One-third of the $3 billion fine is a criminal penalty

In the largest settlement ever involving a pharmaceutical company, British drug-maker GlaxoSmithKline agreed to plead guilty to criminal charges, and pay $3 billion in fines for promoting its best-selling anti-depressants for unapproved uses, failing to report safety data about its top diabetes drug and improperly marketing several other drugs, federal prosecutors announced on Monday.

The agreement also includes civil penalties for improper marketing of a half-dozen other drugs.

The fine against GlaxoSmithKline over Paxil, Wellbutrin and 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 anti-psychotic 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 another anti-psychotic 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.

Fines not enough

But critics argue that even large fines are not enough to deter drug companies from unlawful behaviour. 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 CEOs 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. It got new life when it was strengthened in 1986 and has since served as a lucrative programme for identifying companies that defraud the federal government.

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 anti-depressants, might increase the risk of suicidal thoughts in teenagers. Prosecutors said the company had marketed Wellbutrin for conditions such as 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 FDA.

“Today’s multi-billion-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 GlaxoSmithKline had already set aside cash for the settlement. In a statement on Monday, the company said it had 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.’’

One-third of the $3 billion fine is a criminal penalty. The other $2 billion involves fines in connection with a civil settlement with the federal government and some states over the marketing of the blockbuster asthma drug Advair and 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.

— New York Times News Service

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