Thursday, November 03, 2011

Glaxo Settles With U.S. for $3 Billion


LONDON—GlaxoSmithKline PLC said it will pay the U.S. government $3 billion to settle several long-running criminal and civil investigations into the company, including allegations that Glaxo marketed some drugs illegally and defrauded the Medicaid program.

The settlement will also cover a Department of Justice probe into Glaxo's development and marketing of the diabetes drug Avandia, which has been linked to heart attack risks.

Glaxo said the $3 billion is covered by the large legal provisions the company has taken in recent years as it worked to settle the probes. The final settlement terms are still under negotiation, the company said, adding that it expects to pay the government next year.

The deal is the latest in a string of large settlements the U.S. government has struck with drug companies as it tries to stamp out illegal marketing practices that flourished in the 1990s and early 2000s. Critics of the industry say the sums, while large, are still dwarfed by the profits companies earned from marketing their drugs improperly.

Glaxo's total legal provisions at the end of the third quarter stood at £2.9 billion.

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Glaxo said the settlement includes an eight-year-old probe into the company's marketing of several top-selling drugs, including the antidepressants Paxil and Wellbutrin, between 1997 and 2004. That inquiry began at the U.S. attorney's office in Colorado before moving to the U.S. attorney's office in Massachusetts.

Glaxo has disclosed that investigators examined whether Glaxo promoted Wellbutrin for uses not approved by the Food and Drug Administration, an illegal practice known as off-label marketing.

Investigators have also examined how Glaxo portrayed, in interactions with doctors and the FDA, patients' risk of suicidal behavior while taking Paxil, according to lawyers interviewed by the investigators.

The investigation has also examined Glaxo-funded medical education and clinical trials, and the company's hiring of doctors for various services, according to Glaxo disclosures.

Justice Department officials couldn't be reached for comment early Thursday.

Glaxo said the $3 billion settlement will also cover a Department of Justice investigation into the development and marketing of Avandia, a diabetes drug that was once one of Glaxo's top sellers.

Data tying Avandia to increased risks of heart attacks prompted the FDA to put tight restrictions on the drug's use last year, while European regulators ordered Avandia withdrawn from the market.

Glaxo has already set aside large sums to cover the costs it expects to face over lawsuits patients have filed alleging that Avandia harmed their health.

Glaxo said the $3 billion settlement also covers a Justice Department investigation into whether Glaxo manipulated Medicaid rules to squeeze more money out of the state-financed program, which provides healthcare for low-income Americans.

The $3 billion settlement "is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today," Glaxo chief executive Andrew Witty said in a statement. "In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the US to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently."

A number of big drug companies have struck large settlements with the U.S. in recent years to resolve similar investigations. In 2009, Pfizer Inc. agreed to pay $2.3 billion to settle a federal investigation into whether it promoted the painkiller Bextra off label. Eli Lilly & Co. agreed to pay $1.4 billion to settle similar charges involving its antipsychotic medicine Zyprexa. AstraZeneca PLC and Novartis AG also made big settlements last year relating to their marketing practices.

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