News

GSK set aside $3.4bn in last quarter of 2010 to cover legal costs

BMJ 2011; 342 doi: http://dx.doi.org/10.1136/bmj.d488 (Published 24 January 2011) Cite this as: BMJ 2011;342:d488
  1. Janice Hopkins Tanne
  1. 1New York

GlaxoSmithKline has set aside $3.4bn (£2.1bn; €2.5bn) to cover legal costs in the fourth quarter of last year. That amount wipes out the company’s profit for the fourth quarter, the news agency Reuters has reported. However, a GSK spokeswoman said that she could not give sales projections as they would be reported on 3 February.

In July the company set aside $2.36bn to cover costs related to product liability cases settled or received at that time and other problems, bringing the company’s legal costs for the year to $5.8bn.

The costs are related to litigation over its antidiabetes drug rosiglitazone (marketed as Avandia); the company’s sales and promotion practices concerning several drugs, including paroxetine (Paxil) and bupropion (Wellbutrin); and practices at a former manufacturing plant in Puerto Rico.

A GSK spokeswoman told the BMJ that the Puerto Rico issues dated back to 2002 and concerned a plant owned by a related company, SB Pharmco. This company operated a plant that was found to be inconsistent with good manufacturing practices. GSK closed the plant in 2009.

GSK faces about 13 000 lawsuits over rosiglitazone in the United States. The drug has been associated with an increased risk of heart attacks. The lawsuits go back several years, and some are still being filed.

Rosiglitazone was taken off the European market by drug regulators in September 2010 (BMJ 2010;341:c5291, doi:10.1136/bmj.c5291). In the US the Food and Drug Administration placed strong restrictions on its use, and sales of the drug have been falling.

Since then GSK has been facing more product liability cases over rosiglitazone in the US. In a statement the company said, “The number of new claims received is substantial, and the group has now completed its assessment of these additional cases and estimate of likely future claims.” It said that there was a possibility that legal costs might “exceed the amount of the provisions [funds set aside previously to take care of claims] . . . by a material amount.”

Elpidio (“PD”) Villareal, GSK’s senior vice president for global litigation, said in a statement, “We recognise that this [the $3.4bn] is a significant charge, but we believe the approach we are taking to resolve longstanding legal matters is in the company’s best interests. We have closed out a number of major cases over the last year, and we remain determined to do all we can to reduce our litigation risk.”

Notes

Cite this as: BMJ 2011;342:d488