Token Fine for GlaxoSmithKline Won't Stop BigPharma's Bad Behavior: Watchdog

Tuesday, July 3, 2012 by Common Dreams

Pharmaceutical mammoth GlaxoSmithKline (GSK) has been ordered to pay $3 billion fine in what is described as the largest case of healthcare fraud in U.S. history. But critics say it is just as a slap on the wrist as the amount "pales in comparison" to the profits pharmaceutical companies earn and does nothing to preclude such further behavior from big pharma.

GSK, which had $44 billion in sales and a net profit of nearly $9 billion in 2011, faces the fine for marketing its antidepressants Paxil and Wellbutrin for non-FDA-approved purposes, including marketing them to children, and for withholding from the FDA safety information for its diabetes drug Avandia.

Deputy U.S. Attorney General James Cole said, "At every level, we are determined to stop practices that jeopardize patients' health; harm taxpayers; and violate the public trust — and this historic action is a clear warning to any company that chooses to break the law," he said.

But Dr. Sidney Wolfe, Director of Public Citizen’s Health Research Group, states that this is in no way a "clear warning."

"The fines imposed on pharmaceutical companies for dangerous and illegal conduct pale in comparison to the profits generated from such activity. The industry is therefore tacitly encouraged to continue its illegal activity," Wolfe said in a statement.

"Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become commonplace, companies will continue defrauding the government and putting patients’ lives in danger," added Wolfe.

Economist Dean Baker notes that GSK's lying about its drugs' safety and uses was incentivized by the monopolies drug companies are allowed to have. "This is the incentive that we give to drug companies when the government grants patent monopolies that allow them to sell drugs for hundreds or even thousands of times the cost of production."

GlaxoSmithKline settles healthcare fraud case for $3 billion

By David Ingram - Reuters

WASHINGTON (Reuters) – GlaxoSmithKline Plc agreed to plead guilty to misdemeanor criminal charges and pay $3 billion to settle what government officials on Monday described as the largest case of healthcare fraud in U.S. history.

The agreement, which still needs court approval, would resolve allegations that the British drugmaker broke U.S. laws in the marketing and development of pharmaceuticals.

GSK targeted the antidepressant Paxil to patients under age 18 when it was approved for adults only, and it pushed the drug Wellbutrin for uses it was not approved for, including weight loss and treatment of sexual dysfunction (one of its side effects is sexual dysfunction), according to an investigation led by the U.S. 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 U.S. Food and Drug Administration safety data about its diabetes drug Avandia, in violation of U.S. 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 misdemeanor 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 U.S. Justice Department. He called the action “historic” and “a clear warning to any company that chooses to break the law.”

The settlement includes $1 billion in criminal fines and $2 billion in civil fines.

GSK said in a statement it would pay the fines through existing cash resources. The company announced a $3 billion charge in November related to legal claims [ID:nL5E7M315A].

NEW ‘ERA’ AT GSK

Chief Executive Officer Andrew Witty said the misconduct originated “in a different era for the company” and will not be tolerated. “I want to express our regret and reiterate that we have learnt from the mistakes that were made,” he said in a written statement.

The GSK settlement surpasses what had been the largest criminal case involving a drugmaker in U.S. history. In 2009, Pfizer Inc agreed to pay $2.3 billion to settle allegations it improperly marketed 13 drugs.

The cases follow a trend of U.S. authorities cracking down on how pharmaceuticals are sold, in part because of the rising cost of providing drugs through government programs.

Part of civil fines address allegations that, from 1994 to 2003, GSK underpaid money owed to Medicaid, the healthcare program for the poor run jointly by states and the federal government. The company had an obligation to tell the government its “best prices” but failed to do so, prosecutors said, and $300 million of the settlement will go to states and other public health authorities.

A portion of the $2 billion 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 has not been determined.

‘INTEGRITY’ PLAN

As part of the settlement, GlaxoSmithKline agreed to new restrictions by the U.S. government to prevent the use of kickbacks or other prohibited practices. The inspector general of the U.S. Department of Health and Human Services will oversee the “Corporate Integrity Agreement” for five years.

The company will not be able to compensate its salesmen based on sales goals for territories. It was also required to change its executive compensation program to allow the company to “claw back” certain pay for those engaged in misconduct.

Witty said GSK’s U.S. unit has “fundamentally changed our procedures for compliance, marketing and selling. When necessary, we have removed employees who have engaged in misconduct.”

Prosecutors have not brought criminal charges against any individuals in connection with the GSK case, although the settlement expressly leaves open that possibility. Cole declined to comment on the possibility of future charges.

Almost exactly a year ago GSK agreed to pay nearly $41 million to 37 states and the District of Columbia in an unrelated case about substandard manufacturing processes at a Puerto Rico factory.

In 2010, the company took a $2.4 billion charge in connection with Avandia to settle claims from patients.

GSK’s shares were positive on the New York Stock Exchange on Monday, up 1.6 percent to $46.29 at 1400 EDT.

The case is U.S. v. GlaxoSmithKline LLC, U.S. District Court for the District of Massachusetts, No. 12-cr-10206.

FDA Panel Doles Out Bad Medicine For Lobbying Heavyweight GlaxoSmithKline

By Andrew Kreighbaum on July 14, 2010 4:44 PM 

A 33-member advisory panel to the federal Food and Drug Administration voted today to seriously restrict the labeling and possibly the sale of the controversial diabetes drug Avandia, the New York Times reports. The FDA will consider this recommendation when it makes its final ruling at a later date.

A negative FDA ruling will likely affect the bottom line of a company that spent $8.7 million on federal lobbying in 2009 and has already spent $2.2 million in the first quarter of this year.GlaxoSmithKline, the drug's manufacturer, has much more than that at stake. It earned $1.1 billion from the drug in 2009, Fortune reports.


A 2006 article in the New England Journal of Medicine said that patients taking Avandia had a much greater risk of heart disease than patients on alternative drugs.

A ruling that pulled the drug from the market could result in more litigation against GlaxoSmithKline, Fortune reported, but the drug accounts for only 2 percent of the company's profits.

GlaxoSmithKline is a major political player in Washington and ranks seventh for lobbying expenditures among all pharmaceutical and health product companies this year.

Lobbyists for the drug-maker have lobbied both the House and Senate during the first three months of 2010, but have not reported lobbying the FDA between January and March. Reports for lobbying performed between April and June are due out next week.

Overall, more than 240 companies and groups lobbied the FDA during the first quarter.

And the pharmaceutical industry as a whole spent $69 million on lobbying during the first quarter, putting it on pace to match its record 2009 expenditures.

Glaxo ‘withheld info on diabetes drug’s heart risks’

By Agence France-Presse | Tuesday, July 13th, 2010

WASHINGTON — British pharmaceutical giant GlaxoSmithKline withheld from US drug safety regulators information about the possible dangers of top-selling diabetes drug Avandia, a report in the US press said Tuesday.

The allegation was made in the Wall Street Journal on the day that Food and Drug Administration (FDA) experts began a two-day meeting about the risks associated with Avandia and whether the drug for diabetes should be pulled from the market.

According to the Wall Street Journal, former FDA drug-safety official Rosemary Johann-Liang said in a deposition for lawsuits filed against Glaxo that the British drug company "hadn't given the FDA full information on Avandia's risks in a timely manner."

The paper said Johann-Liang quit her FDA post "after she was unable to convince her superiors about the need for stronger warnings" about Avandia.

Her accusations were included in a letter sent to the FDA by members of a Senate committee investigating Glaxo and Avandia.

Several studies have linked Avandia to an increased risk of heart attack and stroke, but a Glaxo-funded study last year came up with the opposite result.

Last year sales of Avandia, which has been on the market since 1999, were about 800 million dollars worldwide, making it one of the top-selling diabetes treatments and overall drugs.