On the day of the biggest healthcare fraud settlement in US history, GlaxoSmithKline shares were actually up 1.75% even as the Dow was down. This is partly because the initial terms of the $3 billion settlement with the US Department of Justice had been announced in November, and the global pharma giant had already set cash aside for it. Still, it appears to buttress the suspicion that the pharma industry sees even seemingly big settlements as just the cost of doing business. Indeed, in the decade covered by the settlement, the diabetes drug Avandia alone raked in $10.4 billion in sales, the antidepressant Paxil $11.6 billion and ?the happy, horny, skinny pill? Wellbutrin $5.9 billion?many more drugs were fraudulently marketed and billed to Medicaid. At one of the many Puerto Rico/Hawaii/Las Vegas junkets hosted to push doctors to prescribe the concerned drugs, the man who gave the current chief executive Andrew Witty a run for the chair reportedly urged, ?Let?s spin the big jackpot here. Five dollars for every rep for every 100 (prescriptions). I think we can make some millionaires.?
On the other hand, Witty emphasises that Glaxo has cleaned up its act now. It?s not rewarding salespeople by the number of prescriptions sold any more. More importantly, the settlement requires the company?s activities to be monitored by the government for five years. In a first, bonuses etc of top executives who are found to be complicit in wrongdoing in the future will be withdrawn. What is interesting from the Indian point of view is that the Justice Department?s aggressive battle has been facilitated by a strong whistle-blower law. In fact, the entire case has been built on testimony by ex-Glaxo employees and they will even be getting a share of the money being recovered by the government.
