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Manufacturing penalties of $750m for GSK

GlaxoSmithKline subsidiary SB Pharmco Puerto Rico will pay $750m for charges relating to the manufacturing and distribution of adulterated drugs

The US Attorney's Office for the District of Massachusetts has announced that the GlaxoSmithKline (GSK) subsidiary SB Pharmco Puerto Rico will plead guilty to charges relating to the manufacturing and distribution of adulterated drugs and will pay $750m in penalties.

The faulty products were made between 2001 and 2005 at a GSK plant in Cidra, Puerto Rico that was closed in 2009. They included the blockbuster antidepressant Paxil CR, as well as the anti-nausea medication Kytril (granisetron), the topical anti-infectant Bactroban (mupirocin), and the diabetes drug Avandamet (metformin/rosiglitazone).

The government alleges that SB Pharmco's manufacturing operations failed to ensure that Kytril and Bactroban were free of contamination from microorganisms and that the company's manufacturing process caused Paxil CR's layered tablets to split, meaning at least theoretically that tablets could be distributed that either did not have any therapeutic effect or did not contain the drug's controlled-release mechanism. In addition, the government claims that Avandamet tablets manufactured at the plant did not always contain the correct active ingredients.

The facility also had "longstanding problems of product mix-ups, which caused tablets of one drug type and strength to be commingled with tablets of another drug type and/or strength in the same bottle," according to the Department of Justice.

The penalties that GSK will pay consist of a criminal fine and forfeiture totalling $150m, as well as a civil settlement of $600m. The civil settlement, which will be paid to the federal government and the states, resolves charges that the company knowingly caused false claims to be submitted to Medicaid and other government healthcare programs for the adulterated drugs.

The civil settlement resolves a lawsuit filed in federal court in the District of Massachusetts under the whistleblower provisions of the False Claims Act. The whistleblower in this case, a former GSK quality-assurance manager named Cheryl Eckard, will receive about $96m from the federal share of the settlement.

GSK noted that it had already disclosed a $750m charge to its second-quarter 2010 earnings in July in connection with the agreement in principle and that it would record no additional charges as a result of the finalised agreement.

"We regret that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice requirements and with GSK's commitment to manufacturing quality," PD Villarreal, GSK's Head of Global Litigation, said in a statement.

"GSK worked hard to resolve fully the manufacturing issues at the Cidra facility prior to its closure in 2009 and we are committed to continuous improvement in our manufacturing processes. Our commitment to compliance with cGMP is demonstrated by the fact that we have not received an FDA warning letter at any plant since the Cidra facility was cited in July 2002."

27th October 2010

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