GlaxoSmithKline is fined record $3bn in US

GlaxoSmithKline has agreed to plead guilty and pay $3bn (£2bn; €2.4bn) in penalties for unlawful promotion of prescription drugs, failure to report safety data, and false price reporting.

It also signed a 123 page corporate integrity agreement with the US Department of Justice that regulates its activity for the next five years.1

The fine is the largest on record imposed on a drug company in the United States and follows closely on the heels of another huge penalty, $1.6bn, levied on Abbott Laboratories in May for its marketing of valproic acid.2

GSK’s agreement covers several of the its leading drugs. It illegally promoted the antidepressant paroxetine for treating patients under the age of 18, even though the Food and Drug Administration never approved the drug for that age group. The company also created “misleading” journal articles claiming efficacy of paroxetine in that population, when in fact “the study failed to demonstrate efficacy,” the justice department said in its statement, and it hid trials that had negative findings.3

GSK illegally promoted bupropion for weight loss, sexual dysfunction, substance addictions, and attention-deficit/hyperactivity disorder and other off-label uses. It also used “sham advisory boards, and supposedly independent continuing medical education (CME) programs,” and lavish travel inducements to promote unauthorised uses of the drug.

The company was fined for failing to report certain data on the safety of the antidiabetes drug rosiglitazone to the FDA. That included information on cardiovascular risk obtained through post-marketing studies, including those ordered by European regulators.

It also promoted off-label use of the anti-asthma drug fluticasone, the anticonvulsant lamotrigine, and ondansetron, which is approved only for postoperative nausea. Kickbacks were paid to healthcare professionals for prescribing these and other drugs. This defrauded federal health insurance programmes such as Medicare and Medicaid.

The company reported false drug prices that “resulted in GSK’s underpaying rebates owed under the Medicaid Drug Rebate Program,” the justice department’s statement said.

Under the corporate integrity agreement GSK may no longer pay its marketing employees according to sales figures. Company executives may be held personally accountable and forced to give back bonuses and long term incentives “if they, or their subordinates, engage in significant misconduct.”

Bill Corr, deputy secretary of the Department of Health and Human Services, said in a statement, “Today’s historic settlement is a major milestone in our efforts to stamp out healthcare fraud.”

The deputy attorney general, James Cole, added, “At every level we are determined to stop practices that jeopardise patients’ health, harm taxpayers, and violate the public trust.”

Andrew Witty, GSK’s chief executive officer, said in an extended statement released by the company: “Whilst these [violations] 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 learnt from the mistakes that were made.”

He added, “In the US, we have taken action at all levels in the company. 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.”4

But Patrick Burns, a spokesman for the watchdog group Taxpayers Against Fraud, told ABC News that although recovery of the money was a positive step, little was being done on a personal level to combat widespread fraud at the top of the industry, including putting executives behind bars.

Carmin Ortiz, a US attorney in Massachusetts, said, “GSK’s sales force bribed physicians to prescribe GSK products using every imaginable form of high priced entertainment, from Hawaiian vacations to paying doctors millions of dollars to go on speaking tours to a European pheasant hunt to tickets to Madonna concerts, and this is just to name a few.”

GSK’s total sales in 2011 were $44bn and its profit $9bn. In 2010 it made a profit of $3bn.

Commenting on the size of the fine, Ana Nicholls, healthcare analyst at the Economist Intelligence Unit, said in a press statement that “it represents a sizeable slap on the wrist.”

She added, “GSK has a strong cash position, with free cash flow of $6.4bn in 2011, but it has deteriorated over the past couple of years. Moreover, the company is keen to make acquisitions (Human Genome Sciences being one), so this settlement will constrain its ambitions slightly.”

She said that that “sums involved in this settlement in particular will make it even more worth their while” to stamp out unlawful practice, “but a 2011 study claimed the practice is still rife and very difficult to stamp out. GSK has also tried to be increasingly open about its drug data—in the wake of Merck’s Vioxx [rofecoxib] scandal it vowed to publish all its data online—so the admission that it held back data in this case is damaging.”