July 2 (Bloomberg) -- GlaxoSmithKline Plc agreed to plead guilty and pay $3 billion to resolve criminal and civil allegations that it illegally promoted prescription drugs and failed to report safety data, the U.S. said.
The settlement, the largest-ever in a health-care fraud case in the U.S., includes a criminal fine of $956.8 million, the Justice Department said today. London-based Glaxo will also forfeit $43 million, the U.S. said.
GSK will plead guilty to marketing the drugs Paxil and Wellbutrin for uses not approved by the U.S. Food and Drug Administration and for failing to report clinical data on Avandia, federal prosecutors said. The company has agreed to admit to the charges, which are misdemeanors, according to filings today by the U.S. in federal court in Boston.
“Today’s historic settlement is a major milestone in our efforts to stamp out health care fraud,” Bill Corr, deputy secretary of health and human services, said in a statement. “For a long time, our health care system had been a target for cheaters.”
The $3 billion total settlement surpasses the previous record, a $2.3 billion accord that Pfizer Inc. entered in 2009 over marketing of the painkiller Bextra and other drugs.
Glaxo, the U.K.’s largest drugmaker, last year set aside 2.2 billion pounds ($3.5 billion) to cover the cost of the settlement, which resolves a seven-year investigation of the company’s marketing practices for the three drugs. The reserve brought to $6.4 billion the amount the drugmaker has set aside for legal costs tied to Avandia and the other medicines.
The settlement “brings to resolution difficult, long-standing matters for GSK,” Chief Executive Officer Andrew Witty said today in a statement. “Whilst these originate in a different era for the company, they cannot and will not be ignored.”
Federal prosecutors began an investigation in Colorado in 2004, later taken over by the U.S. attorney in Massachusetts, into whether Glaxo promoted drugs for unapproved uses and into ways Glaxo potentially influenced doctors. The probe concerns nine of the company’s best-selling products from 1997 to 2004, including the Advair lung treatment, Glaxo said in its annual report.
The company doesn’t admit to any liability or wrongdoing in connection with marketing of Avandia, Advair and six other drugs, GSK said.
Today’s agreement includes a $300 million civil settlement for failing to provide best prices and underpaying rebates owed under the Medicaid drug program. GSK doesn’t admit wrongdoing on pricing practices, the company said.
Glaxo’s U.S. shares rose 79 cents to $46.36, or 1.7 percent.
The U.S. claimed that GSK failed to provide certain safety data to regulators about Avandia, a diabetes drug, from 2001 to 2007. Since 2007, the FDA has added two black-box warnings to the Avandia label to alert doctors about the potential risk of congestive heart failure and heart attack, the U.S. said.
Glaxo promoted Paxil, which is approved by the FDA for adult use, for the treatment of depression in patients under the age of 18 through sales calls, spa programs, a “false and misleading” medical journal article and “lavish weekend conferences” in Puerto Rico and Hawaii, according to a Justice Department fact sheet.
The company promoted Wellbutrin, a depression medication, for unapproved uses including weight loss, sexual dysfunction and substance abuse. Some sales representatives referred to the drug as “the happy, horny, skinny pill,” according to the fact sheet.
Under federal law, while doctors are allowed to prescribe medications for unapproved uses, drug companies are barred from promoting such sales. Promotion by a manufacturer for off-label uses renders the product “misbranded,” the U.S. said in its statement today.
The settlement includes $1.04 billion resolving civil allegations of off-label marketing of these and other drugs.
Glaxo also promoted its Advair asthma drug for first-line therapy for mild asthma patients even though it wasn’t approved or medically appropriate for these people, the DOJ said today. The settlement also resolves allegations that the company promoted Zofran, approved only for post-operative nausea, for treatment for morning sickness in pregnant women.
Glaxo will pay $832 million to the federal government and $210 million to states participating in the civil off-label marketing settlement, the U.S. said. This portion of the settlement will also resolve four whistle-blower lawsuits pending in federal court in Boston.
Two of these whistle-blowers informed Glaxo in 2001 that company personnel were marketing drugs illegally, their attorney Tavy Deming said today in a statement.
“An ensuing GSK internal investigation verified their allegations, but the company took no action, choosing hefty profits over compliance and patient safety,” she said.
The government’s investigations of allegations brought by her clients, whistleblowers Greg Thorp and Blair Hamrick, lasted nine years, Thorp said in a statement today.
“I cannot be certain, if I knew beforehand what was coming after filing this case, that I could do it again,” he said.
He was pushed out of Glaxo in 2002 and afterward was unable to get work in the pharmaceutical industry, he said. “I applied to some 23 companies without getting a single interview,” Thorp said. “Financially, my life became a nightmare.”
Thorp, Hamrick and other whistle-blowers will receive a share of the governments’ recovery, under federal and state false claims laws. The amounts of these shares haven’t been determined, said attorney Brian Kenney, who also represents whistleblowers Thorp and Hamrick.
The case is U.S. v. GlaxoSmithKline LLC, 12-10206, U.S. District court, District of Massachusetts (Boston).
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