Glaxo to pay $41 million to U.S. states over drug plant

NEW YORK Thu Jun 23, 2011 1:56pm EDT

NEW YORK (Reuters) - GlaxoSmithKline Plc will pay nearly $41 million to 37 U.S. states and the District of Columbia to settle allegations related to faulty drug manufacturing processes at a former factory in Puerto Rico.

Under terms of the pact announced Thursday with Glaxo and its SB Pharmco Puerto Rico Inc unit, each state will share in the total settlement payout.

The settlement follows a related $750 million payment that the British drugmaker said it would make as part of a plea agreement with the U.S. Department of Justice last year.

"Drug manufacturers have a responsibility ... to ensure the products they send to market are pure and unadulterated," New Jersey Attorney General Paula Dow said in a statement. "We are committed to ensuring they meet that responsibility."

In a statement, GlaxoSmithKline said it did not admit to any wrongdoing or liability under states' consumer protection laws as part of the $40.75 million settlement.

"The company chose to settle the matter, which it initially disclosed in its 2010 fourth-quarter results and its 2010 annual report, to avoid the expense and uncertainty of protracted litigation and trial," the statement said.

The attorneys general alleged Glaxo and its Puerto Rico subsidiary engaged in unfair and deceptive practices when they manufactured and distributed some lots of four drugs, citing substandard manufacturing processes between 2001 and 2004.

The drugs in question were antinausea medication Kytril, antibiotic ointment Bactroban, antidepressant Paxil CR, and diabetes drug Avandamet.

The drugs were produced at a plant in Cidra, Puerto Rico, which was closed in 2009.

In the 2010 agreement with the Department of Justice, Glaxo settled allegations that false claims for reimbursement were submitted to government healthcare programs related to the drugs.

Under that deal, SB Pharmco Puerto Rico agreed to plead guilty to a felony of releasing adulterated medicines.

(Reporting by Moira Herbst, editing by Gerald E. McCormick)

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