Paxil Five-Year Litigation History

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The plaintiffs in this case also alleged that Glaxo fraudulently obtained a patent to cover Relafen when internal company documents showed that Glaxo knew that a patent should not be issued.

The settlement involved many Federal cases that had been consolidated in a US District Court in Massachusetts, that claimed that the monopoly had resulted in consumers and payors paying exorbitant prices for Relafen.

"Once approved by the court," PAL said in a statement, "the settlement will result in the creation of a $25 million consumer pool through which individuals may seek reimbursement for Relafen overcharges, and a $50 million pool for third party payors."

The court issued its final order approving the settlement on October 13, 2005.

In a completely different type of litigation, on January 21, 2005, the New York Daily Record reported that 1,300 Glaxo workers who were improperly classified as temporary employees were awarded a $5.2 million settlement.

With such classifications, the Record said, workers were not able to take advantage of the drug maker's employee benefit plans.

Six months later, in a September 20, 2005 press release, the US Department of Justice announced a $150 million settlement with Glaxo to resolve charges that the company engaged in a scheme "to set and maintain fraudulent and inflated prices" for two drugs, knowing that federal healthcare programs established reimbursement rates based on those prices.

According to the DOJ, the difference between the reimbursement rate and the actual price paid by healthcare providers is commonly known as the "spread," and the larger the spread the larger the profit or return on investment.

The drugs involved are typically administered in doctors' offices or hospitals to counter nausea brought on by chemotherapy and radiation. The DOJ said that Glaxo purposely overcharged government programs and then charged health care providers less than the reimbursement rate, to make it more profitable for those providers to sell Glaxo drugs.

The government also alleged that Glaxo engaged in a "double dipping" billing scheme by encouraging health care providers to pool leftover vials of one drug to create an extra dose, which then would be administered to a patient and rebilled to health care programs.

"Because reimbursement from federal programs was based on the fraudulent, inflated prices," the DOJ charged, "GlaxoSmithKline caused false and fraudulent claims to be submitted to federal healthcare programs."

The investigation in this case was massive and involved the Civil Division of the DOJ, the US Attorney's Offices for the Districts of Massachusetts and the Southern District of Florida, the Office of Inspector General for the Department of Health and Human Services, the Office of Program Integrity of TRICARE Management Activity, and the National Association of Medicaid Fraud Control Units.

The investigation began after the filing of a whistleblower lawsuit by a small, home-infusion company, Ven-A-Care of the Florida Keys under the False Claims Act which allows private persons to file whistleblower suits to provide the government with information about wrongdoing.

When persons submit false claims, under the FCA, the government is entitled to recover treble damages and $5,500 to $11,000 for each claim. In lawsuits in which the government is successful in litigating the case, the whistleblower can receive between 15-25% of the amount recovered. As part of the settlement in this particular case, the DOJ said the whistleblowers received approximately $26 million.

In addition, as a condition for doing future business with the Medicare and Medicaid programs, Glaxo signed an addendum to an existing Corporate Integrity Agreement requiring the company to report accurate average sales prices and average manufacturer's prices for its drugs covered by Medicare and other federal healthcare programs.

"This agreement marks another in a series of cases in which a pharmaceutical manufacturer has settled claims that its fraudulent drug pricing cost federal healthcare programs and taxpayers millions of dollars," said Assistant Attorney General Peter Keisler of the DOJ's Civil Division in the press release.

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