Glaxo CEO Responds to Fraud-fine Questions

From Philadelphia Inquirer (PA) (July 26, 2012)


July 26--Billion-dollar fines for inappropriate drug marketing are considered part of the cost of doing business for pharmaceutical companies, industry critics argue, and such conduct won't change until more executives go to jail for illegal activity.

Asked Wednesday about that criticism, GlaxoSmithKline chief executive officer Andrew Witty said he would let "governments and society" choose the drivers of enforcement. But he insisted that his company's operations have improved under his watch, whatever anyone might think in the wake of Glaxo's recent $3 billion payment for conduct under its previous leadership.

"The question of how people get punished or how entities get punished is a big question," said Witty, who became CEO in 2008. "It goes far beyond the drug industry and is for others to think about. I can absolutely answer you that I don'tt think it would have made any difference to the seriousness with which this organization has dealt with and reacted to the issues brought to our attention."

Those issues are related to the July 2 announcement by the U.S. Justice Department that Glaxo had pleaded guilty to three misdemeanor charges and paid a record $3 billion to settle allegations involving sales and safety reporting practices related to three drugs -- antidepressants Paxil and Wellbutrin, and the diabetes drug Avandia -- in the early 2000s.

"I wish it hadn't gone the way it's gone. But it had to be dealt with," Witty said. "I can assure you that having done this, I remain even more relentlessly focused on this agenda. It is absolutely the top focus of this group. We understand this is about our license to operate, and we take this very seriously."

Glaxo, which is based in London, has Pennsylvania and New Jersey operations and is scheduled to begin moving in December from Logan Square to new quarters at the Navy Yard in Philadelphia.

Witty is unusual among big drug-company CEOs. He often answers questions from reporters, not just stock analysts, when Glaxo releases quarterly finances, as it did Wednesday. Some questions were about flat profit; slight dips in sales (2 percent); the recent acquisition of the company Human Genome Sciences, whose headquarters are in Maryland; and governmental pricing pressure, especially in Europe.

But several reporters asked about Glaxo's expensive settlement with the Justice Department.

Witty was a company leader in Europe and other parts of the world before ascending to CEO in May 2008, which is after the criminal conduct involved in the plea agreement. The Glaxo board of directors was aware of the investigation when they chose Witty to replace Jean-Pierre Garnier over other reported candidates, including U.S.-based executives Chris Viehbacher and David Stout.

In congressional testimony in 2011, Dan Levinson, the inspector general of the U.S. Department of Health and Human Services, said: "We are concerned that these providers may consider engaging in fraud schemes, and paying civil penalties and criminal fines if caught, as a cost of doing business."

Four local executives from medical-device-maker Synthes Inc. were sent to prison in autumn. While a cautionary tale for some executives, such penalties remain rare, in part because those allegations went beyond those in many of the drug-marketing cases.

In the Glaxo case, whistle-blowers and the government raised allegations -- but no charges -- of inappropriate marketing of the asthma drug Advair as late as 2010.

Witty said the company "strongly" believed its behavior was appropriate in that area. But he also emphasized his attempts to improve Glaxo's internal-compliance procedures and culture, along with more public actions to prove Glaxo was a responsible health-care company. That includes disclosing payments to doctors, stopping donations to U.S. political parties, leading on contributions to fight neglected tropical diseases, and being the first British CEO to agree to a clawback in his employment agreement for any future misconduct.

Contact David Sell at 215-854-4506 or dsell@ phillynews.com, or follow

on Twitter @phillypharma.

Read his blog at www.philly.com/phillypharma.

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Posted: July 2012


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