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By: David W. Hirshfeld

GlaxoSmithKline LLC ("GSK") has agreed to pay three billion dollars to resolve criminal and civil liability stemming from: the manner in which it marketed Paxil, Wellbutrin, Avandia and a host of other drugs to the public; GSK's failure to report safety data regarding Avandia; and from GSK's underpayment of rebates due pursuant to the Medicaid Drug Rebate Program. As part of its settlement, GSK also entered into a Corporate Integrity Agreement with the Office of the Inspector General of the United States Department of Health and Human Services, as is typical in settlements of this nature.

The settlement is the result of coordinated efforts among several governmental agencies, as well as lawsuits brought by four private citizens on behalf of the United States under the Federal False Claims Act (a/k/a the "Whistle Blower Statute").

Marketing for Off-Label Use.

GSK plead guilty to promoting Paxil, Wellbutrin and Avandia for the following off-label uses:

  • Paxil: for treatment of depression in children, when the FDA never approved the drug for that use;
  • Wellbutrin: for weight loss, treatment of sexual dysfunction, substance addictions and ADHD, when it only had FDA approval for treatment of Major Depressive Disorder; and
  • Avandia: for use as an initial treatment for asthma, when it only had FDA approval for treatment of asthma that had been unresponsive to lesser treatments. Avandia is a combination of two inhalants that was approved for use if treatment by a single inhalant had been ineffective.

Failure to Report Safety Data.

The Food Drug & Cosmetic Act requires manufacturers to file certain information reports that are meant to enable the FDA to determine if a drug continues to be safe for its approved use. The data in these reports is often used to identify trends of negative outcomes associated with the drug. GSK plead guilty of failing to submit data to the FDA indicating that Avandia may increase the risk of cardiovascular events in its users. This data was the result of studies requested by European regulators who had became concerned about the negative cardiovascular effects of Avandia.

GSK's Underpayment of Rebates to Medicaid.

The Medicaid Drug Rebate Program requires GSK to report the lowest price that it charges its customers for its drugs, and to rebate Medicaid the difference between GSK's "best" price and the price it had charged Medicaid. Drugs are sold in a variety of complex arrangements in which various drugs are sometimes grouped with one another and sold in bundles. The price reporting regulations include rules intended to unbundle these arrangements so that the price of each individual drug can be identified and reported. As part of this settlement, GSK resolved claims that it had failed to properly unbundle, identify, and report the lowest price that it had charged customers for certain of drugs. GSK's alleged misreporting, led to it paying Medicaid less of a rebate than Medicaid deserved.

Corporate Integrity Agreement.

In addition to the pecuniary aspects of its settlement, GSK agreed to enter into a Corporate Integrity Agreement with the Office of the Inspector General. Through its Corporate Integrity Agreement, GSK promises to make specific changes to the way it does business in an effort to avoid future non-compliance. Among its provisions, the Corporate Integrity Agreement removes certain incentive aspects of GSK's sales representative compensation program that lead to Avandia being aggressively promoted for its off-label use as a first-line asthma therapy. In addition, GSK is required to change its executive compensation program so that GSK can claw back compensation from former and current high-level executives who engage in significant misconduct either directly or through their subordinates.

Sources for this article include:

  • GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data, U.S. Department of Justice, Office of Public Affairs, July 2, 2012. http://www.justice.gov/opa/pr/2012/July/12-civ-842.html
  • Corporate Integrity agreement Between the Office of the Inspector General of the Department of Health and Human Services and GlaxoSmithKline LLC. http://oig.hhs.gov/fraud/cia/agreements/GlaxoSmithKline_LLC_06282012.pdf
  • Requirements for Rebate Agreement Under the Medicaid Drug Rebate Program. 42 U.S.C. 1396r-8.

 


Mr. Hirshfeld has dedicated the majority of his 18 year legal career to a strong focus on the healthcare industry and has an exceptional reputation as a corporate attorney. He has structured, negotiated and documented many business transactions which include a variety of issues involving compliance; business planning through growth, succession and exit strategies, governance, control and operational issues; and the impact of state and Federal legislation including anti-self-referral (e.g. "Stark"), anti-kickback and corporate practice of medicine laws; professional misconduct; managed care contracting guidelines; Medicare; HIPAA and tax laws. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. or 888-455-7702

Thursday, September 21, 2017

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