regional medical center: GlaxoSmithKline Pleads Guilty In Fraud Case Over Failure To Report Safety Data

GlaxoSmithKline Pleads Guilty In Fraud Case Over Failure To Report Safety Data

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Main Category: Compliance
Article Date: 02 Jul 2012 - 14:00 PDT

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The British multinational GlaxoSmithKline (GSK), the world's fourth largest company, plead guilty today to fraud and agreed to payout some $3 Billion dollars to resolve criminal and civil charges against the company.

The matter relates to failure to report the safety data of certain prescription drugs, as well as false price reporting. It is the largest payout by a drug company over fraud, and the largest healthcare fraud case to date.

GlaxoSmithKline makes some of the world's most well known brands, including Sensodyne, Boost, Horlicks, and Gaviscon. While these brands are not in question, the serious matter of fraud certainly calls into question the companies practices, and may weigh heavily on shareholders who might be wondering what other skeletons the behemoth is hiding.

The prescription drug case relates to Paxil, Wellbutrin and Avandia, and GSK agreed to plead guilty to three counts of criminal information. Paxil (paroxetine) is used to treat depression, obsessive-compulsive disorder and anxiety. Wellbutrin is an atypical antidepressant and smoking cessation aid, while Avandia (Rosiglitazone) is an antidiabetic drug in the thiazolidinedione class of drugs. It works as an insulin sensitizer.

The charges also included two count of introducing misbranded drugs (Paxil, Wellbutrin), and one count of failing to report safety and information data for Avandia.

The fine in the criminal case will total $1 billion, and also removes GSK from further criminal liabilities relating to non-monetary compliance and certifications from GSK's US President and board of directors. The US District Court still has to accept GSK's plea to make the sentence final.

The civil case filed under the False Claims Act, relates to claims made by the federal government and individual states, against the same three drugs, Paxil, Wellbutrin and Avandia, as well as some other products. GSK will pay $2B and will also resolve the pricing fraud allegations against the company.

James M. Cole, Deputy Attorney General, confirmed his take on the matter:

"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 ... 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."

Although the fines might seem drastic on face value, the company is valued in the stock market at some $115 billion, with cash and liquid assets on hand of around $28 billion. In relative terms, it would represent a $26,000 fine for a person with a net worth of a million dollars, and who has $240,000 cash on hand. It's a bit more than a slap on the wrist, but not much more. With a gross profit of more than $33 billion and an operating profit of $13 billion for 2009, the $3 Billion figure barely represents more than a 10% sales tax.

The settlement is the end of a wide ranging investigation by special agents from HHS-OIG, FDA and FBI along with law enforcement departments across the federal government. In the future, GSK will be subject to strict reporting requirements, to prevent any future abuse. Healthcare, especially pharmaceuticals, relies, to a large degree, on companies not being able to market snake oil type products, or worse, ones that actually cause detriment to patients. Although the government bodies may not be the best way to police that, the Health Care Fraud Prevention and Enforcement Action Team (HEAT) can certainly be commended for doing their job for the tax payer on this occasion.

As the Chief Executive Officer Andrew Witty rather conveniently pointed out, the charges go as far back as 1994, apologized and gave an assurance that these kinds of issues would not occur in the future . The charges he said occurred:

In a different era for the company and will not be tolerated ... I want to express our regret and reiterate that we have learnt from the mistakes that were made ... fundamentally changed our procedures for compliance, marketing and selling. When necessary, we have removed employees who have engaged in misconduct."

GSK also committed to restrictions on kickbacks and other prohibited practices, and the company will not be able to compensate salesmen, based on territorial sales goals. The Department of Health and Human Services will oversee the "Corporate Integrity Agreement" for five years.

It's not the first legal trouble for GSK, with a $41 million payout to 37 states last year, due to below standard manufacturing processes in Puerto Rico and a 2010 payout of $2.4 Billion in connection with claims made against the company by patients using Avandia.

The treasury department seems to be doing quite well in drug cases recently, with another payout from Pfizer totaling $2.3 billion in 2009, which was at the time the largest pharmaceutical settlement of its time.

In the GSK case, it has been announced that a part of the $2B civil payout will go to watchdog groups who helped the government unearth the issues at hand. Prosecutors have not, as of now, brought any criminal charges against individuals who worked or still work for the company, but they have not yet ruled out the possibility.

GSK stock climbed 1.6% today, quite a large move for a company of it's size. Presumably shareholders breathed a sigh of relief, sensing that the worst is now over.

Written by Rupert Shepherd

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Senin, 02 Juli 2012

GlaxoSmithKline Pleads Guilty In Fraud Case Over Failure To Report Safety Data

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