Glaxo to Pay $3B in Fines for Improper Drug Marketing

by Christopher Freeburn | July 3, 2012 9:50 am

GlaxoSmithKline (NYSE:GSK[1]) has agreed to pay $3 billion in fines for improperly promoting its antidepressant drugs Paxil, Wellbutrin and Avandia, and its asthma drug Advair. Additionally, the company will plead guilty to criminal charges[2] resulting from the activity.

Shares of Glaxo edged lower in early Tuesday trading, slipping about 1%.

Under terms of the settlement with the government, no individuals have been charged with wrongdoing, a point that prompted critics to dismiss the fines as an insufficient deterrent to corporate rule-breaking, The New York Times noted.

Four Glaxo employees brought suit against their employer under the False Claims Act and will receive a share of the company’s settlement with the government. The former employees, who included a senior marketing executive, alleged that Glaxo used incentives like free vacations to persuade physicians to prescribe the antidepressants to children. The drugs in question had not been approved for use with children.

Terms of the settlement were agreed to in November. Glaxo was fined $1 billion for criminal charges relating to the improper promotion of Paxil, Wellbutrin and Avandia. It will pay another $2 billion to settle civil litigation relating to the sales of its asthma medication Advair.

Glaxo isn’t alone among pharmacuetical companies facing large settlements with the government. Earlier this year, Abbott Laboratories (NYSE:ABT[3]) agreed to pay $1.6 billion over allegations of improper drug marketing, and Johnson & Johnson (NYSE:JNJ[4]) is reported to be on the verge of inking a $2 billion settlement over the improper promotion of an anti-psychotic medication.

Endnotes:
  1. GSK: http://studio-5.financialcontent.com/investplace/quote?Symbol=GSK
  2. plead guilty to criminal charges: http://www.nytimes.com/2012/07/03/business/glaxosmithkline-agrees-to-pay-3-billion-in-fraud-settlement.html?pagewanted=all
  3. ABT: http://studio-5.financialcontent.com/investplace/quote?Symbol=ABT
  4. JNJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNJ

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