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Largest health fraud: Glaxo pays $3 bn

GlaxoSmithKline Plc has agreed to plead guilty to misdemeanour criminal charges.

Written by Reuters | Washington | Published: July 3, 2012 1:21:45 am

GlaxoSmithKline Plc has agreed to plead guilty to misdemeanour criminal charges and pay $3 billion to settle what government officials said on Monday is the largest case of healthcare fraud in US history.

The agreement,which still needs court approval,would resolve allegations that the UK drugmaker broke US laws in marketing of several pharmaceuticals.

GSK targeted the antidepressant Paxil to patients under age 18 when it was approved for adults only,and it pushed the drug Wellbutrin for uses it was not approved for,including weight loss and treatment of sexual dysfunction,according to an investigation led by the US Justice Department.

The company went to extreme lengths to promote the drugs,such as distributing a misleading medical journal article and providing doctors with meals and spa treatments that amounted to illegal kickbacks,prosecutors said.

In a third instance,GSK failed to give the US Food and Drug Administration safety data about its diabetes drug Avandia,in violation of US law,prosecutors said.

The misconduct continued for years beginning in the late 1990s and continued,in the case of Avandia’s safety data,through 2007. GSK agreed to plead guilty to three misdemeanour criminal counts,one each related to the three drugs.

The agreement to settle the charges is unprecedented in both size and scope,said James Cole,the No. 2 official at the US Justice Department. He called the action historic and a clear warning to any company that chooses to break the law.

The settlement marks the largest payment ever by a drug company,eclipsing the previous record of $2.3 billion set by Pfizer in 2009,the government said.

The settlement includes $1 billion in criminal fines and $2 billion in civil fines.

Part of civil fines address allegations that,from 1994 to 2003,GSK underpaid money owed to Medicaid,the healthcare program for the poor run jointly by states and the federal government. The company had an obligation to tell the government its best prices but failed to do so,prosecutors said,and $300 million of the settlement will go to states and other public health authorities.

Also as part of the settlement,GlaxoSmithKline agreed to strict oversight of its sales force by the US government to prevent the use of kickbacks or other prohibited practices. GSK said in a statement it would pay the fines through existing cash resources. The company announced a $3 billion charge in November related to legal claims.

Chief Executive Andrew Witty said GSK’s US unit has fundamentally changed our procedures for compliance,marketing and selling. “When necessary,we have removed employees who have engaged in misconduct.”

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