Healthcare Business News

GlaxoSmithKline agrees to pay $3 billion in largest U.S. healthcare fraud settlement

By Joe Carlson
Posted: July 2, 2012 - 1:30 pm ET

(Story updated at 3:45 p.m. ET.)

In the largest fraud settlement in U.S. history, GlaxoSmithKline has agreed to pay $3 billion in settlements and to plead guilty to criminal charges related to its branding, safety disclosures and price reporting of several drugs.

The Justice Department on Monday announced a “global settlement” with the U.K.-based company that resolves three investigations related to the pharmaceutical giant and imposes an unusual corporate integrity agreement on Glaxo's worldwide operations.

The company will pay $1.8 billion to resolve criminal and civil liabilities for off-label marketing, including $757 million in criminal fines for misbranding antidepressants Paxil and Wellbutrin, and more than $1 billion for alleged False Claims Act violations related to payments of kickbacks for those and other drugs.

The company also agreed to pay a $243 million criminal fine for failing to report safety data to the Food and Drug Administration regarding its diabetes drug Avandia. The company will pay $657 million to resolve allegations about statements it made regarding Avandia's safety and efficacy.

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The corporation will plead guilty to two criminal charges of introducing misbranded drugs into commerce, related to Paxil and Wellbutrin, and one count of failing to report safety information for Avandia. In the cases of Paxil and Avandia, the company was forced to add prominent “black box” safety warnings to drug packaging after its conduct became known to authorities.

Finally, the company will pay $300 million for allegedly failing to report its best prices for certain drugs to Medicaid, according to written comments from Stuart Delery, acting assistant attorney general for the Justice Department's Civil Division.

The settlements still require approval from a U.S. District Court judge before becoming final. The civil settlements would resolve four whistle-blower lawsuits pending in U.S. District Court in Massachusetts, the Justice Department said.

Glaxo is not admitting liability in the government's civil allegations, except to the extent that it agrees to the facts to which the corporation is pleading guilty in the three criminal charges filed against it.

In a written statement, the company said the settlements will be paid with existing cash reserves, now that negotiations with various government agencies had concluded. The company will enter a corporate integrity agreement.

“Today brings to resolution difficult, long-standing matters for GSK,” CEO Sir Andrew Witty said in a written statement. “On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made.”

As part of the global settlement the company will enter a novel corporate integrity agreement (PDF) effective until Dec. 31, 2017.

The agreement forces Glaxo to change how it compensates sales staff, removing pay based on territorial sales goals, which was “one of the driving forces behind the conduct at issue in this matter,” the Justice Department wrote. The agreement also allows the company to recoup executive bonuses and incentive pay if they or their subordinates engage in misconduct.

GSK stock rose after news of the settlement, climbing 1.6% to a share price of $46.30 in late afternoon trading on the New York Stock Exchange.

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