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In largest health care fraud settlement in U.S. history, GlaxoSmithKline to plead guilty, pay $3 billion to resolve allegations of fraud and failure to report safety data; one employee whistleblower will receive $700 million

Global health care giant GlaxoSmithKline LLC (GSK) agreed to plead guilty and to pay $3 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices, the Justice Department announced on July 2. The resolution is the largest health care fraud settlement in U.S. history and the largest payment ever by a drug company.

GSK will pay $2 billion to resolve its civil liabilities with the federal government under the False Claims Act (FCA), as well as the states. The U.S. Attorney’s office in Boston led the investigation into promotional tactics behind a total of nine GSK drugs. As part of this global resolution, GSK has agreed to resolve its civil liability for the following alleged conduct: (1) promoting the drugs Paxil, Wellbutrin, Advair, Lamictal and Zofran for off-label, non-covered uses and paying kickbacks to physicians to prescribe those drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex; (2) making false and misleading statements concerning the safety of Avandia; and (3) reporting false best prices and underpaying rebates owed under the Medicaid Drug Rebate Program.

GSK has agreed to pay $1.043 billion relating to false claims arising from the alleged off-label promotion and kickbacks. The federal share of this settlement is $832 million and the state share is $210 million.

Whistleblowers. The off-label civil settlement resolves four FCA qui tam lawsuits pending in federal court in the District of Massachusetts. One of the relators in the case, Lois Graydon, a nursing professional and former GSK therapeutic sales manager, will receive more than $700 million as her share of the recovery, according to a statement issued by the law firm Grant & Eisenhofer, who represented Graydon in this matter. Two other relators, Thomas Gerahty, a former senior marketing development manager for GSK, and Matthew Burke, a former regional vice president were represented by Phillips & Cohen LLP, who issued a statement detailing their clients contributions to the case. Kenny & McCafferty, P.C., who represented two former GSK marketing employees, also issued a statement regarding the role of their clients, Greg Thorpe and Blair Hamrick, in the case.

Criminal charges. In addition to the settlement of the civil claims, GSK agreed to plead guilty to a three-count criminal information, including two counts of introducing misbranded drugs, Paxil and Wellbutrin, into interstate commerce and one count of failing to report safety data about the drug Avandia to the Food and Drug Administration (FDA). Under the terms of the plea agreement, GSK will pay a total of $1 billion, including a criminal fine of $956,814,400 and forfeiture in the amount of $43,185,600. The criminal plea agreement also includes certain non-monetary compliance commitments and certifications by GSK’s U.S. president and board of directors. GSK’s guilty plea and sentence is not final until accepted by the district court.

Corporate Integrity Agreement. In addition to the criminal and civil resolutions, GSK has executed a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services, Office of Inspector General. The plea agreement and CIA include novel provisions that require that GSK implement and/or maintain major changes to the way it does business, including changing the way its sales force is compensated to remove compensation based on sales goals for territories, one of the driving forces behind much of the conduct at issue in this matter. Under the CIA, GSK is required to change its executive compensation program to permit the company to recoup annual bonuses and long-term incentives from covered executives if they, or their subordinates, engage in significant misconduct. GSK may recoup monies from executives who are current employees and those who have left the company. Among other things, the CIA also requires GSK to implement and maintain transparency in its research practices and publication policies and to follow specified policies in its contracts with various health care payors.