GlaxoSmithKline chief apologises after company fined for mis-selling | Business | The Guardian
GlaxoSmithKline chief Sir Andrew Witty has expressed regret for the "unacceptable" mistakes which led to a record $3bn (£1.9bn) fine for mis-selling drugs in the US, and vowed that a company-wide overhaul would prevent a repeat.
Witty was "very sorry that we have had to deal with the echoes of the past". He said: "We're determined this is never going to happen again."
It took Witty, who became chief executive in May 2008 and previously headed GSK's European operations, four years to deal with the legal cases in America, which involved three of its bestselling drugs.
Britain's biggest pharmaceutical company sold the antidepressant Paxil for unapproved use on children and pushed Wellbutrin for sexual dysfunction and weight loss, uses for which it was not approved. In the case of Avandia, GSK failed to flag up concerns about heart risks to the regulator. The company also lavished entertainment on doctors, such as golf lessons and fishing trips, to entice them to promote its medicines.
Witty said the company had changed under his leadership and had adopted a zero tolerance approach to such marketing practices. GSK has nearly doubled its compliance department since 2008 to more than 240.
"I can't promise you perfection, but we are much more aggressive in terms of disciplining and terminating employment if we find people who don't get it," said Witty. "We understand this is about our licence to operate." The group employs 105,000 people across 150 countries.
He rejected the US justice department's assertion that GSK had been illegally marketing its asthma drug Advair through "at least 2010" for uses not approved by the regulator, the Food and Drug Administration. He added: "It would be naive to believe that someone takes over in mid-2008 and within a few months everything has changed. Obviously it takes time for us to make sure all of the [marketing changes] I've just discussed are in place and done."
GSK recently agreed a £1.9bn fine – which it will pay out of its £7.5bn cash pile – to settle criminal and civil cases with US federal and state governments relating to actions over a 10-year period. The mis-selling and other illegal practices were brought to light by company whistleblowers.
The group reiterated its line that "where necessary, we removed employees who were engaged in misconduct", without naming individuals. GSK's chief executive at the time, Jean-Pierre Garnier, who had his £23m pay deal voted down in 2003 after a shareholder revolt, remained in the job until 2008.
Witty's comments came as GSK unveiled lower first half sales and profits, and a further £500m of cost cuts by the end of 2015. This could involve job cuts, although in the UK "it might just as well mean more jobs", said Witty, as the group brings back previously outsourced jobs, which it has done in Montrose in Scotland.
The company has been hit more than it expected by 7% price cuts imposed by European governments as part of their austerity drive, and warned pricing pressure would keep its sales flat this year. Witty called on European governments to show a greater willingness to negotiate, and warned against exporting lower prices from crisis-ridden countries to other nations.
The drug giant made a second-quarter pretax profit of £1.5bn, slightly down from last year and missing forecasts. While sales growth in Japan and emerging markets remained strong at 6% and 9% respectively, it has slowed from the double-digit growth seen in previous years. European sales fell 8% and the US was down 6%, leading to a 2% drop in sales overall.
However, GSK is through the worst of its patent expiries and is counting on the launch of eight new medicines in the next two years, for conditions including diabetes, HIV and melanoma, the most dangerous type of skin cancer. The group has paid £22bn to shareholders through dividends and share buybacks since Witty became CEO.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "Investor patience is being rewarded via increased shareholder returns, whilst speculative hopes that the group's Consumer Health business might eventually be spun out still linger. In all, given global economic uncertainty of historic proportion, Glaxo continues to be seen as something of a safe port in a storm."