by Michael Connor

GlaxoSmithKline, PLC (GSK) and a subsidiary agreed to pay $750 million to settle charges that between 2001 and 2005 they distributed adulterated drugs made at GSK’s now-closed manufacturing facility in Cidra, Puerto Rico, the U.S. Justice Department said.

Glaxo-GSK_House_full_front_FeatureAuthorities said a corporate whistleblower – Cheryl Eckard – who had filed a lawsuit against GSK under provisions of the U.S. False Claims Act will receive approximately $96 million from the federal share of the settlement.

The False Claims Act allows private citizens with knowledge of fraud to file whistleblower suits on behalf of the United States and share in any recovery.  The Justice Department said it has used the False Claims Act to recover approximately $5.9 billion since January 2009.

In a statement, GSK noted that it had previously disclosed the agreement in principle to settle the case and had taken a $750 million charge to its second-quarter 2010 earnings.

“This settlement resolves a significant and long-standing legal issue facing the company,” said PD Villarreal, GSK’s Senior Vice President and Head of Global Litigation. “We regret that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice (cGMP) requirements and with GSK’s commitment to manufacturing quality.  GSK worked hard to resolve fully the manufacturing issues at the Cidra facility prior to its closure in 2009 and we are committed to continuous improvement in our manufacturing processes.  Our commitment to compliance with cGMP is demonstrated by the fact that we have not received an FDA warning letter at any plant since the Cidra facility was cited in July 2002.”

Authorities said the GSK Puerto Rico subsidiary, SB Pharmco Puerto Rico Inc., will plead guilty to a crime and pay a $150 million fine, including forfeiting assets of $10 million.

Under a separate agreement, GSK will pay $600 million to settle federal government and related state claims under the False Claims Act. The guilty plea and sentence is not final until accepted by the U.S. District Court in Boston.

Among other charges, prosecutors said the GSK facility in Puerto Rico “suffered from longstanding problems of product mix-ups, which caused tablets of one drug type and strength to be commingled with tablets of another drug type and/or strength in the same bottle.”

The government said that the subsidiary’s manufacturing operations failed to ensure that Kytril, an anti-nausea medication, and Bactroban, a topical anti-infection ointment, were free of contamination from microorganisms.

Tablets of the anti-diabetes drug Avandamet “did not always have the Food and Drug Administration (FDA)-approved mix of active ingredients, and, as a result, potentially contained too much or too little of the ingredient with the therapeutic effect,” according to the government

The company’s manufacturing process also caused tablets of Paxil CR, an anti-depressant, to split. The splitting caused the potential distribution of tablets that did not have any therapeutic effect and tablets that did not contain any controlled release mechanism, according to prosecutors.

Under the civil settlement, GSK agreed to pay $600 million to the federal government and the states “to resolve claims that it caused false claims to be submitted to government health care programs for certain quantities of adulterated Kytril, Bactroban, Paxil CR and Avandamet,” the Justice Department said.

The federal share of the civil settlement amount is $436.4 million, according to prosecutors. GSK will pay up to $163.6 million to states that participate in the agreement.

“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 Civil Division of the Department of Justice. “We will continue to work with our law enforcement partners to hold pharmaceutical companies accountable for this type of conduct and protect taxpayers from fraud, waste, and abuse.”