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GlaxoSmithKline Will Pay $3 Billion in Fraud Settlement; Largest Ever

In the largest ever health-care fraud settlement, GlaxoSmithKline has agreed to plead guilty to criminal charges and pay $3 billion in fines for wrongly promoting prescription drugs and not properly reporting important clinical data.

More specifically, Glaxo is pleading guilty to three misdemeanor charges. It is pleading guilty to marketing the anti-depressant Paxil towards children and Wellbutrin as a weight-loss aid, neither ways ever being approved by the FDA. Promoting uses for a drug that have not been approved by the FDA is illegal and is known as off-label marketing.

The other charges are for not reporting important clinical data on Avandia, a drug used in the treatment of diabetics, between 2001 and 2007.

The three misdemeanor charges included a criminal fine of $1 billion for the drugs Paxil, Wellbutrin and Avandia. The remaining $2 billion is connected to the way sales and marketing practices of several drugs, including the asthma drug Advair, were conducted.

A possible positive outcome from the lawsuit it that GlaxoSmithKline has reached a 5-year compliance agreement with the Department of Health and Human Services. Under the agreement, company executives would forfeit annual bonuses if they or their subordinates abuse the way they conduct the sales of their products. Another part of the agreement is that the agents will be paid based on the quality of service they provide rather than how much they make in sales.

“On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made,” CEO Andrew Witty said in a statement, referring to the agreement with the Department of Health and Human Services.

Despite this settlement being the largest in the health care industry, the amount they are paying out is only a small percentage of how much they earned in sales. According to IMS Health, a consultation data group for drug makers, Glaxo made $27.9 billion in sales from Avandia, Paxil and Wellbutrin.

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July 5th, 2012

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