In the largest settlement involving a pharmaceutical company, the British drugmaker GlaxoSmithKline agreed to plead guilty to criminal charges and pay $3 billion in fines for promoting its best-selling antidepressants for unapproved uses and failing to report safety data about a top diabetes drug, federal prosecutors announced Monday. The agreement also includes civil penalties for improper marketing of a half-dozen other drugs.
The fine against GlaxoSmithKline over Paxil, Wellbutrin, Avandia and the other drugs makes this year a record for money recovered by the federal government under its so-called whistle-blower law, according to a group that tracks such numbers.
In May, Abbott Laboratories settled for $1.6 billion over its marketing of the antiseizure drug Depakote. And an agreement with Johnson & Johnson that could result in a fine of as much as $2 billion is said to be imminent over its off-label promotion of an antipsychotic drug, Risperdal.
No individuals have been charged in any of the cases. Even so, the Justice Department contends the prosecutions are well worth the effort — reaping more than $15 in recoveries for every $1 it spends, by one estimate.
Continue reading the main storyBut critics argue that even large fines are not enough to deter drug companies from unlawful behavior. Only when prosecutors single out individual executives for punishment, they say, will practices begin to change.
“What we’re learning is that money doesn’t deter corporate malfeasance,” said Eliot Spitzer, who, as New York’s attorney general, sued GlaxoSmithKline in 2004 over similar accusations involving Paxil. “The only thing that will work in my view is C.E.O.’s and officials being forced to resign and individual culpability being enforced.”
The federal whistle-blower law, officially the False Claims Act, dates to 1863 and was originally envisioned as a check on war profiteering after the Civil War.
Whistle-blowers get a share of any money recovered by the federal government. So far, according to Patrick Burns, spokesman for the whistle-blower advocacy group Taxpayers Against Fraud, at least $10 billion has been agreed to in settlements this fiscal year, which ends in September.
The settlement, which requires court approval, stems from claims made by four employees of GlaxoSmithKline, including a former senior marketing development manager for the company and a regional vice president, who tipped off the government about a range of improper practices from the late 1990s to the mid-2000s.
Prosecutors said the company had tried to win over doctors by paying for trips to Jamaica and Bermuda, as well as spa treatments and hunting excursions. In the case of Paxil, prosecutors claim GlaxoSmithKline employed several tactics aimed at promoting the use of the drug in children, including helping to publish a medical journal article that misreported data from a clinical trial.
A warning was later added to the drug that Paxil, like other antidepressants, might increase the risk of suicidal thoughts in teenagers. Prosecutors said the company had marketed Wellbutrin for conditions like weight loss and sexual dysfunction when it was approved only to treat major depressive disorder.
They said that in the case of Avandia, whose use was severely restricted in 2010 after it was linked to heart risks, the company had failed to report data from studies detailing the safety risks to the F.D.A.
“Today’s multibillion-dollar settlement is unprecedented in both size and scope,” said James M. Cole, the deputy attorney general. “It underscores the administration’s firm commitment to protecting the American people and holding accountable those who commit health care fraud.”
The initial terms of the settlement were announced in November, and Glaxo had already set aside cash for the settlement. In a statement Monday, the company said it has since changed many of its policies, including no longer rewarding sales representatives for the number of drug prescriptions sold.
Andrew Witty, the chief executive, sought to portray the illegal actions as part of the company’s past.
“Whilst these originate in a different era for the company, they cannot and will not be ignored,” he said in the statement. “On behalf of GSK, I want to express our regret and reiterate that we have learned from the mistakes that were made.”
The three criminal charges involved Paxil, Wellbutrin and Avandia and included a criminal fine of $1 billion. The remaining $2 billion involves fines in connection with a civil settlement over the sales and marketing practices of the blockbuster asthma drug Advair and several other drugs.
Part of the civil settlement also includes claims that the company overcharged the government for drugs. Glaxo did not admit any wrongdoing in the civil settlement.
Despite the large amount, $3 billion represents only a portion of what Glaxo made on the drugs. Avandia, for example, racked up $10.4 billion in sales, Paxil brought in $11.6 billion, and Wellbutrin sales were $5.9 billion during the years covered by the settlement, according to IMS Health, a data group that consults for drugmakers.
“So a $3 billion settlement for half a dozen drugs over 10 years can be rationalized as the cost of doing business,” Mr. Burns said.
Mr. Burns and others have said that to institute real change, executives must be prosecuted criminally or barred from participating in the Medicare and Medicaid programs, an action known as “exclusion.”
This has occurred in only a handful of cases, and rarely in a case involving a major pharmaceutical company. In 2011, four executives of the medical device company Synthes were sentenced to less than a year in prison for conducting clinical trials that were not authorized by the Food and Drug Administration.
That same year, the former chief executive of K.V. Pharmaceutical was sentenced to 30 days in jail and fined $1 million for selling misbranded morphine tablets. The previous year, the Department of Health and Human Services excluded him from doing business with the federal government.
Those in the pharmaceutical industry have stressed that the activities revealed in the recent settlements occurred many years ago, and practices have changed radically since then. The Glaxo settlement includes an agreement by the company to withdraw bonuses from top executives if they engaged in or supervised illegal behavior, believed to be a first.
“That creates pressure and it creates an element of responsibility,” said Erika Kelton, who represented two of the four whistle-blowers in the Glaxo case. “I think it’s a good step in the right direction.”
An article on Tuesday about a fine levied on the British drug maker GlaxoSmithKline for illegal marketing of some of its drugs misstated the use of Depakote, an Abbott Laboratories drug involved in a similar case. It is an antiseizure drug, not an antipsychotic.
264 Comments
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Brett
Houston July 2, 2012Why no jail time for anyone? Big Pharma is increasingly looking like Wall Street, where obvious criminality isn't punished but fined. Since the executives who make these decisions see no repercussions (aside from job loss in some cases), what is to deter them from doing them again? If the company pays the fine, why do the executives care? It's heads they win (bonuses for increased sales until caught), tails the company loses (once caught, must pay large fine for criminal mischief).
andy geller
new york, ny July 2, 2012So this is all in GlaxoSmithKline's past? What made them change? A visit from the tooth fairy? Empty words. They did because they thought they could make money and get away with it.
anonymous
U.S.A. July 2, 2012Pharmaceutical companies are far from perfect. However, because of big pharma, conditions like AIDS, rheumatoid arthritis, asthma -- and yes, depression -- no longer need be debilitating. Those who would like to see pharma crippled by judgments like these better have some good ideas about how drug discovery is to be financed. I too would like to see drug discovery conducted free of corporate interests, but unless taxpayers are willing to pick up the tab, pharma remains the best hope for many sick patients.
timesreader
Roslyn Heights, NY July 2, 2012Who ultimately pays these fines anyway? We do in the form of higher drug prices and insurance costs when the fines are passed along as their cost of doing business. That's probably why the fines do not create a disincentive to engage in these practices. There's no downside for the company.
The brand name pharmaceutical manufacturers are essentially monopolies or oligopolies. They have patent protections on their products and limted if any competitiors for each product so they can pass their costs along to the consumer of these products at will.
If the losses from fines are so severe that the company will be bankrupted in the short run, another pharmaceutical company will buy them to acquire the patents.
A good reason why health should not be for-profit and why criminal rather than civil penalties might be more of a deterrent.
DanDeMan
Mtn. view, CA July 2, 2012Until corporate executives are prosecuted for such crimes and are sentenced to hard-time in prison (no Federal Country Clubs,) this sort of fraud, which is also detrimental to patients' health (another more egregious crime,) will continue. If corporations are people, then let's execute them by pulling their corporate charters when they act in egregious ways.. There are several large Wall Street banks that should have been given the "corporate death sentence" long ago, as well as a few pharmaceutical companies. The executives of these companies just see this as CDB, Cost of Doing Business. Let the punishment fit the crime.
Michael
is a trusted commenter Los Angeles July 2, 2012Marketing prescription drugs is a huge business. The occasional billion dollar fine is outweighed by more billions in sales.
People want cheap drugs that are completely effective and safe. When the FDA does its job diligently, people, not just the drug companies, their lobbyists, and the elected officials beholden to them for campaign contributions, complain that it is keeping miracle drugs off the market. Then there is a scandal and the same people complain the FDA is not doing its job.
mkass
Los Angeles July 2, 2012If the company set aside this much money for the fine, it is too low. This means they have just considered this fine as part of their cost of doing business. This criminal activity needs to be viewed just the way organized crime is viewed and GSK needs to be taken down under RICO. The company's profits and assets should be subject to seizure and the principals involved should face mandatory jail time. What is being missed in this whole picture is the damage done to society by the dangerous and addicting drugs this company has pushed (yes that word is used intentionally) on society. That damage far exceeds this paltry fine.
Arnoldo Fiedotin
Atlanta, GA July 2, 2012But why is it that no executive ever serves jail time on a CRIMINAL conviction? Company fines are paid by the stockholders, which are innocent bystanders. Fines,however large, are usually nothing but pocket change(not in this case) and do not serve as deterrent. Companies most of the time do risk evaluations of which course is less expensive, and oftentimes accept he risk of a fine despite the damage to society their actions may produce.
jta
brooklyn, ny July 2, 2012And yet, investors will refuse to divest. The executive suite will still get their bonuses. Doctors will continue to prescribe. And the public will continue to take GSK products.
Welcome to BIG PHARMA.
aek
New England July 2, 2012I've been reading the DOJ documents, including the plea agreement. Among the evidence, I've found:
Over 43 million dollars worth of missing misbranded Paxil and Wellbutrin. It's unknown whether patients already took these medications.
There will be no enforcement of the 5 year limited agreement for GSK to follow its stated policies and procedures.
The DOJ agrees not to criminally prosecute.
The FDA was a victim.
There is no provision for identifying, notifying and helping harmed patients/victims.
GSK identified and went after "targets" of all kinds: academic institutions (Harvard, Rockefeller U and Columbia are on the 1st tier, I'm sure they're happy to read;, "thought leaders" - physicians who contracted to do the illegal offlabel marketing - and many are named in the evidence; peer reviewed journals - again by tiers of influence - JAMA and the NEJM are up there along with Science and Nature; likely prescribers - those physicians who adamantly deny that they EVER could be influenced by pharma marketing - heh; and patients of all ages - who were getting the DTC advertising via TV, women's magazines, their doctors' offices and all over the internet.
Ask yourself if you are a target - find out directly from the horse's mouth.
http://www.justice.gov/opa/gsk-docs.html
Cathymc27
East Meadow, NY July 2, 2012I am always concerned when I see drug company reps in a doctor's office.
I wonder if they are prescribing a certain drug because they are getting kickbacks in some form. When I noticed my son's psychiatrist's office being populated with these sales reps, it made me take notice.
And
NY July 2, 2012Sorry but that is not because of big pharma industry... this is because of academic research, goverment supported. That's what bring the major discoveries. Pharma companies just want the profit of it.
Jerry Joyner
Kansas City July 2, 2012Is no one responsible? There must be something more than just paying the fine and repenting?
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