FiercePharma—new letter 7/2
related to today's settlement can be viewed online at www.justice.gov/opa/gsk-docs.html .
1. GSK pays $3B to wrap up host
of Justice Department claims
GlaxoSmithKline ($GSK) will pay a whopping $3 billion to wrap up longstanding
Justice Department probes. It's the largest healthcare fraud settlement in history, topping Pfizer's ($PFE) $2.3 billion deal from 2009. GSK will plead
guilty to three counts and pay a $1 billion criminal penalty, plus another $2 billion to wrap up civil claims.
One reason the
settlement is so large is that it's so comprehensive. It not only includes the off-label marketing and kickback allegations
we've grown accustomed to reporting, but also pricing and rebate claims other drugmakers have settled separately. Glaxo's
deal also covers allegations that it downplayed the safety risks of its controversial diabetes drug Avandia.
While the Justice
Department crowed about the settlement--"unprecedented in size and scope," Deputy Attorney General James M. Cole said--Glaxo
expressed the "difficult, long-standing matters" the settlement resolves.
CEO Andrew Witty has taken pains to distance his own governance
from past reigns, and his statement today was no different. "Whilst these originate in a different era for the company, they
cannot and will not be ignored," Witty said, going on to list changes he's made at GSK to forestall misconduct. "I want to
express our regret and reiterate that we have learnt from the mistakes that were made," he said.
According to the
Justice Department, GSK will plead guilty to two misbranding charges The third count: failing to report Avandia safety data to the FDA. The company touted Paxil for off-label use in children and adolescents,
despite data that failed to show it was effective for kids, the government says. Meanwhile, Glaxo marketed its antidepressant
Wellbutrin for a litany of off-label uses, including weight loss, substance abuse and sexual dysfunction, Justice alleges.
On Avandia, Glaxo
allegedly failed to report safety data to FDA, the government says, including two studies specifically designed to gauge the
diabetes drug's safety. The drugmaker withheld data from the agency from 2001 to 2007, the statement says. After that, studies
raised red flags about Avandia's risks to the heart, and the drug was slapped with two black-box warnings; its use has since
been severely curtailed by FDA.
The criminal penalties
of $1 billion cover those allegations. The civil claims are more extensive. They cover off-label and kickback allegations
related to 7 drugs, including Paxil and Wellbutrin, but also the asthma drug Advair and seizure drug Lamictal. The Avandia
false-claims allegations include exaggerating the drug's benefits, including, ironically, its cardiovascular benefits. And
then there are pricing claims, covering false prices reported to Medicaid from 1994 to 2003.
No doubt Witty
hopes that this $3 billion payout will put the talk of misbehavior in the past. He might look to Pfizer's example before counting
on that. Every time a drugmaker has settled Justice Department allegations over the past few years, news stories have mentioned
Pfizer's own $2.3 billion, record-setting deal. Now, GSK will own that dubious distinction. But it can take solace in the
fact that its $1 billion criminal fine doesn't beat Pfizer's. That penalty amounted to $1.2 billion.
to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data
July 2, 2012
to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data
care giant GlaxoSmithKline LLC (GSK) agreed to plead guilty and to pay $3 billion to resolve its criminal and civil liability
arising from the company's unlawful promotion of certain prescription drugs, its failure to report certain safety data, and
its civil liability for alleged false price reporting practices, the Justice Department announced today. The resolution
is the largest health care fraud settlement in U.S. history and the largest payment ever by a drug company.
GSK agreed to
plead guilty to a three-count criminal information, including two counts of introducing misbranded drugs, Paxil and Wellbutrin,
into interstate commerce and one count of failing to report safety data about the drug Avandia to the Food and Drug Administration
(FDA). Under the terms of the plea agreement, GSK will pay a total of $1 billion, including a criminal fine of $956,814,400
and forfeiture in the amount of $43,185,600. The criminal plea agreement also includes certain non-monetary compliance
commitments and certifications by GSK's U.S. president and board of directors. GSK's guilty plea and sentence is not
final until accepted by the U.S. District Court.
GSK will also
pay $2 billion to resolve its civil liabilities with the federal government under the False Claims Act, as well as the states.
The civil settlement resolves claims relating to Paxil, Wellbutrin and Avandia, as well as additional drugs, and also
resolves pricing fraud allegations.
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," said James M. Cole, Deputy Attorney General.
"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."
settlement is a major milestone in our efforts to stamp out health care fraud," said Bill Corr, Deputy Secretary of the Department
of Health and Human Services (HHS). "For a long time, our health care system had been a target for cheaters who thought
they could make an easy profit at the expense of public safety, taxpayers, and the millions of Americans who depend on programs
like Medicare and Medicaid. But thanks to strong enforcement actions like those we have announced today, that equation is
marks the culmination of an extensive investigation by special agents from HHS-OIG, FDA and FBI, along with law enforcement
partners across the federal government. Moving forward, GSK will be subject to stringent requirements under its corporate
integrity agreement with HHS-OIG; this agreement is designed to increase accountability and transparency and prevent future
fraud and abuse. Effective law enforcement partnerships and fraud prevention are hallmarks of the Health Care Fraud Prevention
and Enforcement Action Team (HEAT) initiative, which fosters government collaboration to fight fraud.
Under the provisions
of the Food, Drug and Cosmetic Act, a company in its application to the FDA must specify each intended use of a drug.
After the FDA approves the product as safe and effective for a specified use, a company's promotional activities must be limited
to the intended uses that FDA approved. In fact, promotion by the manufacturer for other uses – known as "off-label
uses" – renders the product "misbranded."
the criminal information, the government alleges that, from April 1998 to August 2003, GSK unlawfully promoted Paxil for treating
depression in patients under age 18, even though the FDA has never approved it for pediatric use. The United States
alleges that, among other things, GSK participated in preparing, publishing and distributing a misleading medical journal
article that misreported that a clinical trial of Paxil demonstrated efficacy in the treatment of depression in patients under
age 18, when the study failed to demonstrate efficacy. At the same time, the United States alleges, GSK did not make
available data from two other studies in which Paxil also failed to demonstrate efficacy in treating depression in patients
under 18. The United States further alleges that GSK sponsored dinner programs, lunch programs, spa programs and similar
activities to promote the use of Paxil in children and adolescents. GSK paid a speaker to talk to an audience of doctors
and paid for the meal or spa treatment for the doctors who attended. Since 2004, Paxil, like other antidepressants, included
on its label a "black box warning" stating that antidepressants may increase the risk of suicidal thinking and behavior in
short-term studies in patients under age 18. GSK agreed to plead guilty to misbranding Paxil in that its labeling was false
and misleading regarding the use of Paxil for patients under 18.
Wellbutrin: The United States also alleges
that, from January 1999 to December 2003, GSK promoted Wellbutrin, approved at that time only for Major Depressive Disorder,
for weight loss, the treatment of sexual dysfunction, substance addictions and Attention Deficit Hyperactivity Disorder, among
other off-label uses. The United States contends that GSK paid millions of dollars to doctors to speak at and attend meetings,
sometimes at lavish resorts, at which the off-label uses of Wellbutrin were routinely promoted and also used sales representatives,
sham advisory boards, and supposedly independent Continuing Medical Education (CME) programs to promote Wllbutrin for these
unapproved uses. GSK has agreed to plead guilty to misbranding Wellbutrin in that its labeling did not bear adequate directions
for these off-label uses. For the Paxil and Wellbutrin misbranding offenses, GSK has agreed to pay a criminal fine and forfeiture
The United States alleges that, between 2001 and 2007, GSK failed to include certain safety data about Avandia, a diabetes
drug, in reports to the FDA that are meant to allow the FDA to determine if a drug continues to be safe for its approved indications
and to spot drug safety trends. The missing information included data regarding certain post-marketing studies, as
well as data regarding two studies undertaken in response to European regulators' concerns about the cardiovascular safety
of Avandia. Since 2007, the FDA has added two black box warnings to the Avandia label to alert physicians about the
potential increased risk of (1) congestive heart failure, and (2) myocardial infarction (heart attack). GSK has agreed
to plead guilty to failing to report data to the FDA and has agreed to pay a criminal fine in the amount of $242,612,800 for
its unlawful conduct concerning Avandia.
"This case demonstrates
our continuing commitment to ensuring that the messages provided by drug manufacturers to physicians and patients are true
and accurate and that decisions as to what drugs are prescribed to sick patients are based on best medical judgments, not
false and misleading claims or improper financial inducements," said Carmen Ortiz, U.S. Attorney for the District of Massachusetts.
on their physicians to prescribe the drugs they need," said John Walsh, U.S. Attorney for Colorado. "The pharmaceutical
industries' drive for profits can distort the information provided to physicians concerning drugs. This case will help
to ensure that your physician will make prescribing decisions based on good science and not on misinformation, money or favors
provided by the pharmaceutical industry."
As part of this
global resolution, GSK has agreed to resolve its civil liability for the following alleged conduct: (1) promoting the
drugs Paxil, Wellbutrin, Advair, Lamictal and Zofran for off-label, non-covered uses and paying kickbacks to physicians to
prescribe those drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex; (2) making false and misleading statements
concerning the safety of Avandia; and (3) reporting false best prices and underpaying rebates owed under the Medicaid Drug
and Kickbacks: The civil settlement resolves claims set forth in a complaint filed by the United States alleging that, in addition
to promoting the drugs Paxil and Wellbutrin for unapproved, non-covered uses, GSK also promoted its asthma drug, Advair, for
first-line therapy for mild asthma patients even though it was not approved or medically appropriate under these circumstances.
GSK also promoted Advair for chronic obstructive pulmonary disease with misleading claims as to the relevant treatment guidelines.
The civil settlement also resolves allegations that GSK promoted Lamictal, an anti-epileptic medication, for off-label, non-covered
psychiatric uses, neuropathic pain and pain management. It further resolves allegations that GSK promoted certain forms
of Zofran, approved only for post-operative nausea, for the treatment of morning sickness in pregnant women. It also includes
allegations that GSK paid kickbacks to health care professionals to induce them to promote and prescribe these drugs as well
as the drugs Imitrex, Lotronex, Flovent and Valtrex. The United States alleges that this conduct caused false claims
to be submitted to federal health care programs.
GSK has agreed
to pay $1.043 billion relating to false claims arising from this alleged conduct. The federal share of this settlement is
$832 million and the state share is $210 million.
civil settlement resolves four lawsuits pending in federal court in the District of Massachusetts under the qui tam,
or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the
United States and share in any recovery.
Avandia: In its civil
settlement agreement, the United States alleges that GSK promoted Avandia to physicians and other health care providers with
false and misleading representations about Avandia's safety profile, causing false claims to be submitted to federal health
care programs. Specifically, the United States alleges that GSK stated that Avandia had a positive cholesterol profile despite
having no well-controlled studies to support that message. The United States also alleges that the company sponsored programs
suggesting cardiovascular benefits from Avandia therapy despite warnings on the FDA-approved label regarding cardiovascular
risks. GSK has agreed to pay $657 million relating to false claims arising from misrepresentations about Avandia. The
federal share of this settlement is $508 million and the state share is $149 million.
Price Reporting: GSK is
also resolving allegations that, between 1994 and 2003, GSK and its corporate predecessors reported false drug prices, which
resulted in GSK's underpaying rebates owed under the Medicaid Drug Rebate Program. By law, GSK was required to report the
lowest, or "best" price that it charged its customers and to pay quarterly rebates to the states based on those reported prices.
When drugs are sold to purchasers in contingent arrangements known as "bundles," the discounts offered for the bundled drugs
must be reallocated across all products in the bundle proportionate to the dollar value of the units sold. The United States
alleges that GSK had bundled sales arrangements that included steep discounts known as "nominal" pricing and yet failed to
take such contingent arrangements into account when calculating and reporting its best prices to the Department of Health
and Human Services. Had it done so, the effective prices on certain drugs would have been different, and, in some instances,
triggered a new, lower best price than what GSK reported. As a result, GSK underpaid rebates due to Medicaid and overcharged
certain Public Health Service entities for its drugs, the United States contends. GSK has agreed to pay $300 million to resolve
these allegations, including $160,972,069 to the federal government, $118,792,931 to the states, and $20,235,000 to certain
Public Health Service entities who paid inflated prices for the drugs at issue.
Except to the
extent that GSK has agreed to plead guilty to the three-count criminal information, the claims settled by these agreements
are allegations only, and there has been no determination of liability.
settlement demonstrates the Department's commitment to protecting the American public against illegal conduct and fraud by
pharmaceutical companies," said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department's Civil Division.
"Doctors need truthful, fair, balanced information when deciding whether the benefits of a drug outweigh its safety risks.
By the same token, the FDA needs all necessary safety-related information to identify safety trends and to determine whether
a drug is safe and effective. Unlawful promotion of drugs for unapproved uses and failing to report adverse drug experiences
to the FDA can tip the balance of those important decisions, and the Justice Department will not tolerate attempts by those
who seek to corrupt our health care system in this way."
and Corporate Integrity Agreement
In addition to
the criminal and civil resolutions, GSK has executed a five-year Corporate Integrity Agreement (CIA) with the Department of
Health and Human Services, Office of Inspector General (HHS-OIG). The plea agreement and CIA include novel provisions
that require that GSK implement and/or maintain major changes to the way it does business, including changing the way its
sales force is compensated to remove compensation based on sales goals for territories, one of the driving forces behind much
of the conduct at issue in this matter. Under the CIA, GSK is required to change its executive compensation program to permit
the company to recoup annual bonuses and long-term incentives from covered executives if they, or their subordinates, engage
in significant misconduct. GSK may recoup monies from executives who are current employees and those who have left the company.
Among other things, the CIA also requires GSK to implement and maintain transparency in its research practices and publication
policies and to follow specified policies in its contracts with various health care payors.
integrity agreement with GlaxoSmithKline requires individual accountability of its board and executives," said Daniel
R. Levinson, Inspector General of the U.S. Department of Health and Human Services. "For example, company executives
may have to forfeit annual bonuses if they or their subordinates engage in significant misconduct, and sales agents are now
being paid based on quality of service rather than sales targets."
"The FDA Office
of Criminal Investigations will aggressively pursue pharmaceutical companies that choose to put profits before the public's
health," said Deborah M. Autor, Esq., Deputy Commissioner for Global Regulatory Operations and Policy, U.S. Food and Drug
Administration. "We will continue to work with the Justice Department and our law enforcement counterparts to target companies
that disregard the protections of the drug approval process by promoting drugs for uses when they have not been proven to
be safe and effective for those uses, and that fail to report required drug safety information to the FDA."
"The record settlement
obtained by the multi-agency investigative team shows not only the importance of working with our partners, but also the importance
of the public providing their knowledge of suspect schemes to the government," said Kevin Perkins, Acting Executive Assistant
Director of the FBI's Criminal, Cyber, Response and Services Branch. "Together, we will continue to bring to justice those
engaged in illegal schemes that threaten the safety of prescription drugs and other critical elements of our nation's healthcare
" Federal employees
deserve health care providers and suppliers, including drug manufacturers, that meet the highest standards of ethical and
professional behavior," said Patrick E. McFarland, Inspector General of the U.S. Office of Personnel Management. "Today's
settlement reminds the pharmaceutical industry that they must observe those standards and reflects the commitment of Federal
law enforcement organizations to pursue improper and illegal conduct that places health care consumers at risk."
illustrates the efforts of VA OIG and its law enforcement partners in ensuring the integrity of the medical care provided
our nation's veterans by the Department of Veterans Affairs," said George J. Opfer, Inspector General of the Department of
Veterans Affairs. "The monetary recoveries realized by VA in this settlement will directly benefit VA healthcare programs
that provide for veterans' continued care."
sends a clear message that taking advantage of federal health care programs has substantial consequences for those who try,"
said Rafael A. Medina, Special Agent in Charge of the Northeast Area Office of Inspector General for the U.S. Postal Service.
"The U.S. Postal Service pays more than one billion dollars a year in workers' compensation benefits and our office is committed
to pursuing those individuals or entities whose fraudulent acts continue to unfairly add to that cost."
The criminal case
is being prosecuted by the U.S. Attorney's Office for the District of Massachusetts and the Civil Division's Consumer Protection
Branch. The civil settlement was reached by the U.S. Attorney's Office for the District of Massachusetts, the U.S. Attorney's
Office for the District of Colorado and the Civil Division's Commercial Litigation Branch. Assistance was provided
by the HHS Office of Counsel to the Inspector General, Office of the General Counsel-CMS Division and FDA's Office of Chief
Counsel as well as the National Association of Medicaid Fraud Control Units.
This matter was
investigated by agents from the HHS-OIG; the FDA's Office of Criminal Investigations; the Defense Criminal Investigative Service
of the Department of Defense; the Office of the Inspector General for the Office of Personnel Management; the Department of
Veterans Affairs; the Department of Labor; TRICARE Program Integrity; the Office of Inspector General for the U.S. Postal
Service and the FBI.
is part of the government's emphasis on combating health care fraud and another step for the Health Care Fraud Prevention
and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Kathleen
Sebelius, Secretary of HHS. The partnership between the two departments has focused efforts to reduce and prevent Medicare
and Medicaid financial fraud through enhanced cooperation. Over the last three years, the department has recovered a total
of more than $10.2 billion in settlements, judgments, fines, restitution, and forfeiture in health care fraud matters pursued
under the False Claims Act and the Food, Drug and Cosmetic Act.Court documents related to today's settlement can be viewed online at www.justice.gov/opa/gsk-docs.html