Avandia and legal charges may cost GlaxoSmithKline £2.2 billion

More trouble for GSK

More trouble for GSK

GlaxoSmithKline has made provisions worth £2.2 billion in the fourth quarter of 2010 to settle claims arising out of its diabetes drug Avandia and an US Federal Investigation into the company’s sales and promotional practices for nine other products in the US. The charges are more than the company’s fourth quarter’s net profit and will wipe Q4 earnings of 2010 clean.

The US had restricted the sale of Avandia and Europe banned its use after the drug was suspected to cause heart disease. In July 2010, Glaxo had announced a similar charge of £1.57 billion for its manufacturing standards in Puerto Rico, its antidepressant drug Paxil and claims over Avandia as well.

PD Villarreal, a senior Vice President of the Global Litigation Team said: “We recognise that this is a significant charge, but we believe the approach we are taking to resolve long-standing legal matters is in the company’s best interests” and added “we have closed out a number of major cases over the last year and we remain determined to do all we can to reduce our litigation risk”.

The investigation currently underway against the company has been initiated by the Colorado US Attorney’s office over the company’s promotional practices between 1997 and 2004. Though Glaxo refused to identify the drugs, it said it pertains to ‘off-label promotion’ – an activity where Pharma companies promote drugs for usage without the approval of regulators.

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