Glaxo settles bad drug claim for over $40 million

PROVIDENCE, R.I. – The American subsidiary of a major British drug maker, GlaxoSmithKline LLC, has agreed to pay more than $40 million to 37 states and Washington, D.C., to settle complaints alleging manufacturing process issues at a now-shuttered plant in Puerto Rico, the company and several states' attorneys general said Thursday.

The attorneys general say the company engaged in unfair and deceptive practices in making and distributing the drugs.

In a statement Thursday, GlaxoSmithKline says it settled the state claims "to avoid the expense and uncertainty of protracted litigation and trial." The drug maker is not admitting to wrongdoing under any of the states' consumer protection laws, the statement said.

The state complaints come after GlaxoSmithKline agreed last year to pay $750 million in civil and criminal penalties to settle federal claims related to faulty manufacturing processes at its plant in Cidra, Puerto Rico. Part of that money went to states to cover false claims submitted to Medicaid and other health care programs.

The federal investigation began after a company quality assurance manager reported to the Food and Drug Administration that she had found numerous violations at the Puerto Rico plant, such as a contaminated water system and an air system that allowed for cross-contamination between different products manufactured there.

Federal prosecutors alleged the company let a number of drugs made at the plant be adulterated between 2001 and 2005, including Kytril, an anti-nausea drug used to treat cancer patients; the popular antidepressant Paxil CR; diabetes drug Avandamet; and the antibiotic Bactroban.

At the time, the company said it regretted operating the plant in a manner violating good manufacturing practices. In addition, SB Pharmco Puerto Rico Inc., an indirect GlaxoSmithKline subsidiary, pleaded guilty to certain charges related to drug lots produced at the Cidra plant in 2003 and 2004.

The drug maker closed the factory in 2009, citing declining demand for drugs made there, and sold it the following year.

In Rhode Island, which was among the states involved in Thursday's settlement, Attorney General Peter F. Kilmartin chastised the company.

"With the record profits the pharmaceutical companies make, it is egregious they would cut corners and put millions of people at risk," Kilmartin said.

Other states involved include Massachusetts, where the federal claims were brought, as well as California, Illinois, Colorado, Connecticut and Florida, according to the complaint filed in Rhode Island Superior Court. The settlement still requires approval by the court, Kilmartin's office said. The other states and Washington filed complaints in their own courts.

Rhode Island will receive more than $500,000, while neighboring Connecticut is set to get just over $750,000, according to that state's attorney general. Colorado's attorney general says his state will get about $840,000.

Federal prosecutors said last year that there did not appear to be any harm to patients due to the quality problems at the Puerto Rico plant. Those problems included failing to ensure Bactroban and Kytril were free of microorganism contamination and processes that could have rendered controlled-release Paxil tablets ineffective, prosecutors said.

GlaxoSmithKline employs 96,500 people in over 100 countries.