GlaxoSmithKline Agrees to $3B Settlement with U.S.

November 4, 2011

GlaxoSmithKline PLC has agreed in principle with the U.S. government on a $3 billion settlement of investigations into the company’s sales and marketing practices, the drug maker said Thursday.

The agreement is expected to be completed next year, and the settlement will be paid through the company’s cash resources, GSK said.

The company said the proposed settlement covered its sales and marketing practices for drugs including antidepressants Paxil and Wellbutrin, an investigation begun by the U.S. Attorney’s office of Colorado in 2004 and later taken over by the U.S. Attorney’s Office of Massachusetts; the U.S. Justice Department’s investigation of possible inappropriate use of the nominal price exception under the Medicaid Rebate Program; and the Justice Department’s investigation of the development and marketing of the diabetes drug Avandia.

GSK shares were up 1.6 percent at 1,377 pence ($21.99) in late trading on the London Stock Exchange.

The company said the tentative settlement covers both civil and criminal liabilities.

“This is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today,” CEO Andrew Witty said.

“In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently.”

Among those steps, the company no longer bases bonuses on individual sales targets, GSK said, but on “quality of service.”

In its annual report for 2010, GlaxoSmithKline said it had made a provision of $4 billion for legal and other disputes, double the 2009 figure.

In June, Glaxo’s U.S. subsidiary agreed to pay more than $40 million to 37 U.S. states and Washington, D.C., to settle complaints about manufacturing processes at a plant in Puerto Rico, which has been closed.

The company also paid a $750 million fine in 2010 in the U.S. related to the Puerto Rico plant.

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