GlaxoSmithKline (GSK), Britain's largest pharmaceutical firm, yesterday said that it will record a legal charge of £2.2 billion ($3.4 billion) to settle additional lawsuits and cost of federal investigation in the US against its blockbuster diabetes drug Avandia.
The London-based drugmaker said that the charge primarily relates to additional provisioning in respect of the investigation by the US Attorney's Office of Colorado into the group's US sales and promotional practices, and for product liability cases regarding Avandia.
GSK said that it will record the £2.2-billion charge that equates to an after-tax cost of £1.8 billion in the fourth quarter of fiscal 2010.
Although the drugmaker took a £1.57 billion charge in July 2010 and settled more than 10,000 product liability cases relating to Avandia, its antidepressant Paxil and manufacturing problems at its former factory at Cidra in Puerto Rico, it has continued to receive substantial new product liability cases in the US for Avandia.
''We recognise 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. 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,'' said PD Villarreal, senior vice-president Global Litigation at GSK.
Avandia was once GSK's top-selling drug until the side effects of the drug came into public domain that led to shrinking global sales of the pill from $3.2 billion in 2006 to $1.19 billion in 2009.