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For Big Pharma, Crime Pays

November 2011

Sidney M. Wolfe, M.D.

On Nov. 3, 2011, GlaxoSmith-Kline (GSK), the world’s fourth largest pharmaceutical company, announced that it had tentatively reached a $3 billion settlement — the largest ever — with the federal government to conclude an investigation into illegal activity going back at least seven years.

GSK allegedly promoted multiple drugs, including the dangerous diabetes drug rosiglitazone (Avandia), for uses for which they were not approved, going so far as to pay kickbacks to get doctors to prescribe the medications. The purported settlement breaks the previous $2.3 billion settlement record set in 2009 by Pfizer.

GSK has repeatedly been fined for unlawful conduct. A 2010 Public Citizen report (“Rapidly Increasing Criminal and Civil Monetary Penalties Against the Pharmaceutical Industry: 1991 to 2010,” at www.citizen.org/hrg1924) found that, over the past 20 years, GSK racked up $4.5 billion — more than any other company — in fines levied by the federal government and state governments for a plethora of illegal activities.

The pharmaceutical industry has paid more in penalties to the federal government as a result of these settlements than any other industry. The profits generated by such activities are massive, and when companies are caught, CEOs get off scot-free, while the penalties handed down barely put a dent in the drugmakers’ bottom lines.

The $3 billion settlement may seem like a sizeable sum, but consider that, according to The New York Times, GSK reaped profits of $5 billion on $43 billion worth of sales in just this past year alone. And by announcing the settlement in advance of its official conclusion, GSK put an end to years of investor uncertainty. The company’s stock rose 3 percent following the announcement, confirming yet again that for Big Pharma, at least, crime does indeed pay.

 

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