It's official: GlaxoSmithKline ($GSK) will pay a whopping $3 billion to wrap up longstanding Justice Department probes. It's the largest healthcare fraud settlement in history, topping Pfizer's ($PFE) $2.3 billion deal from 2009. GSK will 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 expressed the "difficult, long-standing matters" the settlement resolves.
CEO Andrew Witty has taken pains to distance his own governance from past reigns, and his statement today 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. "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 will 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.
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 criminal penalties of $1 billion cover those allegations. The civil claims are more extensive. They cover off-label and kickback allegations related to 7 drugs, including Paxil and Wellbutrin, but also the asthma drug Advair and seizure drug Lamictal. The Avandia false-claims allegations include exaggerating the drug's benefits, including, ironically, its cardiovascular benefits. And then there are pricing claims, covering false prices reported to Medicaid from 1994 to 2003.
No doubt Witty hopes that this $3 billion payout will put the talk of misbehavior in the past. He might look to Pfizer's example before counting on that. Every time a drugmaker has settled Justice Department allegations over the past few years, news stories have mentioned Pfizer's own $2.3 billion, record-setting deal. Now, GSK will own that dubious distinction. But it can take solace in the fact that its $1 billion criminal fine doesn't beat Pfizer's. That penalty amounted to $1.2 billion.
- read the DoJ release
- see the statement from Glaxo
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