GlaxoSmithKline to Pay Another $3 billion

November 4, 2011

4 Nov – In one of the largest settlements of its kind, GlaxoSmithKline PLC said it will pay the U.S. government $3 billion to settle several long-running criminal and civil investigations into the company, including allegations that Glaxo marketed some drugs illegally and defrauded the Medicaid program.

Jeanne Whalen
Wall Street Journal 

The settlement will also cover a Justice Department probe into Glaxo’s development and marketing of the diabetes drug Avandia, which has been linked to heart-attack risks. 

Glaxo said the $3 billion is covered by the large legal provisions the company has taken in recent years as it worked to settle the probes—the company’s total legal provisions at the end of the third quarter were £2.9 billion ($4.6 billion). The final settlement terms are still under negotiation, the company said, adding that it expects to pay the government next year. Justice Department officials declined to comment Thursday. 

The deal is one of the largest in a string of settlements the U.S. government has struck with drug companies as it tries to stamp out illegal marketing practices that flourished in the 1990s and early 2000s.  Critics of the industry say the sums, while large, are still dwarfed by the profits companies earned from marketing their drugs improperly. “It’s a speed bump,” said Kevin Outterson, co-director of the health-law program at Boston University. “It’s a cost of doing business.”

Glaxo has disclosed that investigators examined whether Glaxo promoted Wellbutrin for uses not approved by the Food and Drug Administration, an illegal practice known as off-label marketing. 

Investigators have also examined how Glaxo portrayed, in interactions with doctors and the FDA, patients’ risk of suicidal behavior while taking Paxil, according to lawyers interviewed by the investigators. 

In addition, the investigation has examined Glaxo-funded medical education and clinical trials, and the company’s hiring of doctors for various services, according to Glaxo disclosures. 

Glaxo said the $3 billion settlement will also cover a Justice Department investigation into the development and marketing of Avandia, a diabetes drug that was once one of Glaxo’s top sellers. The Justice Department subpoenaed the company last year over Avandia, according to Glaxo. A Justice Department spokesman declined to comment Thursday on the nature of the investigation. 

Data tying Avandia to the increased risk of heart attacks prompted the FDA to put tight restrictions on the drug’s use last year, while European regulators ordered Avandia withdrawn from the market.  A Senate Finance Committee report last year accused Glaxo of knowing for several years about data linking Avandia to cardiovascular risks, but playing down the information and trying to suppress doctors who raised concerns. Glaxo rejected those conclusions, saying it had acted appropriately and never tried to suppress doctors’ views. 

Glaxo has already set aside large sums to cover the costs it is expecting to face over lawsuits patients have filed alleging that Avandia harmed their health.  Louisiana and Utah are also suing Glaxo, accusing it of illegally marketing Avandia. 

Glaxo said the $3 billion settlement also covers a Justice Department investigation into whether Glaxo manipulated Medicaid rules to squeeze more money out of the state-financed program, which provides health care for low-income Americans. 

The $3 billion settlement “is a significant step toward resolving difficult, longstanding matters which do not reflect the company that we are today,” Glaxo chief executive Andrew Witty said in a statement. “In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently.” 

A number of big drug companies have struck large settlements with the U.S. in recent years to resolve similar investigations.  In 2009, Pfizer Inc. agreed to pay $2.3 billion to settle a federal investigation into whether it promoted the painkiller Bextra off label. Eli Lilly & Co. agreed to pay $1.4 billion to settle similar charges involving its antipsychotic medicine Zyprexa. AstraZeneca PLC and Novartis AG also made big settlements last year relating to their marketing practices.

Since 2004, the pharmaceutical industry has paid billions to settle thousands of criminal and civil complaints related to the illegal marketing of drugs that kill or injure more than a million Americans ANNUALLY.  This settlement brings that number to $12 billion – a FRACTION of their annual revenues – and no one goes to jail This short video explains how they do it.