Earlier this week the Justice Department announced a $3 billion settlement of criminal and civil charges against pharma giant GlaxoSmithKline — the largest pharmaceutical settlement in history — for improper marketing prescription drugs in the late 1990s to the mid-2000s.
The charges are deadly serious. Among other things, Glaxo was charged with promoting to kids under 18 an anti-depressant approved only for adults; pushing two other anti-depressants for unapproved purposes, including remedying sexual dysfunction; and, to further boost sales of prescription drugs, showering doctors with gifts, consulting contracts, speaking fees, even tickets to sporting events.
$3 billion may sound like a lot of money, but during these years Glaxo made $27.5 billion on these three anti-depressants alone, according to IMS Health, a data research firm — so the penalty could almost be considered a cost of doing business.
Besides, to the extent the penalty affects Glaxo’s profits and its share price, the wrong people will be feeling the financial pain. Most of today’s Glaxo shareholders bought into the company after the illegal profits were already built into the prices they paid for their shares.
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