Paxil, Avandia Lawsuits Result in $2.3B Liability Charge for Glaxo

GlaxoSmithKline has announced that it is setting aside $2.36 billion to cover the costs of Avandia lawsuits, Paxil lawsuits and to settle an investigation by the U.S. government into a former production facility. 

In a July 15 press release, the company announced that the money would be taken against its second quarter earnings to cover most of the outstanding litigation. The announcement comes the day after an FDA advisory panel voted to allow the diabetes drug Avandia to stay on the market, despite concerns over an increased risk of heart attacks.

The announcement does not detail how much has been set aside specifically to handle Avandia settlements, but earlier this week word leaked that the company had agreed to pay about $460 million to settle Avandia lawsuits filed by about 10,000 people.

Avandia (rosiglitazone) was first approved in the United States in 1998 to treat type 2 diabetes by helping control blood sugar levels. The drug has been used by millions of diabetics, but sales have plummeted in recent years following a May 2007 publication in the New England Journal of Medicine that identified an increased risk of heart attacks and congestive heart failure with Avandia. Many analysts say that Avandia is effectively a dead product after the FDA advisory committee agreed that it increased the risk of heart attacks and death.

The legal charge also includes a $750 million settlement for a little-known Department of Justice (DOJ) investigation into the company’s former Paxil and Avandamet production plant in Cidra, Puerto Rico. FDA investigators began citing the plant for quality control problems in 2002, and in 2005, the factory was raided by U.S. Marshalls. Federal investigators said Glaxo was ignoring public health standards with the deplorable conditions at the factory, which was shut down last year.

Also included in the legal set aside was an unspecified amount of money to settle Paxil lawsuits, and an antitrust lawsuit between GlaxoSmithKline and Apotex over a generic version of the antidepression drug.

In June, the company announced that it had agreed to settle about 200 Paxil birth defect lawsuits after a Philadelphia jury awarded a plaintiff $2.5 million.

Paxil (paroxetine) is a selective serotonin reuptake inhibitor prescribed to treat depression. Approved in 1992, it has become one of the most commonly prescribed drugs in the United States, with sales of just under $1 billion in 2008.

The use of Paxil during pregnancy has been linked to an increased risk of persistent pulmonary hypertension in newborns (PPHN) and other heart problems. In Paxil lawsuits pending throughout the United States, plaintiffs allege that GlaxoSmithKline hid test data and misled doctors and consumers about the risk.