kept in the dark by GSK.

They are still counting the cost but it's understood that up to 600 workers could lose their jobs. Out of this number, about 300 will include professionals, such as pharmacists, accountants, quality assurance experts, sales executives, and HR managers. Additionally, and perhaps more importantly, the over £9-10million annual turnover GSK business in Ghana will be in the hands of an outsider who will be reaping where they have not sowed.

The global giant has plans to triple its business in the country in the next 5 years, with further potential growth opportunities. If the termination stands, the local companies stand to lose out significantly even though they have contributed to the development of the business up to this point.

GSK's product portfolio in Ghana include important medicines such as antibiotics, asthma medications, HIV drugs, vaccines, and dental health products. All these have become therapy options for medical practitioners and patients in Ghana and its will be risky to create a monopoly for one company, let alone a foreign one.

Contracts with the distributors

We are yet to get the full explanation from GSK for their bizarre decision. It will not be surprising if they say things like 1. We don't believe they have to justify their business decisions to anyone 2. The contract terms permit them to take unilateral decisions to terminate the contracts in the absence of contract breaches 3. We are acting in the best interest of GSK patients and shareholders.

Whiles one can appreciate their rights under the contract agreement, it is still absurd to accept their actions because put in context, GSK owe their partners a sensible explanation since they still have interest in the Ghanaian market, else they risk losing it all. To take business away from your established distributors who control over 85% of the business and hand it over to another company in the same market without any known selection process and transparency can only erode confidence and reputation of GSK in Ghana and elsewhere.

It must also be said that multinationals companies use their dominant position as a supplier to their advantage in such contracts. For example, the local companies, if they decide to challenge GSK in court will have to do so in UK courts even though the market is Ghana. This is clearly unfair and the government must not accept such exploitation. Another example is that the contract absorbs them from paying any compensations to the affected partners. In this particular instance, GSK's singular “cough” has left the poor Ghanaian partners in huge debt!

It is also instructive to know that, under GSK's strict and high global standards, distributors are to upgrade their distribution infrastructure, reach and capability to very high standard and this translates into huge capital expenditure and investments at the outset and regular basis on the part of the distributor. They are subjected to periodic quality audits by GSK. This makes GSK's termination decision very unusual.

It is hoped that somebody more considerate in GSK top management will see reason to reverse this unpopular and reputation-damaging decision by Mr Mark Pfister and his management team in Ghana.

Reaction from Industry players

Mr Ernest Owusu Aboagye, National Executive Member of the Pharmaceutical Society of Ghana (PSGH), said this GSK decision has could have dire consequences for the medicine supply chain, leading to the importation of parallel supplies of sub-standard products.

 Aboagye said: "We strongly disagree with the introduction of this new model which will result in unfair competition and create a monopolistic market; indeed this strategic business decision ridicules and blatantly disregards Ghana's much touted local content policy".

Meanwhile, Yaw Asamoah, a concerned Pharmacist said he eagerly awaits the intervention of the Food and Drugs Authority (FDA), Ministries of Health and Trade, Council of State and President Nana Addo Dankwah Akufo-Addo to intervene immediately.

GSK has a significant global presence with commercial operations in more than 150 countries, a network of 87 manufacturing sites, and large R&D centres in the UK, USA, Belgium and China.