Pharma

Latest GSK Avandia pain: A $3.4 billion charge for legal costs

GlaxoSmithKline's Avandia problems are resulting in the company setting aside $3.4 billion to pay for legal costs related to its former diabetes drug, which has been linked to greater cardiovascular risks. Though the drug is now scarce in the European and U.S. markets thanks to greater regulatory scrutiny, GSK faces mounting expenses as Avandia legal claims continue to be filed.

Woes for GlaxoSmithKline’s (NYSE:GSK) embattled diabetes drug Avandia continue and the company will take a $3.4 billion charge in the fourth quarter to cover additional legal costs.

The British pharma giant, which has its U.S. headquarters in Research Triangle Park, disclosed the charge on Monday, saying it will pay for additional legal work related to the U.S. Attorney’s Office for the District of Colorado investigation into GSK’s Avandia  sales and promotional practices.

“We recognize that this is a significant charge, but we believe the approach we are taking to resolve long-standing legal matters is in the company’s best interests,” P.D. Villarreal, GSK’s senior vice president for global litigation, said in a prepared statement.  “We have closed out a number of major cases over the last year and we remain determined to do all we can to reduce our litigation risk.”

Avandia is GSK’s former blockbuster type 2 diabetes drug that came under scrutiny in the United States and Europe last year after being linked to higher risks of heart attack and stroke. In the United States, GSK made the drug at a manufacturing facility in Zebulon, North Carolina.

Last September the U.S. Food and Drug Administration and the European Medicines Agency both issued new guidelines strictly limiting Avandia. The drug was suspended in Europe and allowed in the United States only with stronger warnings about the risks.

The charge follows a $2.4 billion charge that GSK announced in July. The company said it makes financial provisions for legal expenses when it can make a “reasonable estimate” of the likely outcome of the dispute. But there’s no telling whether the $5.8 billion that the company has set aside for Avandia legal expenses will be the end of it. Litigation, investigation and even settlement negotiations could all change the equation. If there are any revisions to that number, expect it to go up. GSK says it continues to receive new Avandia legal claims.

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