GSK admits to fraud in the US, pays $3 bn in penalty

Bangalore: British pharmaceutical giant GlaxoSmithKline (GSK), which was facing civil and criminal liabilities in the US for unlawful promotion of certain prescription drugs and failure to report certain safety data, and for alleged false price reporting practices between 1997 and 2004, has agreed to pay $3 billion to resolve the issues. The US Justice Department announced that the resolution is the largest healthcare fraud settlement in the history of the US and the largest payment ever made by a drug company.

GSK agreed to plead guilty on three counts, including introducing misbranded drugs Paxil and Wellbutrin into interstate commerce and failing to report safety data about the drug Avandia to the US Food and Drug Administration (FDA). Under the terms of the agreement, GSK will pay a total of $1 billion, including a fine of over $956 million and forfeiture in the amount of over $43 million. The criminal plea agreement also includes certain non-monetary compliance commitments and certifications by GSK's US president and board of directors. GSK's guilty plea and sentence is not final until accepted by the US district court.

GSK will also pay $2 billion to resolve its civil liabilities with the federal government under the False Claims Act as well as the states. The civil settlement resolves claims relating to Paxil, Wellbutrin, Avandia and other drugs, and also resolves pricing fraud allegations.

"Today's multi-billion dollar settlement is unprecedented in both size and scope. It underscores the administration's firm commitment to protecting the American people and holding accountable those who commit health care fraud," said r James M Cole, deputy attorney general, Department of Justice, US. "At every level, we are determined to stop practices that jeopardize patients' health, harm taxpayers, and violate the public trust - and this historic action is a clear warning to any company that chooses to break the law."

Reacting to the developments, Mr Andrew Witty, CEO, GSK, said, "This brings to resolution difficult, long-standing matters for GSK. Whilst these originate in a different era for the company, they cannot and will not be ignored. On behalf of GSK, I want to express our regret and reiterate that we have learned from the mistakes that were made. We are deeply committed to doing everything we can to live up to and exceed the expectations of those we work with and serve. Since I became the CEO, we have had a clear priority to ingrain a culture of putting patients first, acting transparently, respecting people inside and outside the organization and displaying integrity in everything we do."

Mr Bill Corr, deputy secretary of the Department of Health and Human Services (HHS), commented that this "historic settlement is a major milestone in efforts to stamp out healthcare fraud". "For a long time, our healthcare system had been a target for cheaters who thought they could make an easy profit at the expense of public safety, taxpayers, and the millions of Americans who depend on programs like Medicare and Medicaid. But thanks to strong enforcement actions, such as those we have announced today, that equation is rapidly changing," he said.

This resolution marks the culmination of an extensive investigation by special agents of the HHS-OIG, FDA and FBI, along with law enforcement partners from the federal government. Moving forward, GSK will be subject to stringent requirements under its corporate integrity agreement with the HHS-OIG. The agreement is designed to increase accountability and transparency and prevent future fraud and abuse. Effective law enforcement partnerships and fraud prevention are hallmarks of the Healthcare Fraud Prevention and Enforcement Action Team (HEAT) initiative, which fosters government collaboration to fight fraud.

Mr Witty further said action has been taken at all levels in the company in the US. "We have fundamentally changed our procedures for compliance, marketing and selling. When necessary, we have removed employees who have engaged in misconduct. In the last two years, we have reformed the basis on which we pay our sales representatives and we have enhanced our ability to ‘claw back' remuneration of our senior management. We have a vital role to play in bringing innovative medicines to patients and we understand how important it is that our medicines are appropriately promoted to healthcare professionals and that we adhere to the standards rightly expected by the US Government," he said.

Trouble began for GSK in 2004

In 2004, GSK became aware that the US Department of Justice was investigating sales and promotional practices of the company between January 1997 and 2004 for nine products (Advair, Flovent, Imitrex, Lamictal, Lotronex, Paxil, Valtrex, Wellbutrin, and Zofran). The investigation of Advair was later extended to June 2010. GSK was also informed in 2004 that the US Department of Justice was investigating certain nominal pricing and alleged bundled sale arrangements under the nominal price exception to the best price reporting requirements of the Medicaid Drug Rebate Program.

The Department of Justice also investigated the company's marketing and regulatory submissions of Avandia, including GSK's reporting of required information to the US Food and Drug Administration, about post-marketing studies being performed by, or on behalf of, GSK, for Avandia.
GSK entered into a final agreement in November 2011 after cooperating with the Department of Justice in these investigations, and announced that GSK had reached an agreement in principle with the US government to conclude these investigations. The final settlement has now been completed.

The company reached this settlement with the government to avoid the delay, expense, inconvenience and uncertainty of protracted litigation of the government's claims and to put behind us these long-standing investigations of what was, for the most part, very old conduct.
As part of a final agreement, GSK will pay $3 billion to resolve civil and criminal liabilities resulting from these investigations, and the company has also entered into a corporate integrity agreement (CIA), with the US government. The CIA also covers obligations that the company has agreed upon for settling the federal government's investigation of its former manufacturing facility at Cidra, Puerto Rico.