Glaxo says it has a $3 billion deal to settle U.S. investigations

GlaxoSmithKline said Thursday it has reached a tentative deal with several units of the U.S. Justice Department to pay $3 billion to settle criminal and civil allegations of illegal marketing practices and pricing under the Medicaid Rebate program.

One investigation, started by the U.S. Attorney's Office in Colorado and now run by the U.S. Attorney's Office in Boston, looked at Glaxo marketing practices related to the drugs Paxil and Wellbutrin. U.S. Attorney's offices are the local units of the Justice Department.

In a second investigation, the Justice Department looked at Glaxo's possible inappropriate use of the nominal price exception under the Medicaid Rebate Program. The nominal price idea is that drug makers are supposed to report the lowest price they charge most organizations, which is then used to calculate the price that Medicaid ultimately pays for its drugs.

The third investigation, also by the Justice Department, was over how Glaxo promoted the diabetes drug Avandia, which was pulled from European markets and severely restricted last fall by the U.S. Food and Drug Administration after it was shown to cause heart attacks in patients using it.

Glaxo is based in London, but has about 1300 Center City employees.

The company said the terms of the settlements won't be finalized until 2012. The company set aside billions of dollars for legal bills earlier in the year, so the bill will be paid from cash on the books.

The company said that since 2008, it has "established a new framework for compliance in the U.S., based on the company’s values, policies and established industry codes of practices. It is supported by a larger compliance staff and strengthened training programs that require certification by employees." The changes included new incentive formulas for sales representatives, eliminating sales targets for bonuses.

“This is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today," Glaxo chief executive officer Andrew Witty said in the statement. "In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently. We reiterate our full commitment to ensuring appropriate promotion of our medicines to health-care professionals and to the standards rightly expected by the U.S. Government.”