Drug maker GlaxoSmithKline hit with $3B in penalties

British drug maker GlaxoSmithKline has admitted to promoting its popular antidepressant medications Paxil and Wellbutrin for unapproved uses and has agreed to the largest health care fraud settlement in U.S. history.

Glaxo agreed to plead guilty to illegally promoting Paxil for treating depression in children from 1998 to 2003 despite the fact that the FDA had approved it only for adults.

The drug maker also agreed that it promoted Wellbutrin – which was only approved for treating depression – for use in battling obesity, sexual dysfunction and attention deficit hyperactivity disorder. 

A federal judge last week approved an agreement that will result in Glaxo paying a total of $3 billion -- $1 billion in criminal fines and $2 billion to resolve civil claims under the government’s False Claims Act. According to U.S. Deputy Attorney General James Cole, it is the largest fine ever paid by a drug company.

“With this case, the federal government is sending a message to drug makers that any wrongdoing will be dealt with swiftly and harshly,” says attorney Brian Albert of legal information website THELAW.TV .

That message has been getting louder in recent years. Pfizer, the world’s biggest drug maker, was hit with $2.3 billion in penalties in 2009 for improperly marketing several mediations, including Viagra and Lipitor. Among other things, Pfizer was accused of using free stays at posh resorts and massages to entice doctors to prescribe their drugs.

“The Justice Department believes it needs to be more aggressive because historically the drug companies have treated fines as a simple cost of doing business,” explains Albert . “When you have a drug that brings in a billion dollars in annual sales, a $500 million penalty doesn’t hurt that much. But if you start hitting these companies with multi-billion dollar fines, they will pay attention.”

As part of this settlement, Glaxo has also admitted that it failed to report safety issues with its diabetes drug Avandia. The medication was banned in Europe and restricted in the U.S. after it was found to increase the risk of heart attacks and congestive heart failure.

Deirdre Connelly, Glaxo’s president for North America pharmaceuticals, responded to the fines in a blog posted on the company’s website. Connelly wrote that Glaxo has changed the way it promotes its products and that “we wish to live up to and exceed the expectations of those who watch us and work with us.”