Glaxo for $3 Billion Settles U.S Drug Disputes

GlaxoSmithKline PLC (NYSE:GSK), Britain’s largest Drug maker, said on Thursday that it has agreed with the United States government to settle most of its pending drug disputes for a sum of $3 billion, covered by existing provisions.

The drug maker was accused by the U.S government over improper marketing and development of its drugs. Glaxo has now agreed to settle its most significant disputes with the U.S government at a cost of $3billion. The final settlement, over both criminal and civil claims is expected to be finalized in 2012.

The deal concerns investigations by the federal government, the investigation into GSK sales and marketing methods that began in 2004 by the U.S Attorney’s office of Colorado and then U.S Attorney’s office of Massachusetts overtook it along with the investigations done by the U.S Department of Justice. These departments looked into the possible inappropriate use of supposed price exception and for the development and marketing of Avandia, the diabetes medicine.

Glaxo, last year took a massive $2.4 billion charge linked to claims on liability from most patients who had been consuming the medicine Avandia. The drug maker currently has $4.6 billion worth legal provisions. The deal to settle the latest issues follows a crackdown on U.S. drug manufacturers and sellers on unfair practices in the pharmaceutical industry that has pushed other drug makers to rethink business methods in the world’s largest market.

Andrew Witty, Glaxo’s Chief Executive Officer, said that this is an important step towards settling long standing disputes which don’t reflect the Glaxo that is today. Adding on he said that the company has modified procedures of marketing, compliance and selling in the United States to ensure operating at high standards of sincerity and to conduct drug business more transparently and explicitly.

Despite the massive settlement cost, nearly about 2.8 percent of Glaxo’s market value, GSK shares dropped only 0.3 percent at 060 GMT. Stoxx 600 Europe drug sector fell by 0.1 percent, as bidders acknowledged the need to clear long standing legal claims.

According to analysts the settlement was positive news as it would minimize financial uncertainties for the drug maker. GSK said the settlement cost of $3billion will be covered with existing legal provisions so there is no need to raise cash and the payment will be done to the U.S government with the help of existing cash resources. Mr. Witty said that Glaxo will reiterate full commitment to ensure suitable promotions of medicines to health care specialists and to the standards expected by the United States Government.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.