GlaxoSmithKline's decision to resolve its most onerous litigation in one fell swoop put it among the largest payouts by a pharma company.

The $2.36 billion total is double the $1.2 billion Lilly paid to settle Zyprexa (olanzapine) personal injury suits and about half the $4.85 billion Merck forked over to resolve litigation over Vioxx (rofecoxib), which unlike Zyprexa had been withdrawn from the market. But GSK's tally covers litigation over several products.

The company announced July 15 that it expects to record a legal charge of $2.36 billion in the second quarter to settle several litigation matters. Of this sum, $750 million is to settle a government investigation of its former manufacturing site in Cidra, Puerto Rico. The remainder will go towards settlements of product liability and antitrust litigation involving Paxil (paroxetine), and product liability litigation regarding Avandia (rosiglitazone) and other products.

GSK did not break out figures for these matters but the company has reportedly agreed to pay $520 million to resolve about 10,700 Avandia suits (¹ Also see "Grassley And Baucus Turn Up Heat On GSK With Attack On Avandia Data Handling" - Pink Sheet, 13 July, 2010.). There have been 14,000 Avandia claims made against the company. Of these, 4,000 to 6,000 were subject to a tolling agreement, in which GSK delayed the statute of limitations to give the parties additional time to decide whether to file suit.

GSK Avoided Higher Avandia Payout

The company decided to resolve the bulk of these cases prior to FDA's advisory committee meeting on Avandia. There was concern that the committee might advise FDA to withdraw the drug from the market, which would have increased the company's liability. But the committee voted instead to increase the warnings and restrictions on use.

The Avandia settlement is far below the billions that some had predicted the company might have to pay. The largest pharma product liability settlements have involved drugs that were withdrawn from the market and the sum for Avandia would likely have been much higher if it had been pulled.

At the top of the charts is the $21.1 billion Wyeth put aside to resolve litigation over fen-phen diet drugs, which were withdrawn from the market in 1997 after they were linked to heart valve disease. In addition to Merck's Vioxx settlement, other big settlements include Bayer's $1.6 billion payment to settle Baycol (cerivastatin) litigation. The cholesterol-lowering drug was withdrawn in 2001 after reports it caused muscle damage that led to kidney failure.

Glaxo Hired Mediator For Paxil Litigation

The Paxil litigation was GSK's next major headache. About 650 cases had been filed against the company, primarily in state court in Philadelphia. The bulk of the cases claim Paxil caused birth defects. There are less than 20 claims that the drug caused homicidal or suicidal behavior and a third group of suits claiming the drug is addictive and causes dependency and withdrawal reactions.

Two Paxil cases had gone to trial. Last year a jury issued a $2.5 million verdict against GSK in a birth defect case. And in 2001 there was a trial in a homicide/suicide case that resulted in a $6 million verdict against the company. GSK said it had resolved the vast majority of the Paxil cases and that the terms are confidential.

One of the lead plaintiffs' attorneys in the Paxil litigation said the judge had started grouping the cases together for trial, which put the defense at a disadvantage. The attorney also noted that GSK had hired a skillful mediator who may have helped move the company towards a settlement.

The Paxil antitrust suit arose out of a patent infringement complaint GSK brought against Apotex. Apotex filed an antitrust counterclaim. GSK said Apotex was seeking damages "substantially larger" than the amount GSK had sought and that they would be trebled if there was a jury verdict against the company.

FDA Issued Consent Decree Against Cidra Plant

As for the government investigation of its former Puerto Rican manufacturing plant, GSK said it had reached an agreement in principle with the U.S. Attorney's Office for the District of Massachusetts and the Department of Justice to pay $750 million. GSK ceased operations at the facilities in July 2009.

The plant had faced problems for several years. In 2003 the U.S. Attorney's Office issued a subpoena for the plant's production records. And in 2005 FDA seized lots of Paxil CR and Avandamet from the plant citing deficiencies in manufacturing processes (² Also see "FDA Seizure Of Paxil CR, Avandamet Follows GSK's Failure To Recall All Lots" - Pink Sheet, 4 March, 2005.). The company subsequently reached a consent decree with FDA to review its GMP compliance and come up with a plan to correct the problems (³ Also see "FDA Consent Decree’s Impact Is Limited, GSK Says" - Pink Sheet, 28 April, 2005.).

GSK noted in its annual report that a former employee had filed a complaint under the False Claims Act, which the U.S. District Court for the District of Massachusetts unsealed in 2007.

GSK did not specify what other products may be the subject of settlement agreements. Its 2009 annual report cites other legal proceedings that have yet to be resolved. They include product liability suits alleging the zinc in Poligrip causes copper depletion and permanent neurological injury. The company announced in February that it was voluntarily withdrawing all zinc-containing formulations of the denture adhesive.

The government is also investigating GSK for sales and promotional practices relating to nine of its largest selling products. That investigation was initiated in 2004. GSK is also subject to a government investigation of its nominal pricing arrangements and average wholesale price litigation.

- Brenda Sandburg ( ⁴ b.sandburg@elsevier.com )

Ripping The Bandage Off: GSK Resolves Suits On Many Products For $2.3 Bil.

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