On July 2 GlaxoSmithKline, the British pharmaceutical company, agreed to plead guilty to off-label promotion of almost a dozen of its drugs, most notably Paxil, Wellbutrin, and Avandia, and will pay $3 billion in fines and civil damages. This is the largest penalty ever levied against a pharmaceutical company, exceeding the $2.3 billion fine Pfizer paid for illegal drug promotion. This record-breaking penalty comes on the heels of several other high-profile cases involving illegal drug marketing, including a $1.6 billion settlement against Abbott Laboratories, and a potential Johnson & Johnson fine of over $2 billion.
While these are certainly notable sums, some critics are still unhappy with the penalties. They point to Glaxo’s sales numbers — Paxil alone made $11.6 billion during the period the settlement covered — and argue that for true change to take place executives should be criminally prosecuted. In what is believed to be a first, the settlement did require the company to revoke any bonuses paid out to top executives if they engaged in or supervised illegal activity. This is definitely a noteworthy precedent to consider, and regardless of whether or not criminal charges ever do become a standard, the move toward punishing individuals rather than relying solely on levying fines against corporations has some serious implications for corporations, their legal departments, and ultimately the law firms that will represent them.
The importance of individuals in these huge cases does not stop with the top executives either. The case itself originated with claims by four whistleblowers about various illegal practices within the company. These practices include doling out trips to the Caribbean and other “gifts” for doctors who were considering the drug. A centerpiece of the U.S. Department of Justice’s case against Glaxo was a video of a sales conference in which Glaxo promised lavish bonuses to its sales force for every prescription of Avandia sold as a treatment for persistent asthma.
It remains to be seen what effect this case will have on pharmaceutical companies’ marketing of drugs, but according to GlaxoSmithKline CEO Andrew Witty’s statements, GSK is no longer using sales of a drug to determine employee compensation. Perhaps we will see a reduction in the number of these high-profile off-label drug marketing lawsuits from the threat of individual penalties, but it is too soon to say whether or not these consequences are harsh enough to deter similar behavior in the future.