Glaxo to Settle Avandia, Other Federal Drug Marketing Investigations

GlaxoSmithKline has agreed to pay $3 billion to resolve federal investigations into the marketing of some of its drugs, including the controversial type 2 diabetes drug, <"">Avandia. According to a report from Bloomberg News, the agreement with the U.S. Department of Justice would constitute Glaxo’s biggest legal settlement so far. Negotiations to finalize the Glaxo settlement should be completed next year.

“This news essentially draws a line under a 10-year legal saga,” Gbola Amusa, an analyst at UBS AG in London who recommends buying Glaxo shares, told Bloomberg in an e-mail. “This removes significant uncertainty on ongoing legal issues.”

According to a report from The Wall Street Journal, the Glaxo settlement relates in part to an eight-year-old probe into the company’s marketing of several top-selling drugs, including the antidepressants Paxil and Wellbutrin, between 1997 and 2004. The settlement also resolves a Justice Department investigation into the development and marketing of Avandia. According to The New York Times, Glaxo whistle-blowers and federal prosecutors said the company had paid doctors and manipulated medical research to promote the drug. In addition, the $3 billion covers a Justice Department investigation into whether Glaxo manipulated Medicaid rules to squeeze more money out of the state-financed program, which provides health care for low-income Americans, the Journal said.

According to a Bloomberg, Glaxo has also reportedly paid $250 million to resolve about 5,500 claims related to Avandia heart attack and stroke lawsuits.

Since November 2007, Avandia’s U.S. label has included a black box warning detailing its association with heart attacks. The black box was added after Dr. Steven Nissen of the Cleveland Clinic published a study showing that patients taking Avandia had a 40 percent increase in the risk of cardiovascular disease. Since 2007, more evidence of Avandia’s heart risks has accumulated. Last year, the U.S. Food & Drug Administration (FDA) placed severe restrictions on sales of Avandia, after determining its heart risks outweighed its benefits.

While the federal settlement will rank the largest yet in a wave of federal cases against pharmaceutical companies accused of illegal marketing, activists indicated to The New York Times that drug makers consider such penalties as nothing more than the cost of doing business.

“Although $3 billion is a very big number in terms of drug industry settlements, it’s not a very big number in relation to almost $50 billion in annual revenue for the world’s fourth-largest pharmaceutical company,” Frances H. Miller, a Boston University law professor and health policy expert, said

“Who at Glaxo is going to jail as a part of this settlement? Who in management is being excluded from doing future business with the U.S. government?” asked Patrick Burns, spokesman for Taxpayers Against Fraud, an advocacy group for whistle-blowers, according to the Times.

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