GlaxoSmithKline to pay a record penalty of $3 billion

Posted: July 04, 2012

In the largest financial penalty of its kind in the United States, drugmaker GlaxoSmithKline agreed to plead guilty to criminal charges and pay federal and state governments $3 billion to settle allegations related to inappropriate marketing of drugs, withholding of safety information, and failure to report accurate prices.

At a Washington news conference, Deputy Attorney General James M. Cole said the settlement was "unprecedented in size and scope" and "underscores our robust commitment to protecting the American people from the scourge of health-care fraud."

Glaxo is based in London, but has a large Center City office and facilities in the suburbs. Two of the four whistle-blowers involved in the consolidated legal case worked out of the Philadelphia office before leaving the company and will share in the settlement, though the amounts have not been determined.

The previous record for a drug company penalty was $2.3 billion, which Pfizer Inc. agreed to pay in 2009 to settle similar allegations.

The Glaxo allegations involved the marketing or safety notification of several drugs, including antidepressants Paxil and Wellbutrin, and the diabetes drug Avandia, with the investigation covering a period from 1999 through 2010.

Part of the settlement relates to allegations that Glaxo did not properly report the prices it was paid for drugs in the marketplace. Those numbers are used to calculate the "rebate" fees that drug companies must pay to the government if they want to sell drugs through Medicaid, the insurance program operated jointly by the states and the federal government that serves low-income citizens.

The New Jersey Attorney General's Office said it would receive $22.1 million from the settlement. Pennsylvania will get $13 million, and Delaware will get $984,000.

Glaxo pleaded guilty to three misdemeanors, two for promoting Paxil and Wellbutrin for uses other than those approved as safe by the FDA, and a third for failing to report clinical experiences and data related to Avandia.

The conduct to which the company pleaded guilty occurred before Andrew Witty - who had worked in the European division - was named CEO in May 2008. Other disputed conduct, for which the company denies any wrongdoing, occurred through 2010.

"On behalf of GSK, I want to express our regret and reiterate that we have learned from the mistakes that were made," Witty said in a statement. "Since I became CEO, we have had a clear priority to ingrain a culture of putting patients first, acting transparently, respecting people inside and outside the organization, and displaying integrity in everything we do."

Manufacturers must get approval from the Food and Drug Administration to sell drugs in this country. The approval is granted for certain illnesses or conditions and the specific language on the official label (which goes beyond words on the pill bottle).

In the United States, doctors are allowed by law to prescribe drugs as they see fit. But companies cannot promote a drug for any use except what is on the label. Doing so is referred to as "off-label" marketing.

Paxil, for example, is an approved antidepressant for adults. But the government alleged that from April 1998 to August 2003, GSK illegally promoted Paxil for treating depression in patients under age 18, even though it was not approved for pediatric use.

The first two Glaxo whistle-blowers to file suit were Greg Thorpe and Blair Hamrick, who worked in Colorado at the time, and are represented by Plymouth Meeting lawyers Brian Kenney and Tavy Deming. Two Philadelphia-area whistle-blowers were Thomas Gerahty and Matthew Burke, according to their attorney, Erika A. Kelton. Gerahty and Burke could not be reached Monday for comment.


Contact David Sell at dsell@phillynews.com, 215- 854-4506, or follow on Twitter @phillypharma. Read his blog, www.philly.com/phillypharma.

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