Glaxo to pay $750m over adulterated drug claims

The drug company GlaxoSmithKline PLC will pay $750m (€542m) to settle allegations that it knowingly manufactured and sold adulterated drugs, federal prosecutors in the US said yesterday.

US Attorney Carmen Ortiz said the London-based company will pay $150m in criminal fines and $600m in civil penalties related to faulty manufacturing processes at its plant in Cidra, Puerto Rico.

The company allowed several drugs to be adulterated between 2001 and 2005, including the widely used anti-depressant Paxil CR, a skin-infection ointment called Bactroban, an anti-nausea drug called Kytril, and a diabetes drug called Avandamet, Ortiz said.

GlaxoSmithKline said in a statement it regrets operating the plant in a manner that violated good manufacturing practices.

The company said the plant closed in 2009 due to declining demand for the medicines it made.

Executives revealed a $750m charge to the company’s second-quarter 2010 earnings on July 15 in connection with the agreement.

Ortiz said no patients appeared to have been harmed by the quality problems, which included failing to ensure that Bactroban and Kytril were free of contamination from microorganisms and Paxil controlled release tablets that were split, meaning tablets were potentially distributed that did not have any therapeutic effect.

The investigation began after Cheryl Eckard, the global quality assurance manager, went to the plant in August 2002 to correct manufacturing violations cited by the US Food and Drug Administration (FDA).

Eckard discovered numerous violations, including a contaminated water system and an air system that allowed for cross-contamination between different products. She reported the problems to her superiors and the compliance department, her lawyers said.

Eckard eventually went to the FDA to report the problems and later filed a whistleblower lawsuit.

Eckard, who worked at the company’s offices in North Carolina, said she was fired in 2003 after repeatedly reporting the problems to the company.

“This is not something I ever wanted to do, but because of patient safety issues, it was necessary,” she said after the settlement was announced yesterday.

As a whistleblower under the federal False Claims Act, Eckard will receive $96m of the settlement paid by the company. The $600m civil penalty will be paid to the federal government and the states to cover false claims submitted to the Medicaid programme and other health care programmes.

The agreement with SB Pharmco Puerto Rico – an indirect subsidiary of GlaxoSmithKline – is the fourth-largest amount ever paid by a pharmaceutical company to the US government to resolve civil and criminal allegations, said Tony West, assistant attorney general for the civil division at the US Department of Justice.