GSK's Witty: Sterner enforcement is a question that 'goes far beyond the drug industry'

Billion-dollar fines for inappropriate drug marketing are considered part of the cost of doing business for pharmaceutical companies, industry critics argue, and such conduct won't change until more executives go to jail for illegal activity.

Asked Wednesday about that criticism, GlaxoSmithKline chief executive officer Andrew Witty said he would let "governments and society" choose the drivers of enforcement. But he insisted his company is operating in cleaner manner under his watch, whatever anyone might think in the wake of Glaxo's recent $3 billion payment for conduct under its previous leadership.

"The question of how people get punished or how entities get punished is a big question," Witty said. "It goes far beyond the drug industry and is for others to think about. I can absolutely answer you that I don't think it would have made any difference to the seriousness with which this organization has dealt with and reacted to the issues brought to our attention.

"I wish it hadn't gone the way it's gone. But it had to be dealt with. I can assure you that having done this, I remain even more relentlessly focused on this agenda. It is absolutely the top focus of this group. We understand this is about our license to operate and we take this very seriously."

Glaxo, which is based in London, has Pennsylvania and New Jersey operations, and is scheduled to begin moving from Logan Square to the Navy Yard in Philadelphia in December.

Witty is unusual among big drug company CEOs, in that he often answers questions from reporters and not just stock analysts when the Glaxo releases quarterly finances, as it did Wednesday. Some questions were about flat profits, slight dips in sales (2 percent), the recent acquisition of Human Genome Sciences and governmental pricing pressure, especially in Europe.

But many of the reporters' questions were about the July 2 announcement by the U.S. Justice Department that Glaxo had pleaded guilty to three misdemeanor charges and paid a record $3 billion to settle allegations involving sales and safety reporting practices related to three drugs in the early 2000s.

Witty was a company leader in Europe and other parts of the world before ascending to CEO in May 2008, which is after the criminal conduct involved in the plea agreement. The Glaxo board of directors was aware of the investigation when they chose Witty to replace Jean-Pierre Garnier over other reported candidates, including U.S. based executives Chris Viehbacher and David Stout.

In Congressional testimony in 2011, Dan Levinson, the Inspector General of U.S. Department of Health & Human Services, said, "We are concerned that these providers may consider engaging in fraud schemes, and paying civil penalties and criminal fines if caught, as a cost of doing business."

Four local executives from medical device maker Synthes, Inc., were sent to prison last fall. But, while a cautionary tale for some executives, such penalties remain rare, in part because those allegations went beyond those in many of the drug marketing cases.

In the Glaxo case, whistleblowers and the government raised allegations - but no charges - of inappropriate marketing of the asthma drug Advair as late as 2010.

Witty said the company "strongly" believes its behavior was appropriate in that area. But he also emphasized his attempts to improve Glaxo's internal compliance procedures and culture, along with more public actions to prove Glaxo is responsible health-care company. That includes disclosing payments to doctors, stopping donations to U.S. political parties, leading on contributions to fight neglected tropical diseases and being the first British CEO to agree to a clawback in his employment agreement.

"It would be naive to think that somebody who takes over in the middle of 2008, within a few months, everything is completely changed," he said, referring to the 2010 dates. "Obviously, it takes time for us to make sure that absolutely all the things I described are in place and done. We are relentlessly trying to make sure this gets through to everybody in our organization."

A link to GSK's second quarter earnings annnouncement is here.