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  Glaxo to Take $3.49 Billion Litigation-Risk Charge
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Glaxo to Take $3.49 Billion Litigation-Risk Charge .

http://www.bioethicsinternational.org/blog/2011/01/18/glaxo-to-take-3-49-billion-litigation-risk-charge/

[WSJ] GlaxoSmithKline PLC said it will record a £2.2 billion ($3.49 billion) charge for the fourth quarter to cover costs relating to a U.S. investigation of its marketing practices, as well as additional costs tied to consumer lawsuits over the diabetes drug Avandia.

The amount is the latest in a series of large charges the U.K. drug giant has taken in recent quarters as it tries to settle several investigations and other liabilities hanging over the company. In last years second quarter, the company took a charge of £1.57 billion to settle lawsuits involving Avandia and the antidepressant Paxil, and to settle a U.S. government probe of a Glaxo factory in Puerto Rico.

The latest chargewhich will likely eclipse Glaxos profit for the quarteris a sign that the company is drawing nearer to settling a seven-year-old U.S. government investigation of its marketing practices that has examined Glaxos promotion of several drugs between 1997 and 2004. That inquiry began at the U.S. attorneys office in Colorado, but is now being led by the U.S. attorneys office in Massachusetts.

We recognize this is a significant charge, but we believe the approach we are taking to resolve long-standing legal matters is in the companys best interests, P.D. Villarreal, Glaxos senior vice president of global litigation, said in a statement Monday. 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.

Glaxo took a £278 million charge related to the same investigation in the fourth quarter of 2008, suggesting that the company has been attempting to settle the probe for more than two years.

The new charge is likely to bring Glaxos total legal provisions to about £4 billion, although a spokesman said he couldnt provide a precise number until fourth-quarter results are released on Feb. 3.

A spokeswoman for the U.S. attorneys office in Massachusetts said she couldnt comment on an ongoing investigation. Officials at the U.S. attorneys office in Colorado werent available to comment.

The investigation has examined Glaxo drugs including the antidepressants Paxil and Wellbutrin. The drug maker has disclosed that investigators examined whether Glaxo promoted Wellbutrin for uses not approved by the Food and Drug Administration, an illegal practice known as off-label marketing. Investigators have also examined how Glaxo portrayed, in interactions with doctors and the FDA, patients risk of suicidal behavior while taking Paxil, according to lawyers interviewed by the investigators.

The probe has also examined Glaxo-funded medical education and clinical trials, and the companys hiring of doctors for various services, according to Glaxo disclosures.

A number of big drug companies have struck large settlements with the U.S. in recent years to resolve similar investigations. In 2009, Pfizer Inc. agreed to pay $2.3 billion to settle a federal investigation into whether it promoted the painkiller Bextra off label. Eli Lilly & Co. agreed to pay $1.4 billion to settle similar charges involving its antipsychotic medicine Zyprexa. AstraZeneca PLC and Novartis AG also made big settlements last year relating to their marketing practices.

Glaxo said its £2.2 billion charge also covers costs it is expecting to face over lawsuits patients have filed alleging that Avandia harmed their health. The cost of settling many of these lawsuits contributed to the £1.57 billion charge Glaxo took in the second quarter, but a substantial number of additional lawsuits have been filed since then, Glaxo said in its statement.

Data tying Avandia to increased risks of heart attacks prompted the FDA to put tight restrictions on the drugs use last year, while European regulators ordered Avandia withdrawn from the market.

Write to Jeanne Whalen at jeanne.whalen@wsj.com