GlaxoSmithKline settles health care fraud case for $3 billion

Michael P. Tremoglie Jul. 2, 2012, 1:31pm

WASHINGTON (Legal Newsline) -- GlaxoSmithKline will plead guilty and pay $3 billion in criminal and civil penalties for fraud, according to the Justice Department.

The fraud resulted from GSK's unlawful promotion of certain prescription drugs, failure to report certain safety data and for alleged false price reporting practices. The settlement is the largest payment for health care fraud in U.S. history. GSK is one of the world's leading research-based pharmaceutical and health care companies.

According to the DOJ, GSK will plead guilty to a three-count criminal indictment, including two counts of introducing misbranded drugs -- Paxil and Wellbutrin -- into interstate commerce and one count of failing to report safety data about the drug Avandia to the Food and Drug Administration. The company will pay a criminal fine of $956,814,400 and forfeiture in the amount of $43,185,600.

"Today's multi-billion dollar settlement is unprecedented in both size and scope," said James M. Cole, Deputy Attorney General. "It underscores the Administration's firm commitment to protecting the American people and holding accountable those who commit health care fraud.

"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."

Bill Corr, Deputy Secretary of the Department of Health and Human Services, agreed.

"Today's historic settlement is a major milestone in our efforts to stamp out health care fraud," Corr said. "For a long time, our health care system had been a target for cheaters who thought they could make an easy profit at the expense of public safety, taxpayers, and the millions of Americans who depend on programs like Medicare and Medicaid. But thanks to strong enforcement actions like those we have announced today, that equation is rapidly changing."

The criminal plea states that GSK unlawfully promoted Paxil for treating depression in patients under age 18 from April 1998 to August 2003 even though the FDA has never approved it for pediatric use. The government alleges that, among other things, GSK caused the publication of a misleading medical journal article that erroneously claimed that a clinical trial of Paxil demonstrated efficacy in the treatment of depression in patients under age 18, when the study failed to demonstrate efficacy.

The government also said that GSK did not make available data from two other studies in which Paxil also failed to demonstrate efficacy in treating depression in patients under 18. GSK sponsored dinner programs, lunch programs, spa programs and similar activities to promote the use of Paxil in children and adolescents. The company paid a speaker to talk to an audience of doctors and paid for the meal or spa treatment for the doctors who attended.

The federal government also alleges that, from January 1999 to December 2003, GSK promoted Wellbutrin, approved at that time only for Major Depressive Disorder, for weight loss, the treatment of sexual dysfunction, substance addictions and Attention Deficit Hyperactivity Disorder, among other off-label uses.

GSK paid millions of dollars to doctors to speak at and attend meetings, sometimes at lavish resorts, to promote the off-label uses of Wellbutrin. It also used supposedly independent Continuing Medical Education programs to promote Wellbutrin for these unapproved uses, according to the DOJ. GSK has agreed to pay a criminal fine and forfeiture of $757,387,200 for the Paxil and Wellbutrin misbranding offenses,

GSK's Avandia transgressions centered around the allegation that between 2001 and 2007 it failed to include certain safety data about Avandia, a diabetes drug, in reports to the FDA. Among the data missing were certain post-marketing studies, as well as two studies undertaken in response to European regulators' concerns about the cardiovascular safety of Avandia. GSK has agreed to plead guilty to failing to report data to the FDA and has agreed to pay a criminal fine in the amount of $242,612,800 for its unlawful conduct concerning Avandia.

"This landmark settlement demonstrates the Department's commitment to protecting the American public against illegal conduct and fraud by pharmaceutical companies," said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department's Civil Division. "Doctors need truthful, fair, balanced information when deciding whether the benefits of a drug outweigh its safety risks.

"By the same token, the FDA needs all necessary safety-related information to identify safety trends and to determine whether a drug is safe and effective. Unlawful promotion of drugs for unapproved uses and failing to report adverse drug experiences to the FDA can tip the balance of those important decisions, and the Justice Department will not tolerate attempts by those who seek to corrupt our health care system in this way."

According to Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services, "Our five-year integrity agreement with GlaxoSmithKline requires individual accountability of its board and executives.

"For example, company executives may have to forfeit annual bonuses if they or their subordinates engage in significant misconduct, and sales agents are now being paid based on quality of service rather than sales targets."

GSK CEO Sir Andrew Witty expressed in a written statement on the company's website, the company's regrets for their errors.

"Today brings to resolution difficult, long-standing matters for GSK," Witty said. "Whilst these originate in a different era for the company, they cannot and will not be ignored. On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made. We are deeply committed to doing everything we can to live up to and exceed the expectations of those we work with and serve.

"In the U.S., we have taken action at all levels in the company. We have fundamentally changed our procedures for compliance, marketing and selling. When necessary, we have removed employees who have engaged in misconduct. In the last two years, we have reformed the basis on which we pay our sales representatives and we have enhanced our ability to 'claw back' remuneration of our senior management."

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