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GlaxoSmithKline: Where Billions in Fines Don’t Dent the Bottom Line

GlaxoSmithKline: Where Billions in Fines Don't Dent the Bottom Line

Especially since the SCOTUS “Citizens United v. FEC” decision, both foreign and domestic corporations operating in America now possess many of the rights and privileges of citizenship, but are neither accountable for the related responsibilities nor subject to associated punishments like incarceration or execution, which encourage most of us to conduct ourselves within the bounds of the law.  There may be rare instances where the corporate veil is pierced and the white collar criminals hiding behind it are brought to justice, but in most cases corporations caught breaching legal covenants or violating laws or regulations simply end up having to pay their lawyers and a settlement or other monetary penalty.  And after our Kleptocracy-controlled Supreme Court made it easy for corporations to shield themselves from class action lawsuits with their April 2011 “AT&T Mobility v. Concepcion” decision, those settlements are likely to be much smaller:



So for any companies that might be ethically challenged, the pervasive profit motive may often have them asking this:

“Which is better for our bottom line?  To do the right thing, or just pay the fine?”

For the multinational Big Pharma conglomerate GlaxoSmithKline, it would be reasonable to assume that the asking of this question is not an occasional moral crisis but a standard operating procedure.  In support of this contention, consider that only yesterday the Wall Street Journal reported the following:

“In one of the largest settlements of its kind, GlaxoSmithKline PLC said it will pay the U.S. government $3 billion to settle several long-running criminal and civil investigations into the company, including allegations that Glaxo marketed some drugs illegally and defrauded the Medicaid program.  The settlement will also cover a Justice Department probe into Glaxo’s development and marketing of the diabetes drug Avandia, which has been linked to heart-attack risks.  Glaxo said the $3 billion is covered by the large legal provisions the company has taken in recent years as it worked to settle the probes – the company’s total legal provisions at the end of the third quarter were £2.9 billion ($4.6 billion).  The final settlement terms are still under negotiation, the company said, adding that it expects to pay the government next year.  Justice Department officials declined to comment Thursday…  The deal is one of the largest in a string of settlements the U.S. government has struck with drug companies as it tries to stamp out illegal marketing practices that flourished in the 1990s and early 2000s.  Critics of the industry say the sums, while large, are still dwarfed by the profits companies earned from marketing their drugs improperly.  ‘It’s a speed bump,’ said Kevin Outterson, co-director of the health-law program at Boston University.  ‘It’s a cost of doing business.'”


This was not the first time GSK found it more profitable to pay the fine than color inside the lines.  Barely a year ago DrugWatch.com posted this:

“GlaxoSmithKline, the manufacturer of several popular drugs, has agreed to pay a $750 million settlement in response to criminal and civil complaints against the company.  SB Pharmco Puerto Rico Inc., a subsidiary of GlaxoSmithKline, has pled guilty to producing and distributing a number of adulterated drugs, including popular medications Paxil and Avandamet.  As a result, GlaxoSmithKline will pay $150 million in criminal fines and $600 million in civil penalties, the U.S. Department of Justice announced on Tuesday.  An investigation of the company’s manufacturing practices showed that as many as 20 different drugs were unsafely produced for years at a large plant in Cidra, Puerto Rico…  In the case of Paxil, a popular antidepressant, the tablets were produced in a manner that caused them to split inappropriately, resulting in the potential loss of all therapeutic effect.  Avandamet tablets produced at the plant did not always contain the appropriate mix of ingredients and may have contained too much or too little of the active therapeutic agent…  The Cidra plant was the subject of a warning letter sent to GlaxoSmithKline by the U.S. Food and Drug Administration [FDA] in 2002.  GlaxoSmithKline closed the Cidra facility in 2009 because of declining demand for the medications produced there, according to the company.”


Let me repeat those last two sentences:

“The Cidra plant was the subject of a warning letter sent to GlaxoSmithKline by the U.S. Food and Drug Administration [FDA] in 2002.  GlaxoSmithKline closed the Cidra facility in 2009 because of declining demand for the medications produced there, according to the company.”

Now let me ask you two questions:

1. If the FDA knew that popular drugs coming out of that plant posed a clear and present danger to the health of potentially millions of Americans in 2002, why did they allow that plant to continue operating until 2009?

2. When GSK finally did close the plant, was their primary motivation to do so the increasing pressure from the FDA, or the decreasing profitability of the products?

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