For Immediate Release - October 26, 2010

AG Coakley's Office Recovers $8 Million for Massachusetts Medicaid Program in Investigation of Pharmaceutical Manufacturer GlaxoSmithKline

Settlement Will Return More than $348 Million to Medicaid Programs Nationwide

BOSTON - Massachusetts Attorney General Martha Coakley's Office has reached an agreement with pharmaceutical manufacturer GlaxoSmithKline ("GSK") to resolve allegations that the company's conduct - pervasive and systemic failure to maintain and operate its Cidra, Puerto Rico facility in accordance with FDA-mandated standards - caused false claims for four drugs (Avandamet, Paxil CR, Kytril and Bactroban) to be submitted to the Massachusetts Medicaid Program and other federally-funded health care programs.

Under the terms of the settlement, GSK will pay more than $8 million to the Massachusetts Medicaid Program, which provides funds for health care products and services furnished to eligible low-income individuals, including elder citizens, children and people with disabilities.

"Today's settlement is another example of my office's continuing commitment to work with our federal partners to monitor the pharmaceutical industry for unfair practices," Attorney General Coakley said. "We stand firm in our commitment to protect health care consumers and to recover taxpayer dollars expended for substandard products and services."

The Massachusetts recovery is part of a national civil settlement that will return more than $348 million to Medicaid programs nationwide and an additional $252 million to other federal health care programs. Attorney General Coakley's office took a lead role in negotiating the state settlement agreements, working in cooperation with the United States Attorney's Office for the District of Massachusetts, the United States Department of Justice, the Office of Inspector General of the U.S. Department of Health and Human Services and representatives of the attorneys general of the states of New York and Ohio.

GSK is a major international pharmaceutical manufacturer whose American operation is incorporated in Delaware, with its principal places of business located in Pennsylvania and North Carolina. Today's settlement is based on a whistleblower lawsuit filed in federal court in Massachusetts, which alleged that GSK was responsible for serious systemic deficiencies in the manufacturing processes at its manufacturing plant located in Cidra, Puerto Rico. The government's investigation confirmed that there were significant problems with the purity and/or potency of four drug products manufactured at the Cidra plant - Avandamet, Paxil CR, Kytril and Bactroban - and that federally-funded health care programs, including Medicaid, paid substantial sums in reimbursement for these products when they did not meet the standards required by the United States Food and Drug Administration ("FDA").

Avandamet
Avandamet is a combination Type II diabetes drug. The government's investigation revealed that the GSK facility in Cidra manufactured and released super-potent and sub-potent Avandamet to the marketplace between January 2003 and April 2005. These problems were the result of faulty and poorly maintained equipment run by machine operators who were not properly trained.

Paxil CR
Paxil CR is a controlled-release formulation of the antidepressant Paxil. The investigation showed that GSK released defective Paxil CR tablets, with the result that, from January 2002 through April 2005, consumers received pills that lacked the active ingredient and/or pills containing only the active ingredient, but lacking the controlled release mechanism.

Kytril and Bactroban
Kytril is an anti-nausea medication frequently used in conjunction with chemotherapy, and must be delivered in a sterile formulation. Bactroban is a topical anti-infection ointment commonly used to treat skin infections in children. In the course of its investigation, the government determined that, from January 2001 through December 2004, the Cidra facility manufactured and distributed Kytril and Bactroban products contaminated by microorganisms. These problems were the result of the plant's old and poorly maintained water system, design deficiencies in the plant's sterile facility, and poor sanitary practices by plant personnel.

In addition to the civil settlements, GSK subsidiary SB Pharmco Puerto Rico, Inc. will enter a plea of guilty to a felony charge of misbranding by introducing adulterated products into interstate commerce under the U.S. Food, Drug and Cosmetic Act and pay $150 million in criminal fines and forfeitures. GSK is also expected to enter into a Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S. Department of Health and Human Services ("HHS-OIG"), which will be made available on the HHS-OIG website ( www.oig.hhs.gov). GSK was required to address the manufacturing conditions at the Cidra plant in 2005 under the supervision of the FDA.

Assistant Attorney General Robert Patten of AG Coakley's Medicaid Fraud Division served as one of the lead negotiators on behalf of the states in this national settlement. He was assisted by Data Analyst Anthony Megathlin, also of AG Coakley's Medicaid Fraud Division, and by Assistant Attorneys General and data analysts from New York and Ohio.

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