GlaxoSmithKline Slapped with a $53 Million Fine for Paying Off Competitors

February 12, 2016
By Alex Keown, BioSpace.com Breaking News Staff

LONDON – Britain-based GlaxoSmithKline has been fined $53 million by the United Kingdom’s Competition and Markets Authority (CMA) for allegedly paying millions to drug manufacturers to keep generic drugs out of the U.K., the Telegraph of London reported Friday.

This is the latest scandal to strike the company that has been at the center of several problems in the United States and in China.

In its latest issue, the Telegraph reported GSK allegedly paid more than $72 million between 2001 and 2004 to companies such as Generics UK Limited and Alpharma Limited to prevent generics of paroxetine to enter the country. GSK manufactures Seroxat, its own antidepressant version of paroxetine. In the UK, 4.2 million prescriptions were issued for Seroxat in 2000 and Seroxat sales exceeded more than $130 million in 2001, the CMA said in a statement. At the time, GSK held certain patents in relation to paroxetine.

“GSK challenged these pharmaceutical companies, alleging that their generic products would infringe its patents, and commenced litigation proceedings against GUK and Alpharma. Before that litigation went to trial, GUK and Alpharma each entered into agreements with GSK, which included terms prohibiting their independent entry into the UK paroxetine market,” the CMA said.

GlaxoSmithKline’s alleged payoffs prevented the consumer price of paroxetine from falling in the U.K., the CMA argued. When generics of the drug finally entered the U.K. in 2003, average prices of paroxetine dropped by more than 70 percent in two years, the CMA said.

GlaxoSmithKline’s alleged payoffs prevented the consumer price of paroxetine from falling in the U.K., the CMA argued. When generics of the drug finally entered the U.K. in 2003, average prices of paroxetine dropped by more than 70 percent in two years, the CMA said.

“The CMA has found that GSK’s agreements with each of GUK and Alpharma infringed the competition law prohibition on anti-competitive agreements. The CMA has also found that GSK’s conduct, in making payments to GUK, Alpharma and one further company, Norton Healthcare Limited (IVAX), to induce them to delay their efforts to enter the UK paroxetine market independently of GSK, infringed the competition law prohibition on abuse of a dominant position,” the CMA said.

GSK said it was considering an appeal to the largest fine on a single company handed down by the government agency since 2012. GlaxoSmithKline told the Guardian it did not accept the CMA’s ruling and also argued that its actions had saved the U.K.’s National Health Service money.

“GSK and the generics companies entered into these agreements at the time in order to settle costly, complex and uncertain patent disputes. The agreements allowed the generics companies to enter the market early with a paroxetine product and ultimately enabled a saving of over £15m ($21.7 million) to the NHS,” GSK told the Guardian.

GSK’s stock has not yet been negatively affected by the latest scandal. Stock is currently trading at $39.21, up from its opening price of $38.95 per share.

In addition to the fines levied against GSK, the CMA fined the three generic companies a combined $10 million.

The fine against GlaxoSmithKline comes at a time when some of the company’s investors are calling for Chief Executive Officer Andrew Witty to be replaced. Witty joined GlaxoSmithKline in 1985 and became CEO in 2008 following the retirement of Jean-Pierre Garnier. Since he took over the helm of the GSK, sales and earnings have dropped 6 percent and 9 percent respectively. During his tenure, the company has been at the center of several scandals, including a 2012 U.S. agreement to plead guilty and to pay $3 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices. GlaxoSmithKline was fined nearly $500 million by the Chinese government when it was revealed that some employees of the pharmaceutical company were bribing doctors with extravagant gifts to prescribe Glaxo medications to their patients. Additionally the company was also accused of violating China’s personal privacy laws through illegal videotaping. Last year, Glaxo faced allegations sales reps in Syria bribed doctors and officials to boost sales of its medicines.