Can business strategy in itself be a red-flag of corporate corruption?In one word, yes, and I discuss how in a recent guest blog (May 19, 2014) in Ethic Intelligence’s “Experts Corner.”I ask, if strategy is pulled back at the C-Suite, does it expose an executive message of strict anti-bribery compliance, while the economics of the sales forecast and corresponding personal incentive packages speak to a “win over everything else” mentality?
A gap in the debate As I shared in the Q and A, I am concerned about the lack of discussion with respect to the corruption risk that front line international sales and marketing personnel face. Specifically, I draw attention to how corporate business strategy can directly contradict, through sales growth plans and incentive compensation packages, the messages of anti-bribery compliance. Such a situation leaves the sales force to decide “what does management really want, compliance or sales?” While in past writings I have discussed “compliance as bonus prevention” in the context of incentive compensation, in the Q and A with Ethic Intelligence, I discuss the role of business strategy as a stand alone red-flag, of which compensation is a sub-set.
I am not alone While I might have thought I was alone in expressing this concern, I recently came across an article by Professor Mak Yuen Teen, published in the Singapore Business Times on May 21, 2014, but also on his blog Governance for Stakeholders, titled “Plausible deniability and graft by MNCs.” By way of background, Professor Mak is an Associate Professor of Accounting at the NUS Business School, Singapore. For his full (and impressive) CV, see here.
In his article, Professor Mak first calls attention to the recent reports of GSK bribery in China, and GSK’s public reaction as calling the conduct “outside of our processes and controls…” (The Guardian, July 22, 2013). However, Professor Mak goes onto demonstrate the reporting relationship between Mark Reilly, former head of GSK China (and subsequently charged by Chinese officials), and his supervisor, Abbas Hussain, President of Europe, Emerging Markets and Asia Pacific, who is part of the “corporate executive team of GSK.”
As Professor Mak states, with this relationship “direct involvement in the scandal has moved up the chain of command of GSK.” However, notwithstanding the discussion and relevancy of the “rouge employee” GSK script, there is a far more interesting element to Professor Mak’s writing as relating to corporate strategy.
“Did you wake up from a 10-year nap?” Professor Mak references an on-line comment to the GSK allegations as above, and asks “whether he (GSK CEO Andrew Witty) and the board ought to have at least asked some probing questions when GSK China was reporting strong sales growth over the years proceeding the scandal.” And that is where compliance gets separated from the reality of international sales growth. Clearly, GSK executives were aware of two basic facts:
- There was a robust anti-bribery program in place at GSK, as referenced in public statements. Professor Mak makes reference to a 29 page anti-corruption document, and Tom Fox discusses the GSK Corporate Integrity Agreement (here).
- There was high sales growth in China.
Therefore, was it in fact what I have called a “zero-sum” game of compliance and sales? Could those two factors have co-existed? In other words, and I don’t think is unique at all to GSK, “was it a case of don’t ask, don’t tell,” at the C-Suite, as Professor Mak remarks. When the regional sales numbers were reported into management was it all “high fives,” or did someone ask “hey, how did you get there?” I would ask the same of those who read this, who have been in those rooms, when the sales figures are shared. What is the message?
Professor Mak focuses on complex multinational corporations (MNCs), where corporate executives are separated from the front line of sales by a deep and wide organizational chart. He asks, “should only executives such as Reilly take the fall while senior management and the board escape accountability…” and “can they really claim that they did not know what was going on…?” I completely agree with Professor Mak, in that it is a long way from the C-Suite, where compliance programs commence, to the front line of international sales and marketing; however, does that distance justify the escape from accountability in not challenging the “reporting of strong growth in markets well known for corruption.”
Professor Mak thinks not, and makes a compelling case, which is reflective of my own view. I repeat his conclusion in its entirety and in bold (just to make sure you get the message):
“It is time for senior management and boards of MNCs to stop hiding behind business conduct codes and anti-corruption and compliance programs, and a “plausible deniability” defense, and address more fundamental questions about the benefits and costs of doing business in highly corrupt countries, their business practices, and how they reward, retain and promote their employees.” From my perspective, it would appear that the “default” for compliance and sales growth in low integrity countries, remains “zero-sum.” Maybe it is time that GSK listen to its own Chief Medical Officer James Shannon whom I referenced in a prior post, when he stated (in an interview with Reuters) that “sometimes you have to step backwards to move forward..” and that it is time for “an entire rethink about our business practice.”
What the hell were these idiot psychiatrists thinking?
“…A man with a history of mental illness killed his landlord and consumed part of his body two days after he came off his medication under the direction of a psychiatrist in Dublin..”
The Central Criminal Court has been told the medical professionals treating Saverio Bellante (36) in his native Italy believed he should remain on the medication for life.
After the dose of his anti-psychotic medication Olanzapine had been gradually lowered when he came to live in Ireland, the medication was stopped on the advice of a consultant psychiatrist on January 9th, 2014.
“…I have estimated in my book, ‘Deadly Medicine and Organized Crime’, that just one of the many preparations, Zyprexa (olanzapine), has killed 200,000 patients worldwide.”
-Peter Gøtzsche (Internationally respected Danish Professor of the renowned Cochrane research group in Denmark).
Is it no wonder that this guy had a complete psychotic break-down? Did the psychiatrist not realize that Zyprexa (Olanzapine) is one of THE most horrific psychiatric medications out there? I’d go as far as to say it’s just as bad as Seroxat.
In fact, it might even be worse.
I worked with a woman who was prescribed it and I witnessed her literally change into a shell of herself before my very eyes over a period of a few months. She turned into a zombie, her tongue would dart out of her mouth like a lizard, she looked like she was startled all the time, her face would contort, and spasm when she tried to do facial expressions, and her eyes were like pins, she was hallucinating half the time, half asleep the other half of the time and basically out of her head all the time on that disgusting drug. Long term psychiatric patients get worse from this type of psychiatric treatment because the drugs turn them into zombies, I saw it with my own eyes, and I was on Seroxat too, so I understand these drugs. I know the damage they cause. They are lethal! Absolutely lethal!
Robert Whitaker has written extensively about psychiatric meds literally killing patients every goddam day, when is the mainstream media going to wake up to this fact!
“The jury were told that two days before the murder he had attended an out-patient appointment at a Dublin clinic where the anti-psychotic medication Olanzapine he had been on was stopped. The psychiatrist for the prosecution Dr Stephen Monks said Mr Ballante had told him he had attended the clinic since arriving in Ireland in 2011. He attended every two months. Mr Bellante said he had been told that he would have to remain on medication for the rest of his life by doctors in Italy. However, medical records show that between January 2012 and January 2014 Mr Ballante’s anti-psychotic medication was gradually reduced in 2.5 milogramme steps up until 9 January 2014 when it was reduced to zero. Mr Ballante was also on a second medication: a mood stabiliser, sodium valproate. Following blood tests after the murder this was found to be lower than the therapeutic measure generally given. However, Dr Conor O’Neill, psychiatrist for the defence, told the court that one or more doses had perhaps been missed and this medication isn’t the one that keeps psychotic symptoms in check.
Secondly, what the hell was he being prescribed an Epilepsy drug for on top of his Zyprexa withdrawal? Sodium Valporate doesn’t stabilize moods (like it says in the article). The brand name is Epilim, the chemical name is Sodium Valporate- I know this because my younger brother was prescribed it when he was a child. My mother had the good sense to get him off it because he was having fits of rage on it, and mood swings. He was like a demon, and we were all actually terrified of him even though he was just a small child! He would go nuts on EpliIm and it made his fits worse! Now he’s ultra healthy, eats only a very specific healthy diet of whole foods and he goes to the gym most days, and guess what? he doesn’t need meds anymore and has no Epileptic fits anymore.
It seems to me that psychiatry is hell bent on using people for their sick agenda of human experimentation. We’re all just lab rats to them, and the result is- murders, suicides, murder-suicides, and life long psychiatric patients on drug merry go rounds, who never ever get better. Why? Because these drugs are toxic poisons that’s why!
The cure for all ‘psychiatric illnesses’ is not psychiatry, psychiatry compounds the traumas through psychotropic drugs and creates customers for life, and in many cases those customers have a short life, because these meds are killers.
All so called ‘psychiatric disorders’ come from trauma, and you cannot medicate trauma away with mind bending, health damaging, psychotropics! If you could then we’d all be on them and we would be getting better wouldn’t we? but guess what? Nobody ever gets better on long term psychiatric drug treatment. In what other medical specialty would you find that people actually get worse the longer their treatment goes on!
Only in psychiatry do you find that, because psychiatry is a fraud.
Some notes on the horrific Zyprexa drug…
Like Seroxat- Zyprexa causes similar symptoms- and like Seroxat- the withdrawal syndrome is horrendous, cruel and inhuman…
Zyprexa Withdrawal Symptoms: List of Possibilities
Below is a list of symtpoms that you may experience when coming off of Zyprexa. Keep in mind that not everyone will experience every single symptom listed below. You may experience a few of the symptoms or many and the severity of withdrawal will be influenced by individual factors.
- Anxiety: Many people report very extreme anxiety when they quit Zyprexa. This is a drug that many people find calming and when taken away, a person can feel extremely anxious. Do your best to practice relaxation exercises and recognize that the anxiety is part of withdrawal.
- Appetite changes: While on Zyprexa, many people experience significant increases in appetite. A person may feel as if they are never full and/or are transforming into Hulk as a result of the food that they eat. When coming off of Zyprexa, most people experience decreased appetite.
- Bipolar symptoms: Some people may experience a reemergence of Bipolar symptoms (e.g. mania) when they quit taking this drug. If you have Bipolar disorder and are on this medication, proceed slowly and with caution when withdrawing.
- Concentration problems: If you find it very difficult to concentrate on tasks such as reading, writing, and/or work, you are not alone. Many people have major difficulties with focusing when they are going through withdrawal. This symptom tends to improve over time as your brain adapts to functioning without the drug.
- Confusion: When you experience a bunch of uncomfortable physical symptoms accompanied by foggy thinking, concentration problems, and emotional disturbances, this can result in a state of confusion. If you feel confused often, just know that this will improve over time.
- Crying spells: The depression that people experience when quitting an antipsychotic like Zyprexa can be very tough to deal with. This may result in a person crying excessively because they feel so down in the dumps.
- Depersonalization: Do you feel unlike your old “normal” self? This is because your neurotransmitters are out of balance and have changed since you took the medication. It will likely take your brain some time to reset its homeostatic functioning.
- Depression: Many people report extreme depression when they stop taking this drug. The depression is thought to be a result of lowered levels of dopamine and serotonin. You should eventually experience some lift in mood after some time off of the medication.
- Diarrhea: Some people experience diarrhea when they discontinue this medication. This isn’t an extremely common symptom, but one that has been reported. If this is the case, you may want to consider some over the counter Imodium.
- Dizziness: Among the most common withdrawal symptoms from any psychiatric medication is that of dizziness. It is common for people to feel very dizzy, especially if the tapering was done too quickly. Dizziness will eventually lessen over time as the brain functioning readjusts.
- Fatigue: Most people report excessive tiredness and general fatigue when they come off of Zyprexa. You may have a difficult time performing everyday tasks because your energy level is so low. Just know that your energy level will eventually return as time passes.
- Hallucinations: There is evidence pointing to the fact that some people experience psychotic symptoms as a result of withdrawal. This is thought to be a result of changes in dopamine receptor functioning and dopamine levels.
- Headaches: Some people experience splitting severe headaches when they come off of this medication. Having headaches accompanied by dizziness can be a very difficult one-two punch. Just know that these should subside after your body restores proper functioning.
- Insomnia: This drug tends to calm people down and in many cases makes them sleepy. When coming off of it, the opposite can be true. Some people report such intense anxiety and an inability to fall asleep. Insomnia may persist for quite some time after your last dose. It should improve as you make some lifestyle changes and your neurotransmitter levels change.
- Irritability: Do you notice yourself becoming increasingly irritable? If you feel more irritable than normal and little things set you off, it may be a result of withdrawal. Neurotransmitter levels are in fluctuation, which is thought to lead to people feeling irritable.
- Memory problems: It is very common to experience poor memory functioning upon drug discontinuation. It isn’t well known as to why these drugs can lead to memory problems. With that said, most people do experience improvements in memory with time off of the drug.
- Mood swings: Some people experience pretty severe mood swings upon discontinuation. One minute you may feel as though the withdrawal is over, the next you may feel swamped in a state of deep depression. For this I’m not referring to “bipolar” mood swings, rather just unexpected changes in mood.
- Muscle cramps: Those who have taken this medication over the long term may experience muscle cramps and/or weakness during the withdrawal process.
- Nausea: Many people report intense nausea during the time in which they discontinue their medication. The nausea can be severe to the point that a person also vomits. In general, the nausea after the last dose shouldn’t last more than a couple weeks.
- Panic attacks: Some individuals report experiencing heightened anxiety to the point of panic attacks. In other words, a person experiences such high arousal that everyday activities lead to intense feelings of panic.
- Psychosis: It has been documented that withdrawal from antipsychotics can cause psychosis. It is not very common to experience this upon withdrawal, but it does happen. Obviously this may signify the reemergence of schizophrenia, but in those without schizophrenia, it can be part of withdrawal.
- Restlessness: If you feel especially restless for no apparent reason, it is likely due to the withdrawal that you are experiencing. The changes in neurotransmitters, elevated level of arousal, and anxious thinking can make a person restless.
- Suicidal thinking: It is extremely common to feel suicidal during your withdrawal. You may experience suicidal thoughts that seem as if they will never subside. Over time, these should gradually subside. If you feel suicidal and cannot cope with these thoughts, please seek professional help.
- Sweating: Many people sweat intensely when they withdraw from psychiatric drugs – this antipsychotic is no exception. If you notice that you are sweating profusely throughout the day and wake up sweating in the middle of the night, just know it’s part of the process.
- Vomiting: Feel flu-like to the point that you are nauseous and keep vomiting? Some people have reported intense vomiting spells during the first week or two when they initially quit this medication. To reduce this symptom, be sure to wean off of Zyprexa as gradually as possible
- Weight loss: Taking this drug is known to increase appetite and slow metabolism, which leads to many people gaining weight. Zyprexa is one of the worst drugs for trying to keep weight off – most people eat way too much food on this drug in particular. When you stop taking it and stay off of it for awhile, you should also lose the weight that you gained.
More than half a million people age 65 years or older die every year in the West from psychiatric drug use, and the worst part is that these death pills aren’t even effective at treating either mental illness or depression. Researchers from Denmark’s Nordic Cochrane Centre found that the benefits of psych drugs are minimal at best, and that most people who currently use them would be better off just ditching them entirely.
Published in The BMJ (British Medical Journal), an eye-opening paper by Professor Peter Gotzsche reveals that most antidepressants and dementia drugs are generally useless when it comes to providing tangible relief. The drugs are also vastly overprescribed, he says, and they come with such a high risk of adverse effects that it isn’t even worth it for the average person to try them.
Meanwhile, hundreds of thousands of people are dying every year from the normal and prescribed use of psych meds like selective serotonin reuptake inhibitors (SSRIs), which are linked to causing extreme depression and provoking users towards suicide or even homicide. Add to this the fact that most psych meds have never been shown effective, matching or not even reaching placebo in terms of their efficacy, and there’s no legitimate reason for their continued use.
The other thing I wanted to blog about before I take a rest is GSK’s latest corruption scandal in Romania which is just hitting the headlines.
This article from Reuters sums it up nicely:
Drugmaker GlaxoSmithKline, which was fined a record 3 billion yuan ($483 million) for corruption in China last year and is examining possible staff misconduct elsewhere, faces new allegations of bribery in Romania.
GSK confirmed it was looking into the latest claims of improper payments set out in a whistleblower’s email sent to its top management on Monday. A copy of the email was seen by Reuters.
The company is already probing alleged bribery in Poland, the United Arab Emirates, Lebanon, Jordan, Syria and Iraq.
The latest allegations say GSK paid Romanian doctors hundreds, and in one cases thousands, of euros between 2009 and 2012 for prescribing its medicines, including prostate treatments Avodart and Duodart and Parkinson’s disease drug Requip.
According to the email, the doctors were notionally paid for speaking engagements, but in three out of six cases, including the most highly paid one, they did not give any speech. The other three medics gave only one speech each, despite receiving multiple payments.
GSK also provided doctors with many international trips and made payments to them under the guise of participation in advisory boards, the email said.
The company said it would look “very thoroughly” into the claims, which cover a period before its pledge in December 2013 to stop paying doctors to speak on its behalf or to attend international conferences.
“We do receive letters of this sort from time to time. We welcome and support the opportunity for people to speak up if they have any concerns,” GSK said in a statement. “Sometimes we do find things and we act on it; sometimes our findings do not substantiate the matters being raised.”
The China scandal, which involved alleged bribes totaling hundreds of millions of dollars, hit GSK’s sales in the country, although Chief Executive Andrew Witty, reporting quarterly results on Wednesday, said its Chinese business was stabilizing.
The sender of the Romania email said its contents would be passed on to the U.S. Department of Justice and the Securities and Exchange Commission (SEC), which are investigating GSK for possible breaches of the Foreign Corrupt Practices Act.
An SEC program provides cash incentives for whistleblowers to report corporate malpractice.
Now why is the media not mentioning the fact that GSK are operating under a so called corporate integrity agreement since 2012; a pact which was originally initiated by the US department of Justice because of GSK’s record breaking 3 Billion dollar fine for fraud (you can read the hundreds of pages of fraud and corruption in the Dept of Justice complaint here).
And you can read through the 122 page corporate integrity agreement here.
I haven’t read though all of it, but I’d be pretty damn sure than the gist of the agreement was that GSK would agree that they would stop being a corrupt, sociopathic, fraudulent company, and start to behave themselves. I reckon that’s reasonable considering they just don’t seem to be able to police themselves, and they also have a knack of destroying patient’s lives with dodgy drugs. It’s only right that they should be forced to comply isn’t it?
So did they behave? No of course not, because GSK are systemically corrupt as all these multiple corruption scandals over several years clearly illustrate.
Corruption IS their business model!
They’ve been doing it for decades, and these fines are just the cost of doing business!
They don’t give a rats ass about patient health, fines, corporate integrity, ethics, or anything else..
They care only for profit!
I expect more GSK scandals over the coming months (they are never ending), but I am taking a break for while. I just wish that more people would speak out, and maybe some journalists would grow some balls and take this rat infested corrupt cartel to task and not leave it to us bloggers to do all the hard work all the time!
So, did GSK break its corporate integrity agreement?
The following articles are worth reading in regards to a possible answer to that question:
May 29, 2014
Friday, November 4, 2011
GlaxoSmithKline: Born Again Ethically?
GlaxoSmithKline, a drug company based in the E.U., agreed in 2011 to pay $3 billion to settle the U.S. Government’s civil and criminal investigations into the company’s Medicaid pricing practices and sales practices, including illegal marketing of Avandia, the diabetes drug linked to coronary problems. The settlement amount surpassed the previous record of $2.3 billion paid by Pfizer in 2009. Even so, it is doubtful that $3 billion proffered enough of a punch to motivate either Glaxo’s board or CEO to do what would be necessary to extirpate a corporate culture perhaps too comfortable with cutting corners.
Although $3 billion is a lot of money, the settlement removed “legal uncertainty”—something particularly important to investors. Les Funtleyder, a health-care strategist at a brokerage firm, explains. “I know $3 billion sounds like an astronomical number, but when you live in the world of worst-case scenarios, like investors do, $3 billion is a welcome relief. At least you have certainty.” Accordingly, the drug company’s stock rose 2.96% on the day of the announcement (November 3, 2011) to $44.55 (near its 52-week high) amid a broader market advance of about 2 percent, according to the New York Times.
The market’s verdict may give one pause in believing the statement of the company’s CEO, Andrew Witty. He said that the matters that had been under investigation no longer “reflect the company that we are today.” He went on to say, “In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently.” So why did a spokeswoman for the company say on the very same day that negotiations were continuing with the government over whether to include a corporate integrity agreement in a separate case regarding complaints about manufacturing quality at a plant in Cidra, P.R. that had since closed? To be sure, the agreement could provide further penalties for other violations in manufacturing, but prime facie, why should a company’s management that had come to see the light on the importance of business ethics not also see the importance (from at the very least a PR standpoint!) of embracing an integrity agreement?
Just one year before that of the $3 billion settlement announcement, the U.S. Justice Department had accused Lauren Stevens, vice president and associate general counsel of the company, of obstruction of justice and making false statements. To be sure, Stevens was subsequently acquitted of all six charges, but the charges alone point to the possibility of a corporate culture existing that disvalues business ethics. It is very unlikely that such a noxious culture can be eviscerated and replaced wholesale in a year without an extensive replacement of executives on down.
Suggesting that the company’s management would not have had sufficient incentive to radically challenge the operative values at the company, Patrick Burns, the spokesman for Taxpayers Against Fraud, asked, “Who at Glaxo is going to jail as a part of this settlement? Who in management is being excluded from doing future business with the U.S. Government?” For a company with a market value of more than $110 billion and sales of $43 billion in the year ending September 30, 2011, $3 billion with “legal certainty” does not proffer the sort of disincentive that is necessary to get major stockholders on the backs of a board to clean house in terms of a new management. To expect an existing staff (including upper echelons) to suddenly value integrity contradicts the nature of the human personality; replacing the managers wholesale would be necessary. So rather than settling for “legal certainty” on one of the legal matters then facing the company (questions of whether Glaxo violated the Foreign Corrupt Practices Act were still at issue), investors should have taken note of whether Glaxo’s board had demanded a corporate cleaning of management or simply taken the CEO’s words of least resistance at face value, as if adding procedures and announcing a newly discovered interest in integrity were sufficient.
How often do corporate boards prioritize, much less even mention the need to do what is necessary to radically change a sordid corporate culture? Given that the financial benefits of an ethical climate can be fuzzy while the costs of unethical practices can be discounted mentally due to their apparent low probability (which hides the high risk, which includes bankruptcy), a real kick is typically needed to commence real change sufficient to shift a corporate culture to a new ethical equilibrium. Typically, this requires a transfusion of new blood in and old blood out. Merely adding new blood while retaining even just some of the old can enable the stygian infection to spread to the new. Given what is required to expunge a squalid culture, it is indeed much easier to simply accept at face value the PR-ready asseverations of a seemingly-contrite “born-again” CEO and be done with the matter.
Click to add a question or comment on GlaxoSmithKline regarding its legal settlement and corporate culture with respect to business ethics.
Source: Duff Wilson, “Glaxo Settles Cases with U.S. for $3 Billion,” The New York Times, November 4, 2011. http://www.nytimes.com/2011/11/04/business/glaxo-to-pay-3-billion-in-avandia-settlement.html Additional Info on the Cidra plant settlement: http://www.whistleblowerfirm.com/wp-content/uploads/2011/03/Pink-Sheet.pdf
And one last thing..
What do former US Attorney General Eric Holder, GSK, and the firm- Covington & Burling- have in common?
One big huge stinking- revolving-door- syndrome, that’s what!
More on this when I return..
Justice Department scores victory for health consumers
But Glaxo didn’t have to endure a lot of gloating from U.S. Attorney General Eric Holder, whose Justice Department extracted the record settlement. Just as his staff was settling the record-breaking fraud case, Holder became the first Attorney General in U.S. history to be held in contempt of Congress. Holder was taken to task by a congressional committee for withholding documents relating to a botched gun trafficking operation known as “Fast and Furious.’’ On Monday, Holder said the contempt charge was a sham, claiming Republicans have made him a “proxy” for President Obama as the election year heats up.
As The Washington Post reported, Holder said the congressional panel was seeking “retribution against the Justice Department for its policies on a host of issues, including immigration, voting rights and gay marriage. He said the chairman of the committee leading the inquiry, Rep. Darrell Issa (R-Calif.), is engaging in political theater as the Justice Department tries to focus on public safety.’’
Whatever the views on those hot-button issues, there’s plenty of evidence to suggest that Holder’s Justice Department has been consistently aggressive in pursuing cases against Big Pharma.
“In 2009, Pfizer Inc. agreed to pay $2.3 billion to settle a federal investigation into whether it promoted the painkiller Bextra off-label,’’ the Wall Street Journal reported. Eli Lilly & Co. agreed to pay $1.4 billion to settle similar charges involving its antipsychotic medicine Zyprexa.’’ And this week’s Glaxo settlement, which still needs judicial approval, was the company’s fourth settlement in the past few years.
Glaxo officials said “we have learned from the mistakes that were made.”
The settlement amounts to another victory for health-care consumers after last week’s U.S. Supreme Court decision upholding the Obama administration’s landmark health-care reform act.
Covington Advises GlaxoSmithKline on $750 Million FCA Settlement
Posted by Brian Baxter
GlaxoSmithKline has agreed to pay $750 million to settle criminal and civil complaints accusing the company of selling tainted drugs from a shuttered Puerto Rican factory, The New York Times reported Tuesday afternoon. The settlement, which is the fourth-largest ever paid by a pharmaceutical company in U.S. history, calls for GSK to pay $600 million in civil penalties and $150 million in criminal fines as a result of quality control problems at the plant between 2001 and 2005.
Covington & Burling litigation partners Geoffrey Hobart and Matthew O’Connor and special counsel Mona Patel represented GSK in the matter. The firm is longtime outside counsel to the company, having advised GSK on its $253 million acquisition of Laboratorios Phoenix this past June.
The federal government began its own investigation of GSK in 2004 after Cheryl Eckard, a former global quality assurance manager at GSK, filed a qui tam (whistle-blower) suit under the False Claims Act against her employer in U.S. district court in Boston.
“She came to our law firm after having heard about our success in other qui tam lawsuits,” says Neil Getnick, Eckard’s lawyer and a managing partner of New York’s Getnick & Getnick. One of those suits was the $257 million Medicaid settlement Getnick helped extract from Bayer Pharmaceuticals in 2003.
Getnick, who advised Eckard along with partner Lesley Skillen, says that Eckard’s case against GSK stands on its own. While previous whistle-blower settlements against large pharmaceutical companies such as Pfizer and Novartis focused on the pricing and marketing of drugs, Eckard’s suit involved claims of how those drugs were made. (Scott Tucker of Boston’s Tucker, Heifetz & Saltzman served as local counsel to Eckard.)
“This is the first whistle-blower recovery for pharmaceutical manufacturing violations,” Getnick says. “This case is far more serious because it focuses on the quality of the drugs that were being produced, and specifically says that what was once the largest plant in the world for GSK was producing and releasing adulterated product. So this is not only a case of financial concern, but also one of patient safety, and that’s what separates it from every one up until now.”
Eckard stands to receive $96 million from the settlement paid by GSK, according to a Justice Department statement. Skillen notes that that GSK’s factory in Cidra, Puerto Rico, produced about $5.5 billion in pharmaceutical products annually for the London-based drug giant.
The GSK subsidiary pleading guilty to the charges, SB Pharmco Puerto Rico, entered a guilty plea on Tuesday. Getnick says that the state governments and the District of Columbia covered under the settlement will now execute their own 51 agreements, which could add to the whistle-blower windfall Eckard stands to receive.
The Justice Department filed its notice of intervention in the case on Tuesday, adopting the complaint filed by Eckard’s lawyers.
“This is one of the rare, if not unique, situations in a case of this size and dimension that the government did not feel the need or desire to substitute their complaint on top of the one that the relator and relator’s counsel filed,” Getnick says.
Covington’s Hobart did not respond to a request for comment.
Former General Counsel of GlaxoSmithKline Joins Covington & Burling as Senior Of Counsel