GlaxoSmithKline Will Pay $750 Million to Settle Drug-Contamination Suit

GlaxoSmithKline Plc (GSK) agreed to pay $750 million to settle charges that the drug making giant sold contaminated anti-nausea medication and baby ointment made at a now-closed Cidra plant in Puerto Rico.

The company will pay $600 million in civil fines and $150 million in criminal fines, the U.S. Justice Department said in a statement Tuesday. As part of the settlement, Cheryl Eckard, a former employee, will receive $96 million. Eckard alleged that GlaxoSmithKline fired her instead of addressing the issues cited in the lawsuit.

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The charges stem from allegedly adulterated drugs GlaxoSmithKline made at its Puerto Rico plant between 2001 and 2005. The company's antidepressant drug, Paxil, was allegedly found to have been made without any controlled-release mechanism, while anti-nausea medication Kytril and anti-infection ointment Bactroban may have been contaminated with microorganisms, according to the Justice Department.

"Adulterated drugs undermine the integrity of the FDA's approval process, can introduce substandard or ineffective drugs on to the market and, in the worst cases, can potentially put patients' health at risk," said Tony West, assistant attorney general for the Justice Department's civil division, in Tuesday's statement.

"We regret that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice requirements and with GSK's commitment to manufacturing quality," said PD Villarreal, GlaxoSmithKline's head of global litigation, in a separate statement Tuesday.

The company in July said it would take a $750 million charge to second-quarter earnings related to the settlement finalized today. In all, GlaxoSmithKline said it would record legal charges of more than $2 billion during the quarter largely because of lawsuits related to its Avandia diabetes medication. That product was alleged to have caused heart attacks and strokes.

GlaxoSmithKline shares were little changed at $40.17 in New York Stock Exchange trading today.