GlaxoSmithKline Agrees in Principle to $3-Billion Settlement with the US Government

GlaxoSmithKline (GSK) has come to a tentative agreement with the US government to conclude ongoing investigations relating to sales and marketing practices. The settlement is still subject to negotiation, but GSK expects to pay around $3 billion, which is covered by existing legal provisions, according to a press statement. The final amount and terms of the settlement are expected to be finalized in 2012. GSK says that the payments will be funded through existing cash resources.

The settlement addresses civil and criminal liabilities, and covers:

• Investigations into GSK’s sales and marketing practices, which were initiated by the US Attorney’s Office in Colorado in 2004, but later taken over by the Massachusetts Office.

• The US Department of Justice’s investigation of possible inappropriate use of the nominal price exception under the Medicaid Rebate Program.

• The Department of Justice’s investigation of the development and marketing of Avandia.

GSK’s CEO, Andrew Witty, said in the statement, “This is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today. In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the US to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently.”

GSK explained that since 2008, it has established a new framework for compliance in the US, which is supported by staff training programs that require certification by employees. In addition, the company has introduced a new incentive compensation system for sales representatives who work directly with healthcare professionals. Instead of using sales targets as a basis for bonuses, the new system bases incentives on the quality of service that representatives deliver to support improved patient health.