December 15, 2009
British drug company GlaxoSmithKline (GSK) has paid $1 billion to settle lawsuits related to Paxil. The fact that it was disclosed by Bloomberg and not the company itself illustrates how lousy financial disclosure rules are in Europe and why drug companies based there cannot be trusted to tell the truth about what is going on with their litigation liabilities and, by extension, the safety of their drugs.
Bloomberg got the $1 billion number by piecing together litigation records, analysts’ reports and GSK’s own partial statements on the issue. But compare the Paxil situation with those faced by Eli Lilly (LLY) and AstraZeneca (AZN). Both companies have been engaged in litigation that has cost them billions (over the antipsychotics Zyprexa and Seroquel, respectively). And both companies have disclosed the full legal bill attached to those suits. (It’s more than $3.3 billion for Lilly and $1.1 billion for AZ.
Those numbers were disclosed in both companies’ earnings reports. Interestingly, Lilly disclosed them because it was required to report anything “material” by the SEC — it’s an American company and that’s the law. Fines and prosecutions await American firms that fail to report bad news.