GlaxoSmithKline settles defective-drug lawsuit for $750 million

By Justin Blum, David Voreacos and Andrew Harris
Wednesday, October 27, 2010; 12:31 AM

GlaxoSmithKline agreed to pay $750 million to settle a U.S. government false-claims lawsuit over the sale of defective drugs.

Glaxo and the U.S. Justice Department announced the accord Tuesday, resolving a lawsuit first filed in 2004 by Cheryl D. Eckard, a former global quality assurance manager for the London-based company.

"This is not something I wanted to do, but because of patient safety it was necessary," Eckard, 51, told reporters after a Justice Department news conference in Boston. As a whistleblower, she will receive $96 million from the settlement money.

Glaxo was accused in court papers of selling tainted drugs under false pretenses. The medicines, made at a Glaxo plant in Cidra, Puerto Rico, were misidentified as a result of product mix-ups, according to papers filed in federal court in Boston. The affected drugs included the antidepressant Paxil CR and the diabetes treatment Avandamet.

The settlement includes a criminal fine and forfeiture totaling $150 million and a $600 million civil settlement under the False Claims Act and related state claims, the Justice Department said in a statement.

"We will not tolerate corporate attempts to profit at the expense of the ill and needy in our society - or those who cut corners that result in potentially dangerous consequences to consumers," Carmen M. Ortiz, the U.S. attorney in Boston, said at the news conference.

SB Pharmco Puerto Rico, a Glaxo unit, agreed to plead guilty to charges relating to the manufacture and distribution of adulterated drugs made at the now-shuttered plant, the Justice Department said. Glaxo said in July it had agreed in principle with the United States to pay $791 million to resolve the investigation.

"We regret that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice requirements and with GSK's commitment to manufacturing quality," PD Villarreal, a Glaxo senior vice president, said in an e-mailed statement.

Eckard's take is the largest ever for a single whistleblower, said Patrick Burns, spokesman for Taxpayers Against Fraud, a nonprofit Washington group that publicizes the use of legal means to combat fraud against the United States. The federal government will receive $436.4 million from the settlement and participating states will split as much as $163.6 million, the Justice Department said.

Other drugs made at the plant include Kytril, an anti-nausea medication, and Bactroban, an ointment used to treat skin infections, the Justice Department said.

"The false claims arose out of chronic, serious deficiencies in the quality assurance function at the Cidra plant and the defendants' ongoing serious violations of the laws and regulations designed to ensure the fitness of drug products for use," the government said in court papers.

The U.S. Food and Drug Administration in 2005 seized some Paxil CR lots after it was discovered that the pills sometimes split inappropriately, according to court papers. Some of the pills lacked an active ingredient.

"We did not uncover any evidence that patients were harmed from these adulterated batches," Ortiz said Tuesday. "It is critical we keep pressure on companies to follow FDA standards and play by the rules."

Bloomberg News


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