Glaxo Settles with U.S. for Record-Breaking $3 Billion Settlement

The British drug company, GlaxoSmithKline said Thursday that it had agreed to pay $3 billion to settle United States government civil and criminal investigations for its illegal sales practices for numerous drugs.

One of the drugs which was severely restricted last year was the diabetes drug Avandia, after it was linked to heart attacks and strokes. It was reported by company whistle-blowers that GlaxoSmithKline had paid doctors and manipulated medical research in order to promote Avandia.

The agreement to settle its biggest federal cases should be completed by next year, as reported by a company representative. It said the $3 billion would not only settle the Avandia case, but also a Justice Department investigation of its Medicaid pricing practices and a nationwide investigation led by the United States attorneys in Colorado and Massachusetts into the sales and marketing of nine of its drugs from 1997 to 2004.

Glaxo said in January it was taking the $3.5 billion charge to cover expenses linked to investigations and suits over its withdrawn Avandia diabetes drug and other medications. They were left with a reserve of $6.4 billion for legal costs tied to Avandia and the other medicines. The company has paid more than $1 billion to settle patient lawsuits for birth defects allegedly caused from Paxil. The settlements averaged $1 million per claim and Glaxo continues to settle cases. Glaxo also has paid more than $700 million to resolve patient lawsuits alleging Avandia caused heart attacks and strokes. These settlements averaged $50,000 per case.

The Glaxo settlement would trump the $2.3 billion Pfizer, Inc. settlement paid in 2009 over the marketing of Bextra and other drugs and the $1.4 billion Eli Lilly & Co. settlement paid in 2009 over its sales of Zyprexa (anti-psychotic drug).

Critics of the settlements made with drug companies argued for stiffer penalties, including prison sentences for corporate officials. What are your thoughts about this massive settlement? Do you think a $3 billion settlement is justice for this massive drug company – who profited off of drugs that caused heart attacks, strokes, and deaths – or do you think there should be additional penalties, such as suspensions or prison sentences for corporate officials?

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