Drug Manufacturer Fraud Litigation - Wednesday, December 14, 2011 8:43 - 0 Comments

Glaxo Settles Cases With The United States For $3 Billion

The British drug company GlaxoSmithKline has agreed to pay $3 billion to settle United States government civil and criminal investigations into its sales practices for numerous drugs. The settlement would be the largest yet in a wave of federal cases against pharmaceutical companies accused of illegal marketing, surpassing the previous record of $2.3 billion paid by Pfizer in 2009. In recent years, drug companies have been prime targets of federal fraud investigations, which have recovered tens of billions of dollars for Medicaid and Medicare.

The cases against GlaxoSmithKline include illegal marketing of Avandia, a diabetes drug that was severely restricted last year after it was linked to heart risks. According to federal prosecutors, the company paid doctors and manipulated medical research to promote the drug. GlaxoSmithKline had already set aside cash for the settlement.

To put things in perspective, the Glaxo settlement will trump the $2.3 billion Pfizer Inc. paid in 2009 relating to its marketing of the Bextra painkiller and other drugs, as well as the $1.4 billion Eli Lilly & Co. paid during the same year over sales of its Zyprexa anti-psychotic medicine. Abbott Laboratories agreed to pay at least $1.3 billion to settle claims by the U.S. government and 24 states alleging the company illegally marketed its Depakote epilepsy drug.

Federal prosecutors began an investigation in Colorado in 2004, later taken over by the U.S. Attorney in Massachusetts, into whether Glaxo promoted drugs for unapproved uses, and into ways Glaxo potentially influenced doctors. The probe concerns nine of the company’s best-selling products from 1997 to 2004, including the Advair lung treatment.

The agreement to settle its biggest federal cases should be completed next year, according to the company. It said $3 billion would settle not only the Avandia case, but also a Justice Department investigation of its Medicaid pricing practices and a nationwide investigation led by the United States attorneys in Colorado and Massachusetts into the sales and marketing of nine of its drugs from 1997 to 2004. GlaxoSmithKline hasn’t specified how much money would resolve each case, nor the possibility of criminal findings and fines, saying the final settlement remained under negotiation. GlaxoSmithKline, with a market value of more than $110 billion, had net profit of about $5 billion on sales of $43 billion in the year ending Sept. 30.

The company set aside $3.4 billion in January — eliminating its fourth-quarter profit — and $2.3 billion in July 2010 to resolve a variety of civil and criminal cases. Critics of the settlements made with drug companies argued for stiffer penalties, including prison sentences for corporate officials. Frances H. Miller, a Boston University law professor and health policy expert, put the settlement in the proper perspective, saying:

Although $3 billion is a very big number in terms of drug industry settlements, it’s not a very big number in relation to almost $50 billion in annual revenue for the world’s fourth-largest pharmaceutical company.

It should be noted that the health care sector accounted for more than 80 percent of the $4 billion in overpayments recovered by the government in 2010 as a result of whistle-blower lawsuits and resulting fraud investigations by federal and state agencies.

Source: Bloomberg and Associated Press