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 year’s 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
charge—which will likely eclipse Glaxo’s profit for the quarter—is 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 Glaxo’s promotion of
several drugs between 1997 and 2004. That inquiry began at the U.S. attorney’s office in Colorado, but is now being led by the U.S. attorney’s 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 company’s best interests,” P.D.
Villarreal, Glaxo’s 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 Glaxo’s total legal provisions to about £4 billion, although
a spokesman said he couldn’t provide a precise number until fourth-quarter
results are released on Feb. 3.
A spokeswoman
for the U.S. attorney’s office in Massachusetts said she couldn’t comment on an
“ongoing investigation.” Officials at the U.S. attorney’s office in Colorado weren’t 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
company’s 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 drug’s use last year, while European regulators ordered
Avandia withdrawn from the market.
Write to
Jeanne Whalen
at jeanne.whalen@wsj.com
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