Is $750 Million Enough to Get Your Attention?

In the largest criminal (and civil) payment for the manufacture of adulterated drugs, GlaxoSmithKline yesterday agreed to pay $750 million to settle complaints that it had knowingly sold contaminated and/or ineffective products.

The complaints all stem from a plant in Cidra, Puerto Rico, since closed. (News articles from the New York Times here, The Guardian here, National Public Radio here; there are many, many more.)

In a statement, a GlaxoSmithKline (GSK) senior vice president said, "We regret that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice (cGMP) requirements and with GSK's commitment to manufacturing quality. 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."

This is an apology? And what is "cGMP" anyway -- not making people sick when they use your product?

So ... just how serious were those "manufacturing issues"? NPR's Scott Hensley termed some of the "sobering":

• Nausea medicine Kytril and antibiotic ointment Bactroban could have been contaminated with bacteria.
• A special coating on Paxil CR pills cracked, leading to medicine that wasn't effective.
• Tablets of Avandeamet, a diabetes drug, were sometimes too strong or too weak.
• Different medicines were mixed up in the same bottles.
  

How were these "sobering" issues first uncovered?

Following a Food and Drug Administration (FDA) warning letter in 2002, Cheryl Eckard, then a GSK global quality assurance manager, was sent to the Puerto Rico plant to lead a team of 100 experts to fix the cited problems.

According to Gardiner Harris and Duff Wilson's article in the New York Times,

[Cidra] was GlaxoSmithKline's premier manufacturing facility, producing $5.5 billion of product each year. But Ms. Eckard soon discovered that quality control was a mess: the water system was contaminated; the air system allowed for cross-contamination between products; the warehouse was so overcrowded that rented vans were used for storage; the plant could not ensure the sterility of intravenous drugs for cancer; and pills of differing strengths were sometimes mixed in the same bottles.

Ms. Eckard complained to her supervisors, and was ignored. Instead, she was fired. A ten-year GSK employee, she turned to the FDA and sued the company. The complete complaint can be found online here; it does not make for pleasant reading. Ms. Eckard will receive $96 million, one of the highest whistle-blower awards for health care fraud.

The three-quarters of a billion dollars that GlaxoSmithKline is paying to settle the charges is the largest ever paid for the manufacture of adulterated drugs, but is only the third highest that drug companies have paid in the last two years. Pfizer agreed to pay a total of $2.3 billion in September 2009 to settle charges relating to Bextra, Zyvox, Lyrica, and other drugs (I wrote about that settlement, here), and Eli Lilly agreed to pay a total of $1.4 billion in January 2009 to settle charges related to its Zyprexa drug.

The key difference in the GSK case is that nearly all prior settlements dealt with illegal marketing issues (e.g., in the Pfizer case, a government investigation showed that Pfizer actively promoted off-label use of Bextra, by providing all-expenses-paid trips, and even kickbacks, to doctors). As the Times article noted, this GSK case "is the first successful case ever to assert that a drug maker knowingly sold contaminated products." (emphasis added)

It should also be noted that 2009 profits were up 20% over the previous year (Financial Channel article here), to 5.5 billion pounds (some $8 billion). At which point $0.75 billion doesn't sound so bad. According to Market Watch, third-quarter 2010 sales and profits are down, larger due to lower sales of Avandia (a troubled diabetes drug) and Valtrex (used to treat certain herpes infections). The company had in July set aside $750 million in anticipation of reaching an agreement with the government regarding the Cidra manufacturing complaints.

I have written before that the starting point of business ethics is contractual: I agree to provide a fair product (or service), and you agree to pay me a fair price. After that, the arguments can start.

When it comes to pharmaceuticals, the floor below which we must not go is: It's safe; it's effective; it's not contaminated; it's what I say it is.

GSK went down to the sub-basement on this one. Very senior heads should roll.