GlaxoSmithKline $3 Billion Settlement (2012)

The government alleged GSK engaged in a sweeping pattern of unlawful marketing and kickbacks across multiple drugs. The accusations centered on three main categories of misconduct.

– Off-label marketing: GSK promoted its products for uses never approved by the FDA. The company targeted vulnerable populations like children and adolescents. It also pushed drugs for conditions such as weight loss and sexual dysfunction while promoting dosages that exceeded approved limits. The scheme involved training sales representatives to downplay risks and overstate benefits for unapproved uses

– Kickbacks to physicians: GSK allegedly offered cash, travel, entertainment, and speaking fees to induce doctors to prescribe its drugs. Tactics included lavish trips, tickets to events, and payments disguised as consulting arrangements

– Safety data withholding and pricing fraud: The company allegedly failed to report certain clinical safety data regarding Avandia to the FDA and submitted incorrect pricing data that underpaid rebates owed to government programs

In the 2012 settlement, GSK paid a total of $3 billion. This was split into $1B to resolve criminal charges and $2B to settle civil allegations.

The $1 billion criminal portion consisted of a criminal fine of $956.8M and an additional asset forfeiture of $43.18M. The remaining $2 billion was paid to resolve civil liabilities under the False Claims Act and related state claims.

The record-setting amount served as both a punishment and a deterrent. The government emphasized that the size of the penalty was meant to send a clear warning to other corporations that healthcare fraud would not be tolerated.

Whistleblowers were the driving force behind the entire GSK settlement. Their insider information and qui tam lawsuits provided the government with the evidence needed to build its case. Without their willingness to come forward, the massive fraud would likely have remained undetected.

– Multiple whistleblowers filed four separate qui tam lawsuits that were consolidated into the government’s case. Key relators included former GSK employees Thomas Gerahty, Matthew Burke, and Cheryl Eckard
– Their evidence covered the full scope of GSK’s misconduct, including off-label marketing, kickbacks to doctors, and manufacturing violations
– The civil portion of the settlement, $1.017 billion, was directly tied to the whistleblowers’ allegations. Under the False Claims Act, relators are entitled to 15-30% of the government’s recovery.

The case involved a range of widely prescribed medications. The misconduct covered ten distinct drugs, but a few key ones were at the center of the government’s allegations.

– Paxil (paroxetine) and Wellbutrin (bupropion): These antidepressants were central to the criminal charges. GSK promoted them for unapproved uses, including treatment for children and adolescents
– Avandia (rosiglitazone): This diabetes drug was the subject of a criminal charge for failing to report safety data to the FDA
– Advair, Lamictal, and Zofran: These drugs for asthma, seizures, and nausea, respectively, were part of the civil settlement resolving off-label promotion allegations
– Other drugs: The civil settlement also included additional drugs like Imitrex, Lotronex, Flovent, and Valtrex

The GSK case forced the pharmaceutical industry to rethink compliance from the top down. The settlement’s five-year Corporate Integrity Agreement introduced provisions that quickly became industry benchmarks.

– Sales compensation tied to quality of service, not sales volume
– Executive bonus clawbacks for misconduct by senior leaders or their subordinates
– Annual compliance reviews reported directly to the Justice Department
– These provisions set a new standard, appearing in subsequent industry Corporate Integrity Agreements

Off-label marketing was the cornerstone of the GSK case, as it underpinned the company’s entire fraudulent scheme.

The government alleged GSK deliberately promoted its drugs for uses the FDA never approved, such as prescribing antidepressants to children and pushing other medications for weight loss or sexual dysfunction. By training sales representatives to downplay risks and overstate benefits for these unapproved uses, the company generated prescriptions that would not have been written otherwise.

Those prescriptions then resulted in claims submitted to Medicare, Medicaid, and other federal programs. This direct link between unlawful promotion and government reimbursement made off-label marketing the central driver of the record $3 billion settlement.

The GSK settlement did not change statutory law, but it set new regulatory benchmarks through its five-year Corporate Integrity Agreement (CIA) with the HHS Office of Inspector General. The novel provisions in that agreement quickly became industry standards for future pharmaceutical CIAs.

– Sales force compensation was tied to quality of service instead of sales targets, removing the incentive to push unnecessary prescriptions
– Executive bonuses and long-term incentives became subject to clawback if senior leaders or their subordinates engaged in misconduct
– The agreement required deferral of 10% to 25% of executive bonuses for up to three years to fund potential recoupment