* Drugmaker agrees to plead guilty to three criminal counts
* GSK sold drugs for purposes for which it lacked approval
* Misconduct occurred in a 'different era'-CEO Witty
By David Ingram
WASHINGTON, July 2 GlaxoSmithKline Plc
agreed to plead guilty to misdemeanor criminal charges and pay
$3 billion to settle what government officials on Monday
described as the largest case of healthcare fraud in U.S.
The agreement, which still needs court approval, would
resolve allegations that the British drugmaker broke U.S. laws
in the marketing and development of pharmaceuticals.
GSK targeted the antidepressant Paxil to patients under age
18 when it was approved for adults only, and it pushed the drug
Wellbutrin for uses it was not approved for, including weight
loss and treatment of sexual dysfunction, according to an
investigation led by the U.S. Justice Department.
The company went to extreme lengths to promote the drugs,
such as distributing a misleading medical journal article and
providing doctors with meals and spa treatments that amounted to
illegal kickbacks, prosecutors said.
In a third instance, GSK failed to give the U.S. Food and
Drug Administration safety data about its diabetes drug Avandia,
in violation of U.S. law, prosecutors said.
The misconduct continued for years beginning in the late
1990s and continued, in the case of Avandia's safety data,
through 2007. GSK agreed to plead guilty to three misdemeanor
criminal counts, one each related to the three drugs.
Guilty pleas in cases of alleged corporate misconduct are
exceedingly rare, making GSK's agreement especially unusual.
The agreement to settle the charges "is unprecedented in
both size and scope," said James Cole, the No. 2 official at the
U.S. Justice Department. He called the action "historic" and "a
clear warning to any company that chooses to break the law."
The settlement includes $1 billion in criminal fines and $2
billion in civil fines.
GSK said in a statement it would pay the fines through
existing cash resources. The company announced a $3 billion
charge in November related to legal claims.
NEW 'ERA' AT GSK
Chief Executive Officer Andrew Witty said the misconduct
originated "in a different era for the company" and will not be
tolerated. "I want to express our regret and reiterate that we
have learnt from the mistakes that were made," he said in a
The GSK settlement surpasses what had been the largest
criminal case involving a drugmaker in U.S. history. In 2009,
Pfizer Inc agreed to pay $2.3 billion to settle
allegations it improperly marketed 13 drugs.
The cases follow a trend of U.S. authorities cracking down
on how pharmaceuticals are sold, in part because of the rising
cost of providing drugs through government programs.
Part of civil fines address allegations that, from 1994 to
2003, GSK underpaid money owed to Medicaid, the healthcare
program for the poor run jointly by states and the federal
government. The company had an obligation to tell the government
its "best prices" but failed to do so, prosecutors said, and
$300 million of the settlement will go to states and other
public health authorities.
A portion of the $2 billion in civil fines may go to a group
of whistleblowers who contributed to the government's
investigation and who are eligible to share in the recovery
under the False Claims Act. Cole said the amount has not been
As part of the settlement, GlaxoSmithKline agreed to new
restrictions by the U.S. government to prevent the use of
kickbacks or other prohibited practices. The inspector general
of the U.S. Department of Health and Human Services will oversee
the "Corporate Integrity Agreement" for five years.
The company will not be able to compensate its salesmen
based on sales goals for territories. It was also required to
change its executive compensation program to allow the company
to "claw back" certain pay for those engaged in misconduct.
Witty said GSK's U.S. unit has "fundamentally changed our
procedures for compliance, marketing and selling. When
necessary, we have removed employees who have engaged in
Prosecutors have not brought criminal charges against any
individuals in connection with the GSK case, although the
settlement expressly leaves open that possibility. Cole declined
to comment on the possibility of future charges.
Almost exactly a year ago GSK agreed to pay nearly $41
million to 37 states and the District of Columbia in an
unrelated case about substandard manufacturing processes at a
Puerto Rico factory.
In 2010, the company took a $2.4 billion charge in
connection with Avandia to settle claims from patients.
GSK's shares were positive on the New York Stock Exchange on
Monday, up 1.6 percent to $46.29 at 1400 EDT.
The case is U.S. v. GlaxoSmithKline LLC, U.S. District Court
for the District of Massachusetts, No. 12-cr-10206.