Settlement amount: $3 billion
Drugs: Paxil, Wellbutrin, Avandia
In not only the largest pharma settlement, but the largest healthcare fraud settlement in history, GlaxoSmithKline ($GSK) agreed to pay a whopping $3 billion to wrap up its Justice Department probes. The deal requires GSK to plead guilty to three counts and pay a $1 billion criminal penalty, plus another $2 billion to wrap up civil claims.
One reason the settlement is so large is that it's so comprehensive. It not only includes the off-label marketing and kickback allegations we've grown accustomed to reporting, but also pricing and rebate claims other drugmakers have settled separately. Glaxo's deal also covers allegations that it downplayed the safety risks of its controversial diabetes drug Avandia.
While the Justice Department crowed about the settlement--"unprecedented in size and scope," Deputy Attorney General James M. Cole said--Glaxo referred to the "difficult, long-standing matters" the settlement resolves.
Since he took over the company in May 2008, CEO Andrew Witty has taken pains to distance his own governance from past reigns. His statement about the settlement was no different. "Whilst these originate in a different era for the company, they cannot and will not be ignored," Witty said, going on to list changes he's made at GSK to forestall misconduct, including revamping sales-rep pay incentives and reporting payments to doctors. "I want to express our regret and reiterate that we have learnt from the mistakes that were made," he said.
According to the Justice Department, GSK agreed to plead guilty to two misbranding charges The third count: failing to report Avandia safety data to the FDA. The company touted Paxil for off-label use in children and adolescents, despite data that failed to show it was effective for kids, the government says. Meanwhile, Glaxo marketed its antidepressant Wellbutrin for a litany of off-label uses, including weight loss, substance abuse and sexual dysfunction, Justice alleges. The civil settlement covers allegations of mismarketing 5 other drugs, including the asthma drug Advair and the seizure drug Lamictal.
On Avandia, Glaxo allegedly failed to report safety data to FDA, the government says, including two studies specifically designed to gauge the diabetes drug's safety. The drugmaker withheld data from the agency from 2001 to 2007, the statement says. After that, studies raised red flags about Avandia's risks to the heart, and the drug was slapped with two black-box warnings; its use has since been severely curtailed by FDA. The Avandia false-claims allegations--wrapped up on the civil side--include exaggerating the drug's benefits, including, ironically, its cardiovascular benefits.
In all this morass of misbehavior, there's one bit of solace for Witty: Glaxo's $1 billion criminal fine doesn't top Pfizer's. That penalty amounted to $1.2 billion.