GlaxoSmithKline and its $3 billion settlement

In the case U.S. v. GlaxoSmithKline LLC, the company GlaxoSmithKline, also known as GSK, pled guilty to criminal charges on July 2, 2012, and has reportedly agreed to a $3 billion settlement in one of the largest healthcare fraud cases in the U.S.  The dubious distinction is that this is quite possibly the biggest payment in history by a drug maker.

This case has had its precedents; in October of 2010, GlaxoSmithKline had reached a settlement of $750 million, making it the 4^th largest settlement in U.S. history that was related to a pharmaceutical company providing compensation due to oversights of regulations, and for misrepresenting certain products to the public.  Regarding this punitive measure by the courts, this case might not have materialized had it not been for a quality assurance manager who had attested that GSK’s products weren’t meeting the standards needed to be in compliance with safety and other health measures.

In regards to the settlement reached in the courts on July of 2012, GSK had been indicted specifically for breaking U.S. laws regarding marketing mechanisms, as well as the development and advocacy of certain pharmaceutical drugs.  In this case led by the U.S. Justice Department, the off-label uses of certain drugs had not been approved by the sanctioning body known as the Federal Drug Administration.  GSK had marketed the drug Paxil for use in minors when it was approved for adult-use only.  Also cited were the off-label uses for the antidepressant Wellbutrin, specifically for usages not approved by the FDA, including weight loss and the alleviation of sexual dysfunction.

According to prosecutors, the British company had gone to great lengths to promote these drugs, including publishing misleading medical journal articles in publications to give the drugs credence for these unapproved uses.  They were also charged for bribing doctors with illegal kickbacks, such as spa treatments and meals.  In another instance, GlaxoSmithKline had failed to give the FDA adequate safety data about its diabetes drug Avandia, which is clearly in violation of U.S. law.  The litany of abuses surrounding Avandia is anything but new, with accusations of misconduct stemming from the late 1990s through 2007.

GSK had agreed to plead guilty to 3 criminal misdemeanor counts related to all 3 of these drugs.  It is worth noting that it is exceedingly rare for a corporation to receive a ‘guilty’ verdict, which makes GSK’s indictment all the more unusual.  The suit’s remuneration has cost GSK $1 billion in criminal fines and $2 billion in civil charges.

Chief Executive Officer of GlaxoSmithKline, Sir Andrew Witty, had disclosed in a written statement that he had regretted these practices by the company, and has said that in the future they will not be tolerated.

Given the case of Pfizer paying $2.3 billion in 2009 amidst charges that it had illegally marketed 13 drugs, these cases exemplify the trend of the American justice system cracking down and taking punitive measures against drug and pharmaceutical companies for how drugs are being sold. This is largely due to the incrementally higher cost of providing drugs through government-assisted programs.  As per the civil fine charges in which GSK will have to pay $2 billion, the allegations state that from 1994 to 2003 the company underpaid money which they owed to Medicaid.  GSK had an obligation to confer with the federal government about possible “best prices” for the drugs, but had failed to do so, according to prosecutors.  $300 million of the settlement will be deferred to states and public health authorities.  Another portion of the $2 billion of civil fines will go to a group of whistleblowers who had contributed to the Justice Department’s investigation and are deemed eligible to a share of the money under the False Claims Act.

As part of the settlement, GSK has responded to possible oversight by the federal government to curb prior illegal practices in which they had incurred such losses, such as misleading the public and kickbacks.  The U.S. Department of Health and Human Service’s Inspector General will be overseeing the “Corporate Integrity Agreement” for a fixed period of 5 years.