GlaxoSmithKline to pay $3 billion in US drug fraud scandal
Diabetes medication Avandia is one of the three drugs concerned in the fraud case
2 July 2012 Last updated at 13:08 ET
GlaxoSmithKline (GSK) is to pay $3bn (£1.9bn) in the largest healthcare fraud settlement in US history. The drug giant is to plead guilty to promoting two drugs for unapproved uses and failing to report safety data about a diabetes drug to the Food and Drug Administration (FDA). The settlement will cover criminal fines as well as civil settlements with the federal and state governments.
The case concerns the drugs Paxil, Wellbutrin and Avandia.
Deputy US Attorney General James Cole told a news conference in Washington DC that the settlement was "unprecedented in both size and scope".
GSK, one of the world's largest healthcare and pharmaceuticals companies, admitted to promoting antidepressants Paxil and Wellbutrin for unapproved uses, including treatment of children and adolescents.
The illegal practice is known as off-label marketing.
The company also conceded charges that it held back data and made unsupported safety claims over its diabetes drug Avandia.
In addition, GSK has been found guilty of paying kickbacks to doctors. "The sales force bribed physicians to prescribe GSK products using every imaginable form of high-priced entertainment, from Hawaiian vacations [and] paying doctors millions of dollars to go on speaking tours, to tickets to Madonna concerts," said US attorney Carmin Ortiz.
As part of the settlement, GSK agreed to be monitored by government officials for five years.
GSK said in a statement it would pay the fines through existing cash resources.
Andrew Witty, the firm's chief executive, said procedures for compliance, marketing and selling had been changed at GSK's US unit. "We have learnt from the mistakes that were made," Mr Witty said. "When necessary, we have removed employees who have engaged in misconduct."
"We have learnt from the mistakes ”
~~ Andrew Witty GlaxoSmithKline chief executive
"Today's multibillion-dollar settlement is unprecedented in both size and scope,'' Deputy Attorney General James Cole said. "At every level, we are determined to stop practices that jeopardize patients' health, harm taxpayers, and violate the public trust - and this historic action is a clear warning to any company that chooses to break the law."
Prosecutors said GlaxoSmithKline illegally promoted the drug Paxil for treating depression in children from April 1998 to August 2003, even though the FDA never approved it for anyone under age 18. The corporation also promoted the drug Wellbutrin from January 1999 to December 2003 for weight loss, the treatment of sexual dysfunction, substance addictions and attention deficit hyperactivity disorder, although it was only approved for treatment of major depressive disorder.
GlaxoSmithKline CEO Sir Andrew Witty expressed regret and said they have learned "from the mistakes that were made."
"Today brings to resolution difficult, long-standing matters for GSK," he said in a statement. "Whilst these originate in a different era for the company, they cannot and will not be ignored."
Crimes and civil violations like those in the GlaxoSmithKline case have been widespread in the pharmaceutical industry and have produced a series of case with hefty fines. One reason some have said the industry regards the fines as simply a cost of doing business is because aggressively promoting drugs to doctors for uses not officially approved — including inducing other doctors to praise the drugs to colleagues at meetings — has quickly turned numerous drugs from mediocre sellers into blockbusters, with more than $1 billion in annual sales.
In the last few years, the Justice Department has become much more aggressive in pursuing such fraud, often in whistleblower cases taken on by a handful of U.S. attorneys focused on such fraud. Among the most active are the U.S. attorneys in Boston, Philadelphia and San Francisco— all in regions with numerous pharmaceutical and biotech company operations.
The prior record-setting case involved Pfizer, the world's biggest drugmaker. Pfizer paid the government $2.3 billion in criminal and civil fines for improperly marketing 13 different drugs, including Viagra and cholesterol fighter Lipitor. Pfizer was accused of encouraging doctors to prescribe its drugs with free golf, massages, and junkets to posh resorts.
It is illegal to promote uses for a drug that have not been approved by the FDA — a practice known as off-label marketing.
"Let me be clear, we will not tolerate health care fraud," Cole told a news conference at the Justice Department. He would not say whether any company executives were under investigation. The company's guilty plea and sentence have to be approved by a federal court in Massachusetts.
"For far too long, we have heard that the pharmaceutical industry views these settlements merely as the cost of doing business," Acting Assistant Attorney General Stuart F. Delery, head of Justice's civil division, said at the news conference. "That is why this administration is committed to using every available tool to defeat health care fraud."
Delery added, "Today's resolution seeks not only to punish wrongdoing and recover taxpayer dollars, but to ensure GSK's future compliance with the law." He noted that a similar recent settlement with Abbott Laboratories also included continuing compliance monitoring.
Justice Department officials also said that between 2001 and 2007 GlaxoSmithKline failed to report to the FDA on safety data from certain post-marketing studies and from two studies of the cardiovascular safety of the diabetes drug Avandia. Since 2007, the FDA has added warnings to the Avandia label to alert doctors about potential increased risk of congestive heart failure and heart attack.
The drug corporation agreed to resolve civil liability for promoting the drugs Paxil, Wellbutrin, Advair, Lamictal and Zofran for off-label, non-covered uses. The company also resolved accusations that it paid kickbacks to doctors to prescribe those drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex.
Of the penalties, $1 billion covers criminal fines and forfeitures and $2 billion is for civil settlements with the federal government and the state governments of Massachusetts and Colorado.
Glaxo is pleading guilty to these violations of FDA regulations, which are misdemeanors. It has set aside $3.5 billion to cover the cost of the fines and other penalties related to the government's seven-year probe of the company's marketing practices for Paxil, Wellbutrin and Avandia, three of its blockbuster drugs.
The company earlier set aisde $3 billion for legal costs tied to health problems that people taking Avandia and the other medicines are at risk of suffering.
Glaxo has already paid more than $700 million to resolve patient lawsuits, alleging Avandia caused heart attacks and strokes. Many of the Avandia cases have been consolidated before a federal judge in Philadelphia.
In a statement, GlaxoSmithKline said it disagreed with some statements the Justice Department made in court papers. For example, the company said its settlement with the government does "not constitute an admission of any liability or wrongdoing in the selling and marketing of Lamictal, Zofran, Imitrex, Lotronex, Flovent, Valtrex, Avandia or Advair products. The government also made allegations about Paxil, Wellbutrin that the company did not admit."
"The civil settlement agreement contains many allegations that are either inaccurate or incomplete, that selectively tell only parts of the story, and that draw unwarranted conclusions from disputed facts," the company said.
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07-02-2012 05:47 PM