Glaxosmithkline $3 bn Settlement

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Case Details:

Case Code : BECG126
Case Length : 21 Pages
Period : 1998-2012
Organization : GlaxoSmithKline
Pub Date : 2013
Teaching Note :Available
Countries : US
Industry : Pharmaceutical Industry

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Introduction Contd...

The GSK case was not the first time that the US government had cracked down on pharmaceutical companies for marketing medicines for unapproved uses. Since 2009, the Federal government had collected more than $11 billion from such settlements under the False Claims Act.11 However, the multi-billion dollar fine levied on GSK was unprecedented in both size and scope and was the largest fine to have been levied in the past 10 years. According to the Pharma industry newsletter, published by FiercePharma,12 the settlement was listed first among the top 11 marketing settlements by the pharmaceutical industry over the past ten years and was the largest fine ever paid by a drug company.13

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Though GSK settled the civil liabilities against its drugs - Paxil, Wellbutrin, and Avandia, and agreed to a five-year Corporate Integrity Agreement14 (CIA) with the health department of the US government, questions were raised about the efficacy of fines and the corporate integrity agreement in deterring corporate behavior of pharmaceutical companies. According to the US health department, the CIA agreement with GSK required enhanced compliance activities within the company for 5 years and the firm had to report to an independent monitor under the US government.

Kevin Outterson (Outterson), professor, Health Law, at Boston University and editor-in-chief of the Journal of Law, Medicine and Ethics, in an editorial published in September 2012 in the New England Journal of Medicine, argued that imposing penalties just on the company would not work and would not help in curtailing criminal behavior as giant companies might view fines as merely the cost of doing business.15 At times, these fines could be a quite a small percentage of their global revenue. According to IMS Health, a data group firm, the three drugs Avandia, Paxil, and Wellbutrin had made $10.4 billion, $11.6 billion, and $5.9 billion respectively in sales, during the period 1999-201016 . Outterson believed that imposing penalties on corporate executive and punishing them could only be a partial solution in deterring corporate misbehavior. Patrick Burns (Burns), the communication director for Taxpayers Against Fraud, a non-profit public interest organization, commented that recovering the money was a positive step, but, little had been done in combating fraud and the industry's top executives were not punished for the fraud committed.17 Taxpayers Against Fraud felt that a large fine might not deter the drug companies from indulging in unlawful behavior; only punitive measures against individual executives could.

Excerpts- Next Page>>

11] Kevin Outterson.J.D., "Punishing Healthcare Fraud - is the GSK Settlement Sufficient?," The New England Journal of Medicine, September 20, 2012
12] FiercePharma is a pharmaceutical industry's daily monitor website which provides Pharma industry news and market development of FDA approved products
13] Tracy Staton and Eric Palmer, "Pharma's Top 11 Marketing Settlements,", June 26, 2012
14] A Corporate Integrity Agreement (CIA) is a document that outlines an agreement, an entity enters into with the Office of Inspector General (OIG) of the United States Department of Health and Human Services (HHS) to promote compliance with the statutes, regulations, and written directives of Federal healthcare programs and statutes, regulations, and written directives of the Food and Drug Administration.
15] Kevin Outterson.J.D., "Punishing Healthcare Fraud - is the GSK Settlement Sufficient?," The New England Journal of Medicine, September 20, 2012
16] Katie Thomas and Michaels.Schmidt, "Glaxo agrees to Pay $3Billion in Fraud Settlement,", July 2, 2012.
17] Pierre Thomas and JackDate, "Pharmaceutical Giant GSK to Pay $3B in Largest-Ever Healthcare Fraud Case,", July2, 2012


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