Lessons from Glaxo set­tle­ment

HHS tar­get­ing lead­er­ship for vi­o­la­tions

Modern Healthcare - - FRONT PAGE - Joe Carl­son

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.

AP PHOTO

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