Avandia Costs GSK $3.4 billion

January 21, 2011

GlaxoSmithKline is expecting to pay $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.

GlaxoSmithKline is expecting to pay $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 the $2.36 billion legal charges previously announced in July 2010 for legal cases regarding Avandia, Paxil and the company’s former manufacturing site in Cidra (Puerto Rico).

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.

“We recognise that this is a significant charge, but we believe the approach we are taking to resolve long-standing legal matters is in the company’s best interests,” P.D. Villarreal, SVP of Global Litigation at GSK, explained in a statement. “We have closed out a number of major cases over the last year and we remain determined to do all we can to reduce our litigation risk.”

Avandia — once GSK’s biggest grossing blockbuster — was recommended by the European Medicines Agency to be removed from the EU market in September 2010 (see a related PharmTech blog) because of cardiovascular safety concerns. Around the same time, the US pinned stringent restrictions on the product’s use.

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.