18.01.11 Health

Drug giant GSK hit by record legal charge

GlaxoSmithKline has unveiled a record-breaking £2.2bn charge to cover litigation costs that will wipe out its fourth quarter profits.

The charge is the latest to hit the pharmaceutical industry. As reported by the Bureau last year, a series of escalating legal actions are being pursued against drug companies in the US by regulators and patients. These allegations relate to aggressive sales tactics and off-label marketing practices, which involve representatives pushing medicines for uses they have not been cleared for.

The latest charge against GSK relates to its diabetes drug Avandia, which has been linked
to increased risk of heart attacks, as well as the off-label promotion of nine other drugs.

It is in addition to a £1.57bn charge Glaxo announced last July.

That was to cover various legal cases, including Avandia claims and other settlements
relating to the antidepressant Paxil. The company also had to cover a settlement over
production standards at a factory in Puerto Rico.

“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,” said PD Villarreal, senior vice
president at Glaxo’s global litigation team.

“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.”

The Bureau’s report ‘Drug Money’, for Al Jazeera revealed the extent
of off-label promotion in the US, and the government’s attempts to
crack down on it.

Off-label marketing is categorised as fraud against the government in
America as Medicare and Medicaid end up paying for drugs that might not
work, and may even harm the patient.

In the last two years the US authorities have forced drug companies to pay
out over $5 billion dollars to settle fraud charges. Six of the top
ten biggest pharma companies have settled cases in that period.

The largest pay-out came from Pfizer. In September 2009 the company
paid £2.3billion to settle civil and criminal charges with the federal
government for marketing four drugs off-label. It was the biggest
fraud case in US history and the biggest criminal fine ever imposed in
the US.

Watch the full investigation:

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