Once More With Feeling: Feds Hit Glaxo for $3 Billion -- Market Yawns

The Department of Justice hit GlaxoSmithKline (GSK) Monday with what it billed as the “largest health care fraud settlement in U.S. history” that is “unprecedented in both size and scope.” Glaxo's $3 billion in fines and other penalties tops the $2.3 billion Pfizer (PFE) paid in 2009, not to mention the $1.5 billion levied against Abbott Labs (ABT) in May.

This may sound serious, but investors know better. Here’s how they reacted to the historic news:

GSK Chart

GSK data by YCharts

As YCharts explained in this story, scary-sounding off-label marketing settlements will not sink pharma stocks. That’s because the companies make far more from sales than they pay when caught.

Glaxo’s settlement, however “unprecedented,” is just another example of this. Glaxo sold Paxil to treat depression in kids under 18, despite a lack of pediatric approval. It also promoted depression drug Wellbutrin to treat weight loss and sexual dysfunction, among other things.

But a quick check of corporate annual reports shows that in the past decade, those two drugs alone brought in more than seven times the amount of this settlement. Paxil brought in close to $14 billion, Wellbutrin $8.5 billion.

These are just rough figures. The release also mentions Advair, Lamictal, Zofran, Imitrex, Lotronex, Flovent and Valtrex, and we’ll let you add up the numbers for those. But it’s clear that even a $3 billion settlement isn’t going to scare companies much. Paying the Department of Justice settlements are apparently just a cost of the drug business.

GSK Chart

GSK data by YCharts

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