A $ 3 billion fine for GSK isn’t the whole story

Nov 9, 2011. GlaxoSmithKline announced it would try to settle a series of federal investigations by paying a $ 3 billion fine. If the company can resolve the matter with the Justice Department, it will represent the largest single fine ever assessed against a pharmaceutical company, exceeding the $ 2.3 billion Pfizer paid in 2009.

The optimistic note for the future is that GSK’s chief executive, Andrew Witty, has apparently decided to end the company’s longstanding pattern of violations and, it is hoped, start a clean slate that renounces off-label marketing and several other practices. Most of the ongoing offenses started well before Witty assumed the company’s top position and some sources there claim the settlement will allow him to impose a new, more ethically appropriate culture at GSK.

At the same time, a background review of the Justice Department’s investigation remains highly astonishing because the settlement covers the way GSK handled a wide range of business on all its best-selling drugs for more than a decade.

Some of the illegal acts uncovered by the federal probe include off-label marketing, fraudulent pricing to cheat Medicaid programs, entertaining physicians and paying them “advisory fees” to encourage prescribing, and suppressing critical data about a big-selling diabetes drug. In other words, the misbehavior at GSK wasn’t limited to some over-eager or unsupervised marketing and sales people. Part of GSK’s entire business operation functioned as a virtual, organized crime entity.

The possibility that pharma has merely moved its violations upscale emerges from the fact that the Justice Department maintains an ongoing investigation of GSK under the Foreign Corrupt Practices Act (FCPA). That DOJ probe concerns sales practices in at least nine countries involving high-level bribery. Other large pharmas also disclosed recent legal matters related to foreign bribery. These involve either indictments by foreign governments or FCPA probes by US agencies.

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