To date, the largest civil fine ever assessed in one case under the Federal False Claims Act was $2 billion. The recipient was GlaxoSmithKline LLC. Criminal penalties added another $1 billion.

This is one of the largest pharmaceutical companies in the world. How did GSK run afoul of the law?

About the charges

In 2012, GlaxoSmithKline agreed to pay $3 billion in fines and penalties for unlawful marketing practices relative to certain drugs they sold through Medicare and Medicaid programs. The company was also charged with alleged false price reporting. GSK agreed to a guilty plea that included two counts of introducing misbranded drugs—Paxil and Wellbutrin—into interstate commerce and one count of failure to report safety data concerning the drug Avandia to the FDA.

Misbranding products

If applying to the FDA for approval that a certain drug is safe and effective, a company must specify each use of the drug it wishes to promote. “Off-label use” is the term given if the promotion efforts go beyond the intended uses that the FDA approves and the drug becomes “misbranded.”

Off-label promotion

The complaint the United States filed also claimed that GSK released misleading claims about the use of its asthma drug Advair. The company was charged with misleading the public on treatment guidelines and for promoting Advair as “first-line therapy” for patients with mild asthma, even though the medication was not approved for this kind of use. Further allegations concerned kickbacks that GSK reportedly promised to healthcare professionals if they would promote and prescribe Advair and other drugs, including Flovent and Valtrex.

Price reporting issues

The United States also alleged that in bundled sales arrangements, GSK included deep discounts they figured in when reporting best prices to the Department of Health and Human Services, as required. The result was that the company underpaid rebates owed to Medicaid and overcharged some Public Health Service entities for its drugs.

Tackling healthcare fraud

The fines and penalties assessed in the GlaxoSmithKline matter combine to illustrate in spectacular fashion how companies can commit healthcare fraud. Whistleblowers are often involved in bringing suspected unlawful actions to the attention of attorneys experienced with False Claims Act issues, and investigations in accordance with state and federal laws may follow.