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In perhaps the largest drug settlement to date, GlaxoSmithKline PLC has announced that it will pay the federal government $3 billion.
The Glaxo settlement will cover a number of ongoing federal civil and criminal investigations. These include allegations that the company engaged in the off-label marketing of Wellbutrin; downplayed the risks of Paxil and diabetes drug Avandia; and defrauded Medicaid.
This deal doesn't end Glaxo's woes, as it is still facing a number of civil lawsuits brought by users of Avandia. The company is also facing lawsuits by a number of states, including one filed by South Carolina in June.
Moreover, the Glaxo settlement doesn't cover all federal investigations. An investigation into possible violations of the Foreign Corrupt Practices Act is still ongoing, according to the New York Times. The DOJ and SEC are looking into the company's foreign sales activities.
Still, some are criticizing the Glaxo settlement, arguing that such sums are built into the way drug companies do business. Indeed, Glaxo set aside $3.4 billion in January to pay for the Avandia investigations, reports the Times. It chose to forgo its fourth quarter profit.
Whether this cheapens the settlement is up for debate. But from a business perspective, it seems fiscally responsible to set aside a reasonable amount of funds when under investigation. And on the government's part, if it asked for significantly more, it could potentially force the company into bankruptcy.
Would you not advise your company to set aside money? It seems like doing so kept the Glaxo settlement within the manufacturer's means.