Glaxo to Pay $70 Million to Settle Drug Overcharge Claims

GlaxoSmithKline said Thursday that it agreed to pay more than $70 million to settle claims by state attorneys general and consumers that the company overcharged government health programs for its medicines.

The settlement covers claims by New York, California, Nevada, Connecticut, Montana and Arizona, as well as potential claims in 34 other states and the District of Columbia, the London-based company said. The agreement also resolves a lawsuit filed in Boston by healthcare programs, individuals and insurers, the company said.

The case stems from the government practice of using so- called average wholesale prices, as reported by Glaxo and other drug companies, to set reimbursement rates for medicines used by Medicare and other federal health programs. The states claimed that the companies used the formula to inflate drug prices, costing their programs hundreds of millions of dollars.

Laws governing average wholesale prices “are very complicated, and it’s easy to run afoul of them,” said Les Funtleyder, a healthcare analyst with Miller Tabak & Co. in New York. “If the attorney general could show it was deliberate, I think the fines would be higher.”

The payment “is nonmaterial” for Glaxo, he said.

Glaxo, which earned $2.42 billion in the second quarter, has set aside the money for the settlement, it said in a statement. The company, which admitted no wrongdoing, said it was settling to “put this historical matter behind” it.

The announcement was made after markets closed in Europe. Glaxo’s U.S.-traded shares rose 56 cents to $55.10.