Lessons from Glaxo settlement
HHS targeting leadership for violations
Wrong-doing by healthcare companies is creating greater risks for executives, as HHS officials look to hold people responsible instead of simply securing large legal settlements. The most recent example is GlaxoSmith-
On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made. —Sir Andrew Witty, CEO of Glaxosmithkline
Kline, which agreed to pay a record $3 billion last week to resolve civil allegations and criminal charges about how it markets and discloses information on its pharmaceuticals.
Government investigators in that case made clear that sanctions for past conduct weren’t enough. The settlement resolving a decade-long series of investigations into the activities of the pharmaceutical firm includes a sweeping five-year, 123-page corporate integrity agreement that experts said was somewhat unusual in its depth.
The agreement between the British company and HHS’ inspector general’s office holds board members and company executives accountable for future violations by allowing for the “claw back” of performance bonuses and changing how GSK compensates its sales staff to decrease the incentive for other problems in the future.
Avoiding those penalties will require vigilance and regular reporting by the company.
“Basically, GSK is going to have a business partner in the office of the OIG,” said Hope Foster, the Washington-based attorney who chairs the healthcare enforcement defense group at Mintz Levin, and who has read the agreement. She said it was stricter than a similar agreement signed by Abbott Laboratories in May that included executive responsibility as part of a $1.5 billion civil and criminal settlement for that company (May 21, 2012, p. 4).
GSK—a company that recorded a 29% operating margin on 27.4 billion pounds ($42.6 billion) of revenue in 2011—saw its shares on the New York Stock Exchange rise nearly 2% on July 2 after its settlement was announced. However, Foster dismissed the notion that $3 billion in civil and criminal settlements was not a significant sanction even for the global drugmaker.
“I can’t imagine that any company, no matter how large, isn’t going to take this very seriously,” Foster said. “One of the reasons you have cases like this is to deal not just with
GSK, but to send messages to the rest of the industry, and I can’t imagine those messages are not being heard loud and clear.”
Indeed, GlaxoSmithKline CEO Sir Andrew Witty released a detailed statement to the international media after the settlements were announced admitting that mistakes were made in U.S. operations and acknowledging that the company has removed employees who engaged in misconduct.
“Whilst these (issues) originate in a different era for the company, they cannot and will not be ignored,” Witty said in the statement. “On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made.”
In addition to civil allegations to which the company did not admit liability, the corporation did agree to plead guilty to three misdemeanor violations of the U.S. Food, Drug and Cosmetic Act, related to illegal off-label marketing of antidepressants Paxil and Wellbutrin, and failure to disclose the results of certain studies about diabetes drug Avandia.
Paxil and Avandia both had prominent “black box” warnings added to packaging following the conduct.
Between 1998 and 2003 Paxil was marketed by GSK to patients under age 18 despite lacking government approval. Like similar antidepressants, Paxil was eventually found to pose a risk of increased suicidal thoughts and behavior among those under 18, according to documents filed with the settlement. Paxil packages now disclose that risk.
Avandia had a warning added to packaging about potential increased risks of congestive heart failure and heart attack. Investigators said in the settlement that the com- pany between 2001 and 2007 failed to disclose post-marketing safety data about the drug from studies undertaken after European regulators expressed concerns about the drug’s cardiovascular safety.
Although GSK said it terminated some employees, company officials were not charged with crimes as part of the settlement.
Robert DeConti, chief of the Administrative and Civil Remedies Branch of HHS’ inspector general’s office, said in a speech at a health law conference last month that Congress has recently been asking tough questions about personal culpability among company officials in the wake of large settlements.
“They are not satisfied seeing hundred-million-dollar, sometimes billion-dollar settlements,” DeConti said during the annual meeting of the American Health Lawyers Association June 27 in Chicago. “They want to know who’s responsible.”
The GSK integrity agreement requires the company to have each member of the board of directors certify regularly that they had made sure the company was implementing an effective compliance program. In addition to implementing new policies and training, a group of top-ranking company officials including the company president must regularly certify that they have taken steps to comply and promote compliance with federal laws.
And the agreement says the company will eliminate “incentive compensation based on territory/individual level sales goals” for sales representatives, and that the company now has the right to recoup or forfeit executive performance pay following certain violations by the executives or other employees.