Glaxo To Pay U.S. Record $3 Billion Settlement Of Probes Into Its Sales Practices

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Posted on 5th November 2011 by gjohnson in Uncategorized

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In what will be the largest settlement of its kind, GlaxoSmithKline plc has reached a deal to pay $3 billion to resolve a variety of pending criminal and civil probes into its marketing of drugs for unapproved uses.

But some consumer advocates were arguing that an executive from the drug giant should be going to prison for what happened.

The British pharmaceutical giant issued a press release Thursday announcing the agreement in principle with the U.S. government.

http://www.gsk.com/media/pressreleases/2011/2011-pressrelease-710182.htm

That settlement will put an end to “significant ongoing Federal government investigations, specifically: the investigation into GlaxoSmithKline’s sales and marketing practices begun by the US Attorney’s office of Colorado in 2004 and later taken over by the US Attorney’s Office of Massachusetts;  the U.S. Department of Justice’s investigation of possible inappropriate use of the nominal price exception  under the Medicaid Rebate Program;  and the Department of Justice’s investigation of the development and marketing of Avandia.”

Avandia is a medication for diabetes whose use in the United State was restricted last year after it was tied to an increased risk of heart attacks.

“Federal prosecutors said the company had paid doctors and manipulated medical research to promote the drug,” The New York Times reported. 

http://www.nytimes.com/2011/11/04/business/glaxo-to-pay-3-billion-in-avandia-settlement.html?_r=1

The GlaxoSmithKline settlement tops the previous highest, when Pzifer paid $2.3 million in 2009, according to The Times. Both cases involved the illegal marketing of drugs.  

The final GlaxoSmithKline settlement, which is expected to address civil and criminal liabilities, remains subject to negotiation of specific terms and is expected to be finalized in 2012.  The company  expects to make payments under the final agreement in 2012.

“This is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today,” GlaxoSmithKline CEO Andrew Witty said in a statement. “In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently. We reiterate our full commitment to ensuring appropriate promotion of our medicines to healthcare professionals and to the standards rightly expected by the U.S. government.”

In its press release, GlaxoSmithKline made the case that it has remedied issues relating to its sales practices.

“Since 2008, GSK has established a new framework for compliance in the U.S., based on the company’s values, policies and established industry codes of practices,” the company said. “It is supported by a larger compliance staff and strengthened training programs that require certification by employees.”

GlaxoSmithKline also said that it had undertaken other changes in its commercial procedures, “including the implementation of a new incentive compensation system for its professional sales representatives who work directly with health care professionals.”

The pharmaceutical giant said, “The new system eliminates individual sales targets as a basis for bonuses, and instead bases incentive compensation on the quality of the service these representatives deliver to customers to support improved patient health.  The Company’s U.S. Commercial Practices Policies now meet or exceed the US PhRMA Code governing interactions with healthcare professionals.”

The drug firm ended its press release with this self-righteous comment, which is rather ironic when one considers what the company was under investigation for allegedly doing.

“GlaxoSmithKline – one of the world’s leading research-based pharmaceutical and healthcare companies – is committed to improving the quality of human life by enabling people to do more, feel better and live longer.”

The Times noted that last year, a former attorney for GlaxoSmithKline, Lauren Smith, was tried and acquited of charges of obstruction of justice and making false statement relating to the accusations against the drug giant.

According to Bloomberg News, the settlement covered both a Justice Department probe of the marketing of Avandia and also GlaxoSmithKline and a federal Medicaid rebate program.   

http://www.bloomberg.com/news/2011-11-03/glaxo-agrees-to-pay-3-billion-to-settle-u-s-probe-into-sales-marketing.html
 

“Drugmakers are required to give rebates to Medicaid, the government health incurance program for the poor,” Bloomberg wrote. “The investigation examined how Glaxo reported prices charged to other payers, which are used in calculating the Medicaid rebates.”

The financial wire service also noted that GlaxoKlineSmith’s compensation system for its sales reps had been changed to eliminate “the link between sales goals and bonuses, which are now based on selling competency, customer evaluations and overall performance ot the representative’s business unit.”

All in all, we’d have to say that we agree with the consumer groups: GlaxoSmithKline got off easy.  


Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justice
g@gordonjohnson.com :: 800-992-9447 :: Attorney Gordon S. Johnson, Jr.