Microsoft word - 2012-07-02 glaxo agrees to pay $3 billion in fraud

Glaxo Agrees to Pay $3 Billion in Fraud Settlement
By nd The New York Times -- Published: July 2, 2012
In the largest settlement involving a pharmaceutical company, the British drugmaker greed to plead guiltyto criminal charges and pay $3 bil ion in fines for promoting its best-sel ing antidepressants for unapproved uses and failingto report safety data about a top diabetes drug, federal prosecutors announced Monday. The agreement also includes civilpenalties for improper marketing of a half-dozen other drugs.
The fine against GlaxoSmithKline over Wel butrin, and the other drugs makes this year a record for moneyrecovered by the federal government under its so-cal ed whistle-blower law, according to a group that tracks such numbers.
In May, Abbott Laboratories settled for $1.6 bil ion over its marketing of the antipsychotic drug Depakote. And an agreementwith Johnson & Johnson that could result in a fine of as much as $2 bil ion is said to be imminent over its of -label promotionof another antipsychotic drug, Risperdal.
No individuals have been charged in any of the cases. Even so, the Justice Department contends the prosecutions are welworth the ef ort — reaping more than $15 in recoveries for every $1 it spends, by one estimate.
But critics argue that even large fines are not enough to deter drug companies from unlawful behavior. Only whenprosecutors single out individual executives for punishment, they say, wil practices begin to change.
“What we’re learning is that money doesn’t deter corporate malfeasance,” said Eliot Spitzer, who, as New York’s attorneygeneral, sued GlaxoSmithKline in 2004 over similar accusations involving Paxil. “The only thing that wil work in my view isC.E.O.’s and officials being forced to resign and individual culpability being enforced.” The federal whistle-blower law, official y the False Claims Act, dates to 1863 and was original y envisioned as a check onwar profiteering after the Whistle-blowers get a share of any money recovered by the federal government. So far, according to Patrick Burns,spokesman for the whistle-blower advocacy group Taxpayers Against Fraud, at least $10 bil ion has been agreed to insettlements this fiscal year, which ends in September.
The set lement, which requires court approval, stems from claims made by four employees of GlaxoSmithKline, including aformer senior marketing development manager for the company and a regional vice president, who tipped of thegovernment about a range of improper practices from the late 1990s to the mid-2000s.
Prosecutors said the company had tried to win over doctors by paying for trips to Jamaica and Bermuda, as wel as spatreatments and hunting excursions. In the case of Paxil, prosecutors claim GlaxoSmithKline employed several tactics aimedat promoting the use of the drug in children, including helping to publish a medical journal article that misreported data froma clinical trial.
A warning was later added to the drug that Paxil, like other antidepressants, might increase the risk of suicidal thoughts inteenagers. Prosecutors said the company had marketed Wel butrin for conditions like weight loss and sexual dysfunctionwhen it was approved only to treat major depressive disorder.
They said that in the case of Avandia, whose use was severely restricted in 2010 after it was linked to heart risks, thecompany had failed to report data from studies detailing the safety risks to the “Today’s multibil ion-dol ar settlement is unprecedented in both size and scope,” said James M. Cole, the deputy attorneygeneral. “It underscores the administration’s firm commitment to protecting the American people and holding accountablethose who commit health care fraud.” The initial terms of the settlement were announced in November, and Glaxo had already set aside cash for the settlement.
In a statement Monday, the company said it has since changed many of its policies, including no longer rewarding salesrepresentatives for the number of drug prescriptions sold.
Andrew Witty, the chief executive, sought to portray the il egal actions as part of the company’s past.
“Whilst these originate in a different era for the company, they cannot and wil not be ignored,” he said in the statement. “Onbehalf of GSK, I want to express our regret and reiterate that we have learned from the mistakes that were made.” The three criminal charges involved Paxil, Wel butrin and Avandia and included a criminal fine of $1 bil ion. The remaining$2 bil ion involves fines in connection with a civil settlement over the sales and marketing practices of the blockbusterasthma drug Advair and several other drugs.
Part of the civil settlement also includes claims that the company overcharged the government for drugs. Glaxo did notadmit any wrongdoing in the civil settlement.
Despite the large amount, $3 bil ion represents only a portion of what Glaxo made on the drugs. Avandia, for example,racked up $10.4 bil ion in sales, Paxil brought in $11.6 bil ion, and Wel butrin sales were $5.9 bil ion during the yearscovered by the settlement, according to IMS Health, a data group that consults for drugmakers.
“So a $3 bil ion settlement for half a dozen drugs over 10 years can be rationalized as the cost of doing business,” Mr. Burnssaid.
Mr. Burns and others have said that to institute real change, executives must be prosecuted criminal y or barred fromparticipating in the nd rograms, an action known as “exclusion.” This has occurred in only a handful of cases, and rarely in a case involving a major pharmaceutical company. In 2011, fourexecutives of the medical device company Synthes were sentenced to less than a year in prison for conducting clinical trialsthat were not authorized by the Food and Drug Administration.
That same year, the former chief executive of K.V. Pharmaceutical was sentenced to 30 days in jail and fined $1 mil ion forsel ing misbranded morphine tablets. The previous year, the Department of Health and Human Services excluded him fromdoing business with the federal government.
Those in the pharmaceutical industry have stressed that the activities revealed in the recent set lements occurred manyyears ago, and practices have changed radical y since then. The Glaxo settlement includes an agreement by the companyto withdraw bonuses from top executives if they engaged in or supervised il egal behavior, believed to be a first.
“That creates pressure and it creates an element of responsibility,” said Erika Kelton, who represented two of the fourwhistle-blowers in the Glaxo case. “I think it’s a good step in the right direction.”

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