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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Global pharmaceutical company, Glaxo1 SmithKline2 (GSK) on 02 July 2012 had agreed to pay $3 billions in fines and pleaded guilty to criminal charges for illegally promoting its best selling anti-depressants drugs for unapproved uses to Food and Drug Administration3 (FDA)4. The pharmaceutical company was also accused of overcharging the US national health care program, Medicaid5 , and for allegedly paying kickbacks to doctors who prescribed some of its drugs.Though GSK did not admit to any wrong doing in the civil settlement, according to the US Justice Department, on July 2, 2012, the pharmaceutical company had agreed to plead guilty to criminal charges for promoting its anti-depressants drugs Paxil and Wellbutrin for children and adolescents despite the drugs not being approved by the FDA.6

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The company also pleaded guilty for failing to report safety data about its top selling diabetic drug Avandia. The diabetes drug was banned in the year 2007 in Europe after it was found that its intake sharply increased the risk of having heart attacks and congestive heart failure. The drug was also restricted in the US on the same grounds.

The pharmaceutical firm pleaded guilty to three counts of criminal misdemeanor - two counts to introducing the misbranded drugs, Paxil and Wellbutrin, into interstate commerce and one count to failing to report on the safety data about the drug Avandia to the FDA. GSK agreed to pay $3 bn as fines to absolve from criminal and civil liabilities.7

The US Justice Department in its notification about the settlement, described it as the largest healthcare fraud settlement in US history.8 Briefing the press about the settlement charges, James M. Cole, deputy attorney general of the US Justice Department, Washington, said that the fine was unprecedented in both size and scope and was a clear warning to pharmaceutical companies committing healthcare frauds.9 At a press conference after the settlement, assistant attorney general, Stuart F. Delerly, said that the fine was levied not only to punish the wrong doer and recover taxpayer dollars but also to ensure GSK’s future compliance with the law. GSK CEO Sir Andrew Witty (Witty) in a press note commented that the company had learned from the mistakes that it had made.10

Introduction Contd...- Next Page>>

1] Glaxo was founded in New Zealand in 1873 by Joseph Nathan. In 1995, it took over Burrough Wellcome to form GlaxoWellcome.
2] SmithKline Beckman merged with Beecham in 1989 to form SmithKlineBeecham. Later, on 17 January, 2000, GlaxoWellcome and SmithKlineBeecham merged to form GlaxoSmithKline (GSK).
3] The FDA is the consumer protection agency in the US. FDA protects and monitors medical devices, food, drugs, vaccines, blood and biologics, animal & veterinary cosmetics, radiation-emitting products and tobacco products.
4] Linda A. Johnson, "GlaxoSmithKline to pay $3B for health fraud,", July 03, 2012
5] Medicaid is a US national healthcare program, which pays for medical services for low-income people. Medicaid is paid to providers of healthcare - doctors, hospitals and pharmacists.
6] Department of Justice, US, "GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data,", July 12, 2012.
7] Reports, "Drug gaint Glaxo pleads guilty, fined $3B for drug marketing",, July 92, 2012, accessed on November 12.
8] Chris Woollams, "Glaxo in the largest ever US drug fraud settlement,", accessed on October 29, 2012.
9] Sharise Cruz, "GalxoSmithKline Agrees to $3billion Fraud Settlement," www., July 3, 2012.
10] Jesse J.Holland, "GlaxoSmithKline to pay $3B for health fraud," Associated Press, July 2, 2012


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