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GlaxoSmithKline settles false-claim lawsuit for $750 million

The US Department of Justice (DOJ) [official website] announced Tuesday that British pharmaceutical giant GlaxoSmithKline (GSK) [corporate website, JURIST news archive] and its subsidiary SB Pharmco Puerto Rico Inc., have agreed to plead guilty to civil and criminal charges [press release] relating to the manufacture and distribution of adulterated drugs and will pay a total of $750 million as part of the settlement. The charges stem from a false-claim lawsuit filed in 2004 in the US District Court for the District of Massachusetts [official website] by Cheryl Eckard, the company's former quality assurance manager, after her visit to its now-closed manufacturing facility in Cidra, Puerto Rico. In her complaint [text, PDF], Eckard alleged that the false claims made by GSK "arose out of chronic, serious deficiencies in the quality assurance function at the Cidra plant and the defendant's ongoing serious violations of the laws and regulations designed to ensure the fitness of drug products for use." As a result of pleading guilty to the civil charges, GSK will pay $600 million to the states and the federal government. Additionally, the company will pay a criminal fine in the amount of $150 million. In a press release [text] PD Villarreal, GSK's Senior Vice President and Head of Global Litigation, stated:

This settlement resolves a significant and long-standing legal issue facing the company. We regret that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice requirements and with GSK's commitment to manufacturing quality. GSK worked hard to resolve fully the manufacturing issues at the Cidra facility prior to its closure in 2009 and we are committed to continuous improvement in our manufacturing processes.
This settlement is the fourth largest health care fraud settlement in US history.

According to the Taxpayers Against Fraud Education Fund [advocacy website], a nonprofit public interest group, health care cases accounted for approximately 80 percent of the $3.1 billion recovered by the DOJ under the False Claims Act [text] last year. In September 2009, pharmaceutical company Pfizer [corporate website] and a subsidiary settled [JURIST report] a health care fraud suit [fact sheet] for a record $2.3 billion. As a part of that settlement, Pfizer agreed to pay $1 billion to resolve civil claims brought under the Federal Claims Act, which alleged that they illegally promoted the drugs Bextra, Geodon, Zyvox and Lyrica, caused false claims to be submitted to health care programs, and paid kickbacks to health care providers. Following the settlement, the company entered into an agreement with the US Department of Health and Human Services [official website] that set new policies and required them to continue the maintenance of a compliance program for five years.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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