Healthy Skepticism Library item: 19193

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Grogan K
GSK sets aside £2.2 billion for Avandia and marketing probes
Pharma Times 2011 Feb 18
http://www.pharmatimes.com/Article/11-01-18/GSK_sets_aside_%C2% A32_2_billion_for_Avandia_and_marketing_probes.aspx

Full text:

GlaxoSmithKline’s fourth-quarter earnings are going to be wiped out after the healthcare giant revealed that it is going to take another hefty charge relating to fresh legal battles concerning its diabetes drug Avandia and an investigation into its marketing practices in the USA.

Ahead of announcing its full-year financials on February 3, GSK announced that it expects to record a legal charge for the fourth quarter of £2.2 billion, equating to an after-tax cost of £1.8 billion. It relates to “additional provisioning in respect of the investigation by the US Attorney’s Office for the District of Colorado into the group’s US sales and promotional practices and for product liability cases regarding Avandia (rosiglitazone)”.

Last September, European regulators said the pill should be withdrawn from the market and major restrictions were placed on Avandia in the USA on the drug, amid claims it is associated with fluid retention and increased risk of heart failure. Third-quarter sales slumped 65% to £70 million.
Related Links
Avandia and healthcare reforms hit GSK earnings Avandia Reaction and implications

In the second quarter last year, GSK took a £1.57 billion charge to settle lawsuits related to Avandia but now says it has “continued to receive new product liability cases” regarding the pill in the USA. The company added that “the number of new claims received is substantial” and the charge has been taken following an assessment of these additional cases “and an estimate of likely future claims”.

PD Villarreal, GSK’s senior vice president of global litigation, said “we recognise that this is a significant charge, but we believe the approach we are taking to resolve long-standing legal matters is in the company’s best interests”. He added that “we have closed out a number of major cases over the last year and we remain determined to do all we can to reduce our litigation risk”.

The charge will swallow up GSK’s profits for the fourth quarter but analysts do not seem overly concerned. Credit Suisse said over half of it is likely to be related to the Colorado investigation, which has been ongoing since 2004, suggesting that the latest discussions with the US authorities have led to the need for higher provision”.