Glaxo Shows Importance of Compliance

For many with a business degree, compliance can be an annoying concept. Governments of all sizes are ready to lay out regulations that make companies jump through hoops. Why bother? If you’re GlaxoSmithKline, you know why, and it only cost $3 billion and pleading guilty to criminal charges. The U.K.-based company had allegedly gotten involved in illegally marketing off-label use, or the application of prescription medicines to conditions the Food and Drug administration hasn’t approved, as various outlets like the Wall Street Journal reported:

Over a period of more than a decade, the government’s latest investigation found, the company plied doctors with perks such as free spa treatments, Colorado ski trips, pheasant-hunting jaunts to Europe and Madonna concert tickets, Justice Department officials said. Meanwhile, it encouraged those doctors to write prescriptions for the two antidepressants that went beyond their sanctioned uses. U.S. law bars companies from marketing a drug for uses not approved by the Food and Drug Administration, though doctors may prescribe approved drugs as they see fit.

One example, according to prosecutor allegations, was well-known media personality Dr. Drew Pinsky. Known as Dr. Drew to his audiences, the DoJ claims he was paid $275,000 by Glaxo over a period of two months to promote the antidepressant Wellbutrin, claiming that it could improve the libido of depressed people, without revealing the sponsorship. Here are the details from the DoJ:

GSK agreed to plead guilty to a three-counts of 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 U.S. District Court. GSK will also pay $2 billion to resolve its civil liabilities with the federal government under the False Claims Act, as well as the states. The civil settlement resolves claims relating to Paxil, Wellbutrin and Avandia, as well as additional drugs, and also resolves pricing fraud allegations.

No matter how annoying regulatory issues may seem, and how unnecessary people in business may find them, they are a fact of commercial life. Noncompliance can have serious consequences, and getting accused is becoming easier than ever. For example, the Department of Justice has significantly increased enforcement of the Foreign Corrupt Practices Act, which can land companies and executives in hot water based on payments that subsidiaries or even sales agents make to gain business. Smart business today means understanding the legal restrictions on what you can and cannot do. Is it worth spending the time to learn? Ask Glaxo.