GSK to pay more than $4 billion for criminal and legal charges
Headlines have been full of news about GlaxoSmithKline in recent weeks and none of it has been particularly flattering for the company. Firstly, January saw the airing of a US program (60 Minutes) about a whistleblower lawsuit that resulted in GSK paying $750 million to settle civil and criminal charges after the company was accused of manufacturing and selling adulterated drug products to Medicaid and other government health plans. The products were manufactured at the company's Cidra plant in Puerto Rico, which was closed in 2009 due to declining demand.
Eckard claims that nothing was done. She was made redundant in 2003 and filed the whistleblower suit in February 2004, ultimately leading to the FDA seizing all stocks of Avandamet and Paxil CR manufactured at Cidra — the largest seizure in FDA history. The FDA also placed the Cidra plant under a Consent Decree, requiring that all products released to the market be approved by an independent monitor.
The 60 Minutes programme will have been a harsh blow to GSK's reputation, with claims being made that some medicines may have been contaminated with bacteria or mislabelled, while others may have been too strong or not strong enough. Additionally, claims were made that GSK tried to cover up the problems after a pharmacist called to report a mix up with an antidepressant medicine.
"They [GSK] filed a report with the FDA that said that the mix-up was not real. And did not happen at the factory," said Eckard in the programme.
In its response to the programme, GSK says that it regrets the manufacturing issues at the Cidra facility and "strongly disagrees with 60 Minutes' implication that patients suffered harm as a result". GSK also emphasised that the issues outlined in the 60 Minutes story occurred between 2001 and early 2005, and related to one manufacturing facility. "GSK had been working with the FDA to improve the plant's performance as early as 2001, before Cheryl Eckard was sent in 2002 as part of the team to address issues cited by the FDA," said a GSK statement.
The company also added: "The FDA; the US Department of Justice; and Neil Getnick, Cheryl Eckard's attorney, all stated that there was no indication that patients were harmed as a result of the production issues."
Avandia legal charges
On top of the $750 million, GSK also recently announced that it is expecting to pay an enormous $3.4 billion to settle legal charges relating to its diabetes drug Avandia, as well as sales and promotional practices in the US for other products. The amount is in addition to the $2.36 billion legal charges previously announced in July 2010 for legal cases regarding Avandia, Paxil and the former site at Cidra.
Since this time, GSK says it has continued to receive a "substantial" number of new product liability cases regarding Avandia in the US. The $3.4 billion estimate stems from the company's assessment of the additional cases and an estimate of likely future claims.
The charges also relate to an investigation by the US Attorney's Office for the District of Colorado into GSK's US sales and promotional practices between 1997 and 2004.
According to third-party sources, the charges may wipe out the company's expected earnings for Q1.