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GlaxoSmithKline (NYSE: GSK ) has reached a $3 billion settlement agreement with the U.S. government to end a federal inquiry into the company's pharmaceutical sales and marketing practices and an investigation over embattled diabetes drug Avandia.
The British drug maker, which has its U.S. headquarters in Research Triangle Park, North Carolina, said the final settlement is expected to address civil and criminal liabilities. The deal covers an investigation started by the U.S. Attorney's Office of Colorado into whether GSK promoted its drugs for unapproved, off-label uses. That inquiry was taken over by the U.S. Attorney's Office of Massachusetts.
Also, the Department of Justice has been investigating GSK's development and marketing of Avandia, the diabetes treatment that came under heavy scrutiny last year amid growing concerns that the drug increased cardiovascular risks and could lead to death. The Food and Drug Administration and the European Medicines Agency last year both imposed new restrictions on Avandia that all but spelled the end for the product. But the company still faced litigation regarding its marketing of that product as well. GSK in January disclosed it would take a $3.4 billion charge for Avandia litigation alone.
GSK said the settlement will reduce financial uncertainty for the company and is in the best interest of shareholders. The final agreement is subject to negotiation of specific terms and is expected to be finalized in 2012. GSK said it would make payments through its existing cash resources.
GSK CEO Andew Witty has been focused on changing the company since taking the reins at the pharma in 2008. Among the changes is a new sales and marketing strategy that removes the financial motive from pharma sales and instead evaluates them on criteria that includes customer feedback and the reps' ability to communicate about a drug. Witty has also tried to improve transparency about the company.
"This is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today," Witty said in a statement. "In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently."