GlaxoSmithKline takes a $3 billion hit to avoid worse


You have to have pretty grimy hands to agree to “settle” for a $3 billion U.S. Justice Department fine, which is what British drug giant GlaxoSmithKline did yesterday.

The company’s statement notwithstanding, Glaxo had twisted knickers.

The company reached this settlement with the government to avoid the delay, expense, inconvenience and uncertainty of protracted litigation of the government’s claims and to put behind us these long-standing investigations of what was, for the most part, very old conduct.”

Neverrrrmind.

Right, I added that last part. Not the most impressive response I’ve ever read. But contrary to what we wrote about yesterday — that reputation has capital value — GSK’s stock rose yesterday 1.7 percent. Go figure. That’s mostly because the settlement lifted the burden of uncertainty.

Glaxo is mostly a B2B company, with the second B being doctors and hospitals. In this case, the Justice Department charged they were essentially bribed with expensive gifts, trips, tickets and the like to prescribe Glaxo drugs for conditions the Food and Drug Administration never approved.

If I were taking an anti-depression drug and my doc told me it’d grow hair on my head, my depression would be a lot less, right? Maybe, but not legally.

The takeaway then is how much this rip of Glaxo’s reputation will hurt the company and its products in the long run. Hard to say, but early indications are not much. The company is “too big,” has too many products and did not directly burn the people taking those drugs. If mere greed resulted in reduced sales, well, companies all over would tank.

My informed guess is that GSK weather’s this tempest. After all, the drugs inappropriately promoted and on which this $3 billion fine is based sold more than $18 billion worth of prescriptions last year.

The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with seven offices in the Northeast and Southeast. Learn more about EMA at www.mower.com. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.

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About steveoncrisis

The content is about crisis management and mismanagement in a digital age. It comes from Steve Bell, who spent 30 years as a journalist for the Associated Press and as managing editor and editorial page editor at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower and Associates, one of the nation's largest independent advertising, integrated marketing and public relations agency with six offices in the Northeast and Southeast.
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