Drugmaker coughs up record $3.7b settlement in fraud case
Drugmaker GlaxoSmithKline has agreed to plead guilty to misdemeanour criminal charges and pay US$3 billion (NZ$3.7b) to settle what government officials describe as the largest case of healthcare fraud in US history.
The agreement, which still needs court approval, would resolve allegations that the British drugmaker broke US laws in the marketing and development of pharmaceuticals.
GSK targeted the antidepressant Paxil to patients under the age of 18 when it was approved for adults only, and it pushed the drug Wel- lbutrin for uses it was not approved for, including weight loss and treatment of sexual dysfunction, according to an investigation led by the US Justice Department.
The company went to extreme lengths to promote the drugs, such as distributing a misleading medical journal article and providing doctors with meals and spa treatments that amounted to illegal kickbacks, prosecutors said.
In a third instance, GSK failed to give the US Food and Drug Administration safety data about its diabetes drug Avandia, in violation of US law, prosecutors said.
The misconduct continued for years beginning in the late 1990s and continued, in the case of Avandia’s safety data, through 2007. GSK agreed to plead guilty to three misdemeanour criminal counts, one each related to the three drugs.
Guilty pleas in cases of alleged corporate misconduct are exceedingly rare, making GSK’s agreement especially unusual.
The agreement to settle the charges ‘‘is unprecedented in both size and scope,’’ said James Cole, the No 2 official at the US Justice Department. He called the action ‘‘historic’’ and ‘‘a clear warning to any company that chooses to break the law’’.
The settlement includes US$1b in criminal fines and US$2b in civil fines.
GSK said it would pay the fines through existing cash resources. The company announced a US$3b charge in November related to legal claims.
Chief executive Andrew Witty said the misconduct originated ‘‘in a different era for the company’’ and would not be tolerated.
‘‘I want to express our regret and reiterate that we have learnt from the mistakes that were made,’’ he said.
The GSK settlement surpasses what had been the largest criminal case involving a drugmaker in US history. In 2009, Pfizer Inc agreed to pay US$2.3b billion to settle allegations it improperly marketed 13 drugs.
The cases follow a trend of US authorities cracking down on how pharmaceuticals are sold, in part because of the rising cost of providing drugs through government programmes.
Part of civil fines address allegations that, from 1994 to 2003, GSK underpaid money owed to Medicaid, the healthcare programme for the poor run jointly by states and the US government.
The company had an obligation to tell the government its ‘‘best prices’’ but failed to do so, prosecutors said, and US$300 million of the settlement will go to states and other public health authorities.
A portion of the US$2b in civil fines may go to a group of whistleblowers who contributed to the government’s investigation and who are eligible to share in the recovery under the False Claims Act.
Cole said the amount had not been determined.
Witty said GSK’s US unit had ‘‘fundamentally changed our procedures for compliance, marketing and selling’’.
‘‘When necessary, we have removed employees who have engaged in misconduct.’’