1 consolidated second amended complaint 09/26/2005
TRANSCRIPT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
__________________________________________)
In re: GlaxoSmithKline plc Securities ) Civil Action No. 05 CIV. 3751 (LAP)Litigation )
) DEMAND FOR JURY TRIAL__________________________________________)
CONSOLIDATED SECOND AMENDED COMPLAINT
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JURISDICTION AND VENUE
1. The claims asserted herein arise under §§ 10(b) and 20(a) of the Securities Exchange
Act of 1934 (“1934 Act”) and Rule 10b-5. Jurisdiction is conferred by § 27 of the 1934 Act, and 28
U.S.C. §1331. Venue is proper here pursuant to § 27 of the 1934 Act. GlaxoSmithKline plc and
SmithKline Beecham Corporation doing business as GlaxoSmithKline plc (collectively “GSK”) is
headquartered in London, England, but conducts business in this District. GSK’s ADRs trade on the
New York Stock Exchange headquartered in this District.
THE PARTIES
2. Lead Plaintiff Joseph J. Masters (“Plaintiff”) acquired publicly traded securities of
GSK during the Class Period and was damaged thereby.
3. Defendant GlaxoSmithKline plc is a public company. GlaxoSmithKline plc’s ADRs
trade in an efficient market on the NYSE under the symbol “GSK.” GlaxoSmithKline plc’s ordinary
shares trade in an efficient market on the London Stock Exchange. Defendant SmithKline Beecham
Corporation is a Delaware corporation, which is a wholly-owned subsidiary of GlaxoSmithKline plc.
GlaxoSmithKline plc was created in December 2000 when Glaxo Wellcome merged with
SmithKline Beecham. Both GlaxoSmithKline plc and SmithKline Beecham, as well as all of their
predecessors, subsidiaries and successors, are referred to herein collectively as “GSK.”
4. Defendant Jean-Pierre Garnier (“Garnier”) was CEO and Chairman of GSK
throughout the Class Period. By reason of his position, Garnier had access to material inside
information about GSK and was able to control directly or indirectly the acts of GSK and the
contents of the representations disseminated during the Class Period by or in the name of GSK.
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5. The defendants are liable, jointly and severally, as direct participants in the scheme
and wrongs complained of herein. Defendants had a duty promptly to disseminate accurate and
truthful information with respect to GSK’s products, operations, financial condition and future
business prospects or to cause and direct that such information be disseminated so that the market
prices of GSK’s stock and ADRs would be based on truthful and accurate information.
SUMMARY OF THE ACTION
6. From the time it was formed, GSK has relied upon various deceptive practices to
artificially inflate its stock price. Concerning its patents for various medications, GSK would file
baseless patent applications to prevent competition to its products from generic drug manufactures.
GSK would tout to the investing public that the drug patents for its largest selling medications, Paxil
and Augmentin, would expire years in the future, when in reality GSK knew, or should have known,
that its patent protection for both Paxil and Augmentin had either already expired, or would expire
shortly. These two drugs accounted for billions of dollars in sales for GSK during the class period.
By falsely touting that the patents for these two drugs would expire years in the future, GSK mislead
the investing public into believing that the future sales and profits from these two drugs would
remain high. GSK knew that without patent protection, generic manufactures would undercut GSK’s
monopoly prices, which would directly lead to plunging sales for GSK. This is exactly what
happened. In addition, GSK’s illegal practice of patent manipulation violated U.S. anti-trust laws.
So far GSK has paid out over $160 million to settle antitrust class actions for its illegal practice of
patent manipulation involving Paxil and $29 million to settle antitrust class actions involving
Augmentin. This is not the only liability GSK faces for its practice of patent manipulation of Paxil
and Augmentin. GSK is currently being sued for by the City of New York for medicare fraud, and
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by various insurance companies for anti-trust violations springing from this practice of patent
manipulation. GSK’s public false and misleading statements concerning the patent protection for
both Paxil and Augmentin have damaged investors, who would not have paid the high prices for
GSK that they did if they had know patent protection had or would shortly expire.
7. Not only did GSK illegally file baseless patents for its Paxil medication, it also hid
from the public and government regulators the fact that Paxil was causing serious and sometimes
deadly health problems to consumers. GSK touted Paxil to doctors as a medication that was safe and
effective for children, when it knew from its own drug testing program that Paxil was less effective
than a placebo, while it also was twice as likely as a placebo to cause suicide. These problems, when
disclosed to the public, lead to decreased sale for Paxil. Some countries forbid doctors from
prescribing Paxil to children, while here in the U.S. Paxil was required to warn that children who
use Paxil are at increased risk of suicide. GSK also hid from consumers and government regulators
the fact that Paxil was causing withdrawal problems, even in healthy test subjects. Sales of Paxil
plunged as medical professionals and the public became aware that GSK’s statements that Paxil was
safe and non-habit forming were false and misleading. Not only have sales been negatively impacted
by the disclosure of these problems, but class action products liability suits have been filed which
have resulted in billions of dollars in potential liability. GSK shares have suffered as a result.
8. Finally, GSK has also violated the Federal False Claims Act numerous times, which
has artificially raised reported profits. The latest violation was shown on September 20, 2005, when
it was announced that GSK had paid out $150 million to settle claims that GSK engaged in a scheme
to inflate the price of its drugs Zofran and Kytril for the Medicare and Medicaid programs.
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CLASS ACTION ALLEGATIONS
9. This is a class action on behalf of those who purchased or otherwise acquired GSK
common stock and ADRs during the period from December 27, 2000 through August 5, 2004,
inclusive (the “Class Period”), excluding defendants, directors and officers of the Company and their
families and affiliates (the “Class”). Class members are so numerous that joinder of them is
impracticable. At all relevant times, the markets for GSK ADRs and common stock were efficient.
10. Common questions of law and fact predominate and include whether defendants
(i) violated the 1934 Act; (ii) omitted and/or misrepresented material facts; (iii) knew or recklessly
disregarded that their statements were false; and (iv) artificially inflated GSK’s stock and ADR
prices and the extent of and appropriate measure of damages.
11. Plaintiff’s claims are typical of those of the Class. Prosecution of individual actions
would create a risk of inconsistent adjudications. Plaintiff will adequately protect the interests of
the Class. A class action is superior to other available methods for the fair and efficient adjudication
of this controversy.
BACKGROUND
12. Concerning its patent protection, SmithKline Beecham disclosed in its Form-20F for
the year ending December 31, 1999 that [t]he patent situation on potassium clavulanate (Augmentin
and Timentin) is complex. Although patents on the compound expired in some markets in 1995, the
relevant U.S. patents will not expire until 2002 and patent extensions in France and Italy also provide
protection beyond 2000.” Concerning Paxil, this Form-20F also disclosed that “[t]he patent for the
marketed form of Seroxat/Paxil expires during or after 2006.”
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13. On January 17, 2000, the Boards of Glaxo Wellcome (NYSE: GLX) and SmithKline
Beecham (NYSE: SBH) announced that they have unanimously agreed the terms of a proposed
merger of equals to form Glaxo SmithKline.
14. March 1, 2000, SmithKline Beecham announced that it had obtained a new US patent
on its broad-spectrum antibiotic, Augmentin. This patent was completely baseless and filed only to
illegally prohibit generic drug manufactures from selling generic forms of Augmentin.
15. The terms of the merger were released in the PR Newswire on July 5, 2000. Under
the terms of the merger, Glaxo Wellcome Shareholders and SmithKline Beecham shareholders
would receive, respectively: for each Glaxo Wellcome share 1 GlaxoSmithKline share and for each
SmithKline Beecham share 0.4552 GlaxoSmithKline shares. Holders of Glaxo Wellcome ADRs
and holders of SmithKline Beecham ADRs would receive, respectively: for each Glaxo Wellcome
ADS 1 GlaxoSmithKline ADS for each SmithKline Beecham ADS 1.138 GlaxoSmithKline ADSs.
Based on the number of shares outstanding as at the 31st December 1999, upon the merger becoming
effective, 3,640,804,312 GSK shares would be issued to Glaxo Wellcome shareholders and
2,556,309,411 GlaxoSmithKline shares would be issued to SmithKline Beecham shareholders,
representing approximately 58.75 percent and 41.25 percent respectively of the issued ordinary share
capital of GSK.
16. On July 26, 2000, in an article by the Financial Time, defendant Garnier is quoted as
identifying Paxil/Seroxat and Augmentin as “stars of the show” as these two drugs each brought in
over a billion dollars in revenue. Defendant Garnier also stated he was confident that newly granted
patents on Augmentin, would keep competition at bay until 2013.
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17. On December 27, 2000, the start of the Class Period, the merger between Glaxo
Wellcome and SmithKline Beecham was completed. Trading in the shares of GSK commenced on
the London Stock Exchange and trading also commenced on GSK American Depositary Receipts
(ADRs) on the New York Stock Exchange.
18. The FDA approves drugs for human use if they are safe and effective as determined
through scientifically conducted clinical studies. Throughout the Class Period, GSK manufactured
and sold paroxetine under the name Paxil in the United States and under the name Seroxat in Great
Britain (hereinafter, “Paxil”). Paxil is a selective serotonin re-uptake inhibitor (SSRI) approved
for treating depression, panic, obsessive compulsive disorder, post traumatic stress disorder, social
anxiety disorder, premenstrual dysphoric disorder general anxiety disorder in adults. It was not
approved for any condition or illness in children and adolescents. However, physicians are allowed
to prescribe FDA-approved drugs for conditions or diseases for which FDA approval has not been
obtained when, through the exercise of independent professional judgment, the physician determines
that the drug in question is an appropriate treatment for an individual patient. This practice is referred
to as "off-label" use, and prescribing paroxetine for children and adolescents is an off-label use.
19. Approximately 2.1 million prescriptions for paroxetine were written for children
and adolescents in the United States during 2002. Nearly 900,000 of these prescriptions were for
youngsters whose primary diagnosis was a mood disorder, the most common of which is
depression. It is estimated that one-third of such prescriptions are written by non-psychiatrists,
many by family practitioners and pediatricians. Prescriptions for paroxetine to treat mood
disorders in children and adolescents translated into US sales for GSK of approximately
$55 million in 2002, and much more world-wide.
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20. GSK has misrepresented information concerning the safety and efficacy of
paroxetine for treating MDD in children and adolescents. GSK has allowed positive information
about pediatric use of paroxetine to be disclosed publically, but has withheld and concealed
negative information concerning the safety and effectiveness of the drug as a treatment for
pediatric MDD.
21. GSK selectively released only data from favorable studies regarding Paxil and
concealed data from unfavorable studies, using its employees, paid consultants, and unwitting
researchers as conduits to disseminate the misleading information from these studies to the public
and investors, as follows:
22. From May 30, 1998 through June 4, 1998, Drs. M.B. Keller, N.D. Ryan and B.
Birmaher, et al., presented a poster at the American Psychiatric Association (“APA”) Annual
Meeting in Toronto, Canada, entitled “Efficacy of [Paxil] in adolescent depression.” This poster
found Paxil efficacious in children and adolescents.
23. In 1998, Drs. K.D. Wagner, B. Birmaher and G. Carlson et al. presented a poster at
the New Clinical Drug Evaluation Unit (“NCDEU”) Annual Meeting in Boca Raton, Florida, entitled
“Safety of [Paxil] and imipramine in the treatment of adolescent depression.” This poster found
Paxil efficacious in children and adolescents.
24. In October 1998, Drs. R. Berard and N. Ryan presented a poster at the European
College of Neuropsychopharmacology Annual Meeting in Paris, France, entitled “Adolescent
depression: Efficacy of [Paxil].” This poster found Paxil efficacious in children and adolescents.
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25. In August, 1999, Dr. C. Gagiano presented a poster at the World Congress of
Psychiatry Meeting Hamburg, Germany, entitled “[Paxil] in adolescent depression.” This poster
found Paxil efficacious in children and adolescents.
26. In December, 1999, Drs. G.J. Emslie, K.D. Wagner and M.A. Riddle, et al. presented
a poster at the American College of Neuropsychopharmacology (“ACNP”) Annual Meeting in
Acapulco, Mexico, entitled “Efficacy and safety of [Paxil] in the treatment of children and
adolescents with OCD [obsessive compulsive disorder].” This poster found Paxil efficacious in
children and adolescents.
27. In December, 1999, Dr. Karen Wagner, one of the authors listed on the published
article concerning GSK’s study to assess the safety and efficacy of Paxil in treating children and
adolescents, Study 329, spoke at a meeting of GSK Neuroscience consultants, at which she discussed
Study 329. She was quoted by an internal GSK newsletter as having said: “We can say that [Paxil]
has both efficacy and safety data for treating depression in adolescents.”
28. From May 13 - 18, 2000, Drs. B. Birmaher, J.P. McCafferty and K.M. Bellew, et al.,
presented a poster at the APA Annual Meeting in Chicago, Illinois, entitled “Comorbid ADHD and
disruptive behavior disorders as predictors of response in adolescents treated for major depression.”
This poster found Paxil efficacious in children and adolescents.
29. From May 30, 2000 through June 2, 2000, Drs. K.D. Wagner, G.J. Emslie and B.
Birmaher, et al., presented a poster at the NCDEU in Boca Raton, Florida, entitled “Safety of [Paxil]
in the treatment of children and adolescents with OCD.” This poster found Paxil efficacious in
children and adolescents.
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30. The above statements each remained alive and uncorrected in the market at the
beginning of the Class Period.
CLASS PERIOD STATEMENTS AND EVENTS
GSK’S PUBLIC STATEMENTS CONCERNING PAXIL’S USE ON CHILDREN
31. On February 21, 2001, GSK announced preliminary results for the year ended
December 31, 2000. GSK reported Paxil sales of £1.55 billion, an increase of 17% from the year
before.
32. From May 5 - 10, 2001, Drs. D.A. Geller, J. Biederman and D.J. Carpenter, et al.,
presented a poster at the APA Annual Meeting in New Orleans, Louisiana, entitled “Comorbid
psychiatric illness and response to treatment in pediatric OCD.” This poster found Paxil efficacious
in children and adolescents.
33. From May 28 - 31, 2001, Drs. D.A. Geller, J. Biederman and K.D. Wagner, et al.,
presented a poster at the NCDEU Annual Meeting in Phoenix, Arizona, entitled “Comorbid
psychiatric illness and response to treatment, relapse rates and behavioral adverse event incidence
in pediatric OCD.” This poster found Paxil efficacious in children and adolescents.
34. Defendants commissioned Drs. M.B. Keller, N.D. Ryan and M. Strober, et al., to
write an article about one of GSK’s allegedly successful Paxil studies, Study 329. It was published
in an article in the Journal of the American Academy of Child and Adolescent Psychiatry, entitled
“Efficacy of [Paxil] in the treatment of adolescent major depression: A randomized, controlled trial.”
J Am Acad Child Adolesc. Psychiatry, 2001 Jul;40 (7):762-72. This article concluded that: “[Paxil]
is generally well tolerated and effective for major depression in adolescents.”
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35. In November, 2001, GSK issued a Medical Information Letter regarding the use of
Paxil to treat major depressive disorder (“MDD”) in children and adolescents, which reported studies
with positive efficacy results. GSK also enclosed a published article regarding its favorable study
with the Medical Information Letter.
36. On May 19 - 23, 2002, Drs. D. Gallagher, C. Gardiner and D.J. Carpenter presented
a poster at the APA Annual Meeting in Philadelphia, Pennsylvania, entitled “Interim Results: Long-
term safety of [Paxil] in pediatric patients.” This poster found Paxil efficacious in children and
adolescents.
37. In June, 2002, Drs. D.A. Geller, K.D. Wagner and G.J. Emslie, et al., presented a
poster at the NCDEU Annual Meeting in Boca Raton, Florida, entitled “Efficacy of [Paxil] in
pediatric OCD: Results of a multicenter study.” This poster found Paxil efficacious in children and
adolescents.
38. In June, 2002, Drs. K.D. Wagner, E. Wetherhold and D.J. Carpenter, et al., presented
a poster at the NCDEU Annual Meeting in Boca Raton, Florida, entitled “Safety and tolerability of
[Paxil] in children and adolescents: Pooled results from four multicenter, placebo-controlled trials.”
This poster found Paxil efficacious in children and adolescents.
39. From October 22 - 27, 2002, Drs. D.A. Geller, K.D. Wagner, and G.J.Emslie, et al.,
presented a poster at the American Academy of Children in Adolescent Psychiatry Annual Meeting
in San Francisco, California, entitled “Efficacy of [Paxil] in pediatric OCD: Results of a multicenter
study.” At that same meeting, Drs. K.D. Wagner, M.B. Stein and R. Berard, et al, presented a poster
entitled “Efficacy of [Paxil] in childhood and adolescent social anxiety disorder.” Also at that
meeting, Drs. K.D. Wagner, E. Wetherhold and D.J. Carpenter et al, submitted an abstract entitled
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“Safety and tolerability of [Paxil] in children and adolescents: Pooled results from five multicenter,
placebo-controlled trials.” These posters and abstract found Paxil efficacious in children and
adolescents.
40. In December, 2002, K.D. Wagner, E. Wetherhold and D.J. Carpenter , et al.,
published an article in the Journal of Child and Adolescent Psychopharmacology, entitled “Safety
and tolerability of [Paxil] in children and adolescents: Pooled results from four multicenter, placebo-
controlled trials.” This article found Paxil efficacious in children and adolescents.
41. In December, 2002, Drs. D.A. Geller, K.D. Wagner, and G.J.Emslie published an
article in the Journal of Child and Adolescent Psychopharmacology, entitled “Efficacy and safety
of [Paxil] in pediatric OCD: Results of a double-blind, placebo-controlled trial.” This article found
Paxil efficacious in children and adolescents.
42. On December 8 - 12, 2002, Drs. K.D. Wagner, M.B. Stein and R. Berard, et al.,
presented a poster and the ACNP Annual Meeting in San Juan, Puerto Rico, entitled “Efficacy of
[Paxil] in childhood and adolescent social anxiety disorder.” This poster found Paxil efficacious in
children and adolescents.
43. In January, 2003, Drs. A. Braconnier, R. Le Coent and D. Cohen published an article
in the Journal of the American Academy of Child and Adolescent Psychiatry, entitled “[Paxil] versus
clomipramine in adolescents with severe major depression: A double-blind, randomized, multicenter
trial.” This article found Paxil efficacious in children and adolescents
44. On May 17 - 22, 2003, Drs. K.D. Wagner, E. Wetherhold and M. Gee, et al.,
presented a poster at the APA Annual Meeting in San Francisco, California, entitled “Remission of
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pediatric social anxiety disorder with [Paxil].” This poster found Paxil efficacious in children and
adolescents.
45. On May 17 - 22, 2003, Drs. R. Berard, K.D. Wagner, and D.J. Carpenter, et al.,
presented a poster at the APA Annual Meeting in San Francisco, California, entitled “SSRI therapy
of pediatric patients with social anxiety disorder or OCD.” This poster found Paxil efficacious in
children and adolescents.
46. In May, 2003, Drs. K.D. Wagner, E. Wetherhold and M. Gee, et al., presented a
poster at the NCDEU in Boca Raton, Florida, entitled “Remission of pediatric social anxiety disorder
with [Paxil].” This poster found Paxil efficacious in children and adolescents.
47. The various statements in the preceding paragraphs were all sponsored by and/or
known to GSK, which was instrumental in publicizing them. They were each misleading for failing
to disclose other negative studies known to GSK.
48. On June 2, 2004, the Attorney General for the State of New York sued GSK based
upon GSK’s suppression of adverse studies relevant to Paxil use to treat children and adolescents.
In response to this announcement, GSK stock dropped from $42.77 on June 1 to $41.39.
49. On August 5, 2004, The Wall Street Journal published an article which reported that
a new analysis by the FDA had confirmed the link between SSRIs and suicidal tendencies in young
people.
50. On August 26, 2004 New York Attorney General Eliot Spitzer and GSK announced
a settlement in which GSK agreed to release previously unpublished data about the safety and
effectiveness of the antidepressant drug Paxil. As part of the settlement, GSK’s drug tests for Paxil
were published on GSK’s website. Also, GSK agreed to pay $2.5 million.
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51. On December 9, 2004, the ABC News’ program “Primetime Live” did a story on
Paxil concerning its effects on children and its causing withdrawal symptoms. As part of the story
ABC published internal documents from GSK that were previously unavailable. These documents
are still publicly viewable at http://abcnews.go.com/Health/story?id=311956&page=1 As a result
of these disclosures GSK’s price declined on December 10 from $45.08 to $44.82.
52. Ono of the documents is a GSK memo dated August 16, 2001 to its sales force in
2001 touting the drug's “remarkable efficacy and safety in the treatment of adolescent depression”
and that the drug was a "truly a remarkable product that continues to demonstrate efficacy." This
memo was sent to its sale force even though internal studies by GSK had concluded that Paxil had
little or no effect in treating depression in children and adolescents. And as far back as 1997, the
company was aware of studies reporting suicide-related behaviors in young patients taking the drug.
53. The story also noted that, according to the 1997 review, one study found that 25
percent of patients taking Paxil in one experienced discontinuation symptoms (vs. 5.9 percent for
patients taking a placebo). In a study of patients with major depression, 42 percent of the patients
taking Paxil experienced one discontinuation symptom. However, an internal 1998 “business plan
guide” for sales reps instructed them to “minimize concerns surrounding discontinuation symptoms.”
Sales reps were also told to explain to doctors that the “discontinuation incident rate is two in 1,000
patients.” This rate is markedly different from the results of the studies in the safety review published
nine months earlier.
54. In a company-sponsored education program for sales representatives, “withdrawal
syndrome” was clearly defined as “a class effect that can occur when an SSRI is stopped abruptly.
Symptoms may include asthenia, flu-like symptoms, fatigue, dizziness, nausea, and sleep
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disturbances (insomnia, vivid dreams or nightmares).” However, the next direction recommended
reps avoid using the term: “instead of ‘withdrawal syndrome,’ which implies addictive properties,
try to refer to this phenomenon as ‘discontinuation symptoms.’” One vivid reminder of the
importance of Paxil to GSK is found on a May 1997 sales memo. Sales reps are reminded, “Let's
face it in the end. [sic] The only thing the anxious and agitated patient will be saying is: ‘Where's
my Paxil!!!!!!’” The comment is illustrated by a cartoon of a screaming woman.
55. As if to underscore the importance of Paxil to GlaxoSmithKline, another company
sales document graphically explained why discontinuation is an issue. The answer: $1 billion, the
total sales of Paxil and Seroxat (a related SSRI) as of September 1997. This statement is illustrated
by a large, black money bag.
56. In a June 5, 1997 memo, a public relations firm working for GSK, Ruder-Finn drafted
a letter on the topic of discontinuation symptoms that was apparently intended for publication by a
company spokesperson or possibly a physician. The memo explained that “complete duplication will
look fishy if we decide to submit both. Are there other references we could draw on for the various
drugs? At the very least, we can't have the references appear in the same order.” The draft letter
listed three physicians as the intended senders, including Dr. Bruce Pollock of the University of
Pittsburgh.
57. A letter by Pollock appeared in the October 1998 issue of the Journal of Clinical
Psychiatry. Although Pollock's letter was not the same as what the PR company drafted, it made
nearly every point in the draft — almost in the same sequence. The company's 1998 business plan
guide for sales reps cited Pollock's letter as “an effective tool for addressing discontinuation.”
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GSK'S MISREPRESENTATIONS IN ITS MEDICAL INFORMATION LETTERS:
NOVEMBER 2001 THROUGH JANUARY 2003
58. GSK also provides information concerning off-label uses of its drugs to physicians
through its Medical Information Letters, but only when the physician makes an unsolicited
request for the information. As of November 2001, GSK had completed and approved the final
clinical reports on studies 329, 377 and 701, and the extension phase of study 329. GSK issued
Medical Information Letters in November 2001 and January 2003, both of which misrepresented the
information concerning the safety and efficacy of paroxetine for treating MDD in children and
adolescents as GSK knew it at the time. GSK enclosed the published article concerning study
329 with some of the Medical Information Letters.
59. Neither of these Medical Information Letters reported the four efficacy outcomes
from study 329 that were not statistically significant. Nor did the Medical Information Letters
refer to the fact that study 329 had an extension phase in which the rate of relapse did not differ
between the paroxetine and placebo groups. While all of the efficacy outcomes from study 377
placebo were not statistically significant, the Medical Information Letters failed to communicate
GSK's own conclusion that there was no clinical significance, as well as no statistical significance,
in the outcomes from study 377. Nor did these Medical Information Letters include
any reference to study 701 in which placebo outperformed paroxetine. Each of these Medical
Information Letters, however, reported open label (non-placebo-controlled) studies with positive
efficacy results.
60. GSK reported emotional lability data from its MDD paroxetine studies in only one
of the two Medical Information Letters it sent to physicians during this period. Even when GSK
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reported the emotional lability information in one Letter, which was exclusively from study 329,
it did so only for the paroxetine group. Without the comparative data from the placebo group,
these data on possibly suicide-related thinking and acts lost much of their meaningfulness.
61. The Medical Information Letter that reported emotional lability data from study 329
also provided information on other categories of adverse events observed during study 716. This
Letter, however, did not inform physicians that in study 716 emotional lability was experienced by
6.8 percent of the participants (children and adolescents) with a primary diagnosis of MDD and in
12.5 percent of the adolescents with MDD. Extension study 329 was not mentioned in any of the
Medical Information Letters, although in this study emotional lability was observed in 7.7 percent
of the paroxetine group versus 3.0 percent in the placebo group.
62. GSK’s representations in its Medical Information Letters concerning its safety and
effectiveness on children and adolescents were false and misleading because GSK failed to disclose
that the results of its own drug studies showed that Paxil was less effective than placebos and that
Paxil use doubled the risk of self-harm. Because of its numerous drug studies involving Paxil, GSK
knew that Paxil was not effective in treating adolescents and children. More important that simply
showing that Paxil was ineffective, these drug studies showed that Paxil was actually harmful to
adolescents and children. When the results of these studies became known, Paxil was banned as a
treatment in many countries. Additionally, the FDA, while it did not ban Paxil, gave it a “blackbox
warning” that it could increase suicides in children. These measures greatly decreased the sale of
Paxil worldwide.
PAXIL DRUG STUDIES
63. GSK conducted three randomized, placebo-controlled, double-blind clinical
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studies to assess the safety and efficacy of paroxetine in treating children and adolescents
diagnosed with MDD. These studies are referred to by GSK as studies 329, 377 and 701.
64. GSK management approved the final clinical reports for studies 329 and 377 in
1998 and for study 701 on July 31,2001. GSK has represented that studies 329, 377 and 701 were
“well designed and appropriate to investigate whether paroxetine was efficacious in children and
adolescents with MDD.” The FDA has also referred to them as “well-controlled trials.”
65. GSK conducted two additional studies that were extensions of studies 329 and 701.
The extension of study 329 (final clinical report approved by GSK on October 31,2001), which
included only youngsters with MDD, was not randomized. It was designed to evaluate relapse rate
and longer-term safety, not efficacy. Study 716 (final clinical report approved by GSK on September
16, 2002), was not randomized, placebo-controlled or blind (all participants received paroxetine
during the extension) and included participants from completed studies of pediatric patients with
MDD (study 701) or OCD. It examined the longer-term safety of paroxetine.
66. These studies were published on GSK’s website in 2004 as part of its settlement with
New York Attorney General Eliot Spitzer’s lawsuit alleging that GSK hid data showing Paxil was
harmful to children.
67. GSK's studies did not demonstrate that paroxetine is efficacious in treating
children and adolescents with MDD. Two of the three GSK placebo-controlled studies (377 and
701) failed to show that paroxetine was more effective than placebo or that there was any evidence
of efficacy for treating MDD in children and adolescents. Study 377 found that "[n]o clinically or
statistically significant differences were detected between paroxetine and placebo in either of the
[two] primary efficacy variables," or on any of the secondary measures. In study 701, placebo
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actually outperformed paroxetine on the primary efficacy measure and there were no statistically
significant differences between paroxetine and placebo on any of the secondary measures.
68. Another placebo-controlled trial, study 329, presented a mixed picture of paroxetine.'s
efficacy in treating MDD in a pediatric population. Before study 329 began, GSK specified seven
measures of efficacy, two of which it identified as "primary" endpoints and five as "secondary"
endpoints. The efficacy of paroxetine was not measured as superior to placebo at a level of statistical
significance on either of the primary measures. It was measured as superior to placebo on three of
the five secondary ones, as well as on an endpoint that was added to the analysis.
69. Worse, GSK's studies showed the possibility of a link between paroxetine and an
increased risk of suicidal thoughts and acts in adolescents. Combined, studies 329, 377, and 701
showed that certain possibly suicide-related behaviors were approximately two times more likely
in the paroxetine group than the placebo group. The extension phase of study 329 and study 716
provided support for the presence of such a risk in youngsters taking paroxetine.
70. In the five studies (329, 377,701, 329-extension and 716), GSK coded suicidal
thinking and acts, as well as mood swings, crying and similar behaviors, as "emotional lability." In
study 329, emotional lability was recorded for 6.5 percent of the participants on paroxetine (for five
of six of these youngsters, the events were classified as "serious") and only 1.1 percent in the placebo
group (also "serious"). In study 377, emotional lability occurred in 4.4 percent of the paroxetine
group, while it occurred in 3.2 percent in the placebo group. In study 701, emotional lability
occurred in 3.6 percent of the paroxetine group participants who remained in the study for the
tapering-off or follow-up periods, while it occurred in 1.4 percent of the same group of participants
who took placebo.
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71. In the 329 extension study, emotional lability was found in 7.7 percent of the
youth on paroxetine (four individuals) and 3.0 percent of the placebo group. The reported
incident for three of the four paroxetine youngsters was intentional overdose, and the youth from
the placebo group was reported as suicidal and homicidal. The adverse events for these four
participants were categorized as serious.
72. In study 716, which had no placebo group, emotional lability occurred in 6.8
percent of the participants (children and adolescents) with a primary diagnosis of MDD and in
12.5 percent of the adolescents with MDD.
GSK'S PRESENTATION OF POSITIVE INFORMATION AND ITS
MISREPRESENTATION AND SUPPRESSION OF NEGATIVE INFORMATION.
73. Because its studies failed to demonstrate efficacy for paroxetine in treating MDD in
children and adolescents and suggested a possible increased risk of suicidal thinking and acts for
these youth, GSK sought to limit physicians' access to only the most favorable aspects of the
data from these studies. To accomplish this, GSK embarked on a campaign both to suppress and
conceal negative information concerning the drug and to misrepresent the data it did reveal
concerning the drug's efficacy and safety.
74. An internal GSK document from 1998 concluded that, in light of the mixed
efficacy outcomes from study 329 and the entirely negative results of study 377, GSK's "target"
was "[t]o effectively manage the dissemination of these data in order to minimize any potential
negative commercial impact.” As part of its campaign to "manage the dissemination of these data,"
the document recommended that GSK prepare and cause the publication of a full article on the only
study with some favorable conclusions, study 329.
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75. Thereafter, and in accordance with the recommended plan, an article that described
and analyzed the results of study 329, referred to above as “Efficacy of [Paxil] in the Treatment of
Adolescent Major Depression: a Randomized, Controlled Trial” was published J Am Acad Child
Adolesc. Psychiatry, 2001 Jul;40 (7):762-72. The authors of this article included two GSK
employees who authored GSK's final clinical report for study 329.
76. Although it allowed the data from study 329 to be published, GSK concealed and
suppressed studies 377 and 701, which failed to show that paroxetine was more effective than
placebo in treating MDD in children and adolescents. While information from study 377 was
presented at a medical convention in 1999, neither study 377 nor study 701 had ever been published,
and they remained unavailable to physicians until recently, same as the results of the extension phase
of study 329 and study 716. (Interim results from study 716 were presented at a medical conference
in 2002).
77. The data in studies 377 and 701, as well as the data from the extension phase of
study 329 and study 716, are material to the risk-benefit balance and, therefore, to a physician's
decision whether to prescribe paroxetine for a child or adolescent with MDD. This is especially
true in light of the publication of the positive results study 329.
78. GSK has repeatedly misrepresented the safety and efficacy outcomes from its studies
of paroxetine as a treatment for MDD in a pediatric population to its employees who promote
paroxetine to physicians. These sales representatives are the GSK personnel who
routinely have personal contact with the physicians who decide whether to write prescriptions for
paroxetine.
79. On a cover memo that transmitted the published article concerning study 329 to
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"All Sales Representatives Selling Paxil," Zachary Hawkins, GSK Paxil Product Management,
stated, "Paxil demonstrates REMARKABLE Efficacy and Safety in the treatment of
adolescent depression." (Type face as in original). Study 329 did not demonstrate remarkable
efficacy and safety in treating adolescent depression. Although the memo contained the boiler-plate
language, "FYI Article will be stamped: This article is for pharmaceutical consultants' Information
only. Do not use it with, or distribute it to physicians," it is clear that this was the intent. The sole
reason GSK had to provide this information to sales representatives was to falsely characterize
study 329 in their communications with physicians. Indeed, it appears that these sales
representatives had paroxetine "targets" for psychiatrists who treat only children and adolescents,
because GSK informed its sales force that these targets would be eliminated in 2003.
80. In December 1999, Dr. Karen Wagner, one of the authors listed on the published
article concerning study 329, spoke at a meeting of GSK Neuroscience consultants, at which she
discussed study 329. She was quoted by an internal GSK newsletter as having said, "We can say
that paroxetine has both efficacy and safety data for treating depression in adolescents." Although
study 377 had also been completed when this newsletter was distributed, its negative results were
not mentioned.
THE TRUTH CONCERNING PAXIL AND CHILDREN BEGINS TO EMERGE
81. In 2002, as part of its application for FDA approval of paroxetine to treat OCD in
children and adolescents, GSK submitted the final clinical reports for studies 329, 377 and 701,
which assessed the safety and efficacy of paroxetine in the treatment of MDD in pediatric
patients. GSK subsequently provided these materials to the drug-regulatory agencies of other
countries. The studies raised issues for all the drug-regulatory agencies regarding the efficacy
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and safety of pediatric use of paroxetine for treating MDD.
82. In documents submitted in response to safety and risk-benefit issues raised by various
drug-regulatory agencies, including the FDA, the UK's Medicines and Healthcare products
Regulatory Agency ("MHRA ") and the European Agency for the Evaluation of Medicinal Products
("EMEA "), GSK admitted that studies 329, 377 and 701 "all failed to separate paroxetine from
placebo overall and so do not provide strong evidence of efficacy in this indication."
83. On June 10,2003, the MHRA stated that its analyses of GSK's studies suggested
the risk of self-harm and potential suicidal behavior of youngsters with MDD was between 1.5
and 3.2 times greater for the paroxetine group than for placebo. The MHRA reported that its
Committee on Safety of Medicines advised that paroxetine "should not be used in children and
adolescents under the age of 18 years to treat depressive illness." The agency also added a
contraindication for this use on the paroxetine labeling in the UK, which substantially
curtailed its use as a treatment for pediatric MDD.
84. The Irish Medicines Board followed suit in December 2003.
85. In response to the MHRA's June 10, 2003 warning, GSK admitted in a letter to
physicians in the UK that the "clinical trials in children and adolescents under 18 years of age
failed to demonstrate efficacy in Major Depressive Disorder and that there was a doubling of the
rate of reporting of adverse events in the paroxetine group compared with placebo, including ...
emotional lability." In a press release GSK issued in the UK, the company admitted that, in its
studies of youngsters with depression, it had observed "a difference between [paroxetine] and
placebo in terms of suicidal thinking or attempts, particularly in adolescents."
86. In a submission GSK made to the EMEA and subsequently sent to the FDA on
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November 17, 2003, GSK admitted that the risk-benefit balance for treating pediatric MDD
patients using paroxetine was unfavorable. Citing the overall lack of statistical significance in the
efficacy outcomes from studies 329, 377 and 701 and the possibly increased risk of suicidal
thinking and acts for these youth, especially for older adolescents, GSK stated, "it must be
concluded that the benefit-risk balance is in [favor] of not treating children and adolescents
[diagnosed with MDD] with paroxetine." GSK also stated in this submission, "in view of a safety
signal concerning a possible increase in suicidal behavior, particularly in adolescents with
MDD, the use of paroxetine in children and adolescents with MDD cannot be recommended."
87. On June 19,2003, the FDA issued a Talk Paper, which stated that it was reviewing
the data from studies of paroxetine use in children and adolescents with MDD to assess possible
increased risk of suicidal thinking and attempts in this population. Noting the absence of
evidence of efficacy, the FDA also stated that although the review of the safety data was not
complete, "FDA is recommending that Paxil not be used in children and adolescents for the
treatment of MDD." In a second Talk Paper in October 2003, the FDA did not retract its finding
that "three well-controlled" clinical trials of paroxetine did not establish its efficacy in treating
MDD in the pediatric population, but it noted the scientific fact that the lack of evidence of
efficacy in any particular study is not "definitive" evidence that the drug is not effective. It also
stated that the possibility of a link between paroxetine and an increased risk of suicidal thoughts and
acts was under agency review and advised that paroxetine and other drugs in its class (Selective
Serotonin Reuptake Inhibitors or "SSRls") be used with caution. The FDA strengthened its advice
to use SSRIS with caution in a third FDA Talk Paper issued March 22, 2004.
88. On July 15, 2003, after discussions with Health Canada, the Canadian regulatory
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agency, GSK issued a public advisory "alerting patients, their parents or guardians, and
healthcare professionals that until further information is available Paxil should not be given to
pediatric patients (children and adolescents under 18 years of age), due to concerns of a possible
increased risk of suicidal thinking, suicidal attempts or self-harm. Paxil must not be used in
pediatric patients with major depressive disorder, due to the additional fact that studies have
failed to show that Paxil was effective in this patient population."
89. On April 22, 2004, the Committee for Proprietary Medicinal Products of the
EMEA announced that, following its review of scientific data, it was recommending to the
European Commission that paroxetine not be prescribed for pediatric patients.
90. Despite its 2003 admissions to regulatory agencies and to the public in the UK and
Canada, and despite the agencies' negative assessment of efficacy and articulated safety concerns
about the use of paroxetine by children and adolescents with MDD, GSK continues to
misrepresent and conceal information in an ongoing effort to encourage physicians to prescribe
paroxetine to these youngsters.
91. For example, GSK revised its Medical Information Letter three times after the
FDA's first Talk Paper in June 2003. While these Letters included all of the data from study 329,
none cited the existence of the extension phase of this study, which showed no difference in
relapse rate between paroxetine and placebo. One of these three 2003 Medical Information
Letters did not report any additional information concerning emotional lability beyond what was
reported in the earlier Medical Jnforn1ation Letters that pre-dated any of the Talk Papers. None of
the Letters reported the particularly negative emotional lability data from study 329-extension and
study 716, although they cited other non-randomized studies that had no placebo control,
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Moreover, all of these communiques to physicians referenced the FDA Talk Papers, but one
failed to acknowledge the absence of evidence of efficacy from the clinical studies, which the
FDA's first Talk Paper had noted.
92. GSK also issued a fourth Medical Information Letter explicitly responding to the
FDA's first Talk Paper, which omitted any reference to the agency's finding of no evidence of
paroxetine's efficacy in treating MDD in a pediatric population. This Medical Information Letter
was specifically focused on the use of paroxetine to treat children and adolescents with MDD,
and stated: "GlaxoSmithKline stands firmly behind Paxil as a safe and effective medication that
continues to help millions of patients suffering from mood and anxiety disorders. We will
continue to work with the FDA on the safety evaluation." In the context of this document, the
quoted statement appeared to announce GSK's position concerning paroxetine as a treatment for
MDD in a pediatric population, suggesting it is safe and effective for this use.
93. GSK further controlled physicians' access to negative information about
paroxetine as a treatment for MDD in children and adolescents by controlling the information
provided to its own personnel. While GSK attached the FDA's June 19,2003 Talk Paper to a
July 15, 2003 internal company newsletter, it instructed the sales representatives that the copy of
the Talk Paper was "for your information only, and it [sic] not to be used with your customers." This
2003 newsletter also informed the sales personnel, who communicate directly with physicians, that
study 329, as described in the published article, was able to establish efficacy despite a high
placebo-response rate. At most, study 329 presents a mixed picture on efficacy.
94. Although, in response to the British and Canadian regulatory actions, GSK
distributed letters to the physicians in those countries informing them that clinical studies had
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failed to demonstrate the efficacy of paroxetine in MDD in the pediatric population and that there
was a doubling of the rate of reporting of adverse events, including emotional lability, it did not
provide American physicians with this same information. Instead, it sent the Medical
Information Letters, with their omissions of material information, to only those physicians who
specifically requested information concerning paroxetine use as a treatment for MDD in children
and adolescents.
95. GSK took affirmative steps to conceal negative information about the use of
paroxetine to treat MDD in children and adolescents from the American public. Unlike GSK's
June 10, 2003 press release in Britain, which disclosed that GSK had "seen a difference between
[paroxetine] and placebo in terms of suicidal thinking or attempts [in its MDD studies]
particularly in adolescents," GSK's June 19,2003 American press release noted only that "there
is no evidence that Paxil is associated with an increased risk of suicidal thinking or acts in adults"
and that "not a single person [who participated in the pediatric paroxetine trials] committed
suicide." The American press release provided no safety or efficacy information material to
treatment decisions for pediatric patients with MDD.
96. Virtually all physicians have access to the results of study 329 through the
published article. GSK's failure to disclose to these physicians the findings of studies 377, 701, and
the safety outcomes of studies 329-extension phase and 716, created the false impression
that, based on the scientific evidence in GSK's control, there is no question about paroxetine's
safety and efficacy in treating MDD in children and adolescents and, therefore, the risk-benefit
balance is well settled and generally favorable for this off-label use. This impression was
reinforced by GSK's mischaracterization of much of the information it did disclose, its further
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concealment and suppression of negative information, and its paroxetine-related targeting of
psychiatrists who treat only pediatric patients.
FRIVOLOUS PATENT LITIGATION
97. In addition to making false and misleading statements and failing to disclose known
negative effects of Paxil obtained during its drug trials on children and adolescents, throughout the
Class Period, GSK filed a number of frivolous lawsuits to prevent other drug makers from marketing
less expensive, generic versions of Paxil and Augmentin.
98. Prior to the beginning of the Class Period, both Paxil and Augmentin had been GSK
best selling drugs.
99. GSK represented throughout the Class Period that its patent on Paxil would expire
in 2006. This representation was made in GSK’s Form 20-F for the years ending December 31,
1999, 2000, and 2001.
100. The false and misleading information that GSK’s patent for its best selling drug,
Paxil, patent would expire in 2006 was widely distributed. As announced in the February 19, 2001
edition of the Financial News, in an article entitled “Pharmaceutical Company to Soothe Investors'
Fears” noted that “GSK already has a strong franchise in treating depression, thanks to
Paxil/Seroxat. Paxil, which is similar to Prozac, is the group's biggest-selling drug, but it faces the
loss of its patent protection from 2006.”
101. On February 21, 2001 GSK released its Preliminary Announcement of Results for the
year ended 31st December 2000. GSK said in part that “Strong growth from key therapy areas: CNS
growth driven by Seroxat/ Paxil. In GSK's largest sales category, CNS, excellent growth of 16 per
cent to #3,279 million was driven by an outstanding performance from Seroxat/Paxil, which
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increased by 17 per cent to[1,550 million English pounds]. During 2000, Paxil became the market
leader in the US SSRI (selective serotonin reuptake inhibitor) market in new retail prescriptions.
Paxil [benefitted] throughout the world from its new indication for Social Anxiety Disorder. GSK's
strategy of broadening the label for new indications continued with filings for Generalised Anxiety
Disorder and Post Traumatic Stress Disorder, and the expected launches during 2001 will contribute
to further growth of Paxil in the USA. In Europe, where Seroxat continues to be the number one
antidepressant, its sales grew by 11 per cent to #334 million, while in the RoW [rest of the world]
growth was 29 per cent to #159 million. Paxil was launched in Japan at the end of 2000 and is off
to a strong start. In the growing anti-depressant market, DTC campaigns [focusing] on social anxiety
disorder helped Paxil to grow by 18 per cent.
102. Concerning its patents, GSK stated that it was engaged in litigation in the USA and
Europe regarding infringement of the Group's patents related to Paxil/Seroxat. . . . GSK has become
aware of [authorizations] issued by regulatory authorities in Europe for paroxetine hydrochloride
anhydrate, a variant of paroxetine hydrochloride hemihydrate, the active ingredient in Seroxat/Paxil,
following the expiration of the data exclusivity period in European markets. GSK believes that
marketing of a paroxetine hydrochloride anhydrate product by third parties in European countries
would infringe its patents and expects to vigorously litigate its position should a third party launch
such a product.
103. On April 12, 2001, GSK published its Form 20-F for the year ending on December
31, 2000. In this Form-20 GSK stated that its patent for Seroxat/ Paxil paroxetine expired
“During or after 2006"
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104. Concerning its intellectual property litigation, GSK made the following
announcements. In July 1998 the Group filed an action against TorPharm, Apotex nc and Apotex
Corp in the US District Court for the Northern District of Illinois charging infringement of the
Group's patent for paroxetine hydrochloride hemihydrate ( Paxil/ Seroxat). TorPharm, through its
US agent, Apotex Corp, filed an Abbreviated New Drug Application (ANDA) with the US Food and
Drug Administration (FDA) seeking approval to introduce a generic form of Paxil into the US
market prior to expiration in 2006 of the Group's patent. TorPharm asserted in the ANDA that its
compound does not infringe the Group's patent, and in February 2000 challenged the validity of that
patent. The parties are still engaged in the discovery process; no trial date has been set.
105. In 1999 the Group filed an action against Geneva Pharmaceuticals and in 2000 against
Zenith Goldline in the US District Court for the Eastern District of Pennsylvania charging
infringement of the Group's patents for paroxetine hydrochloride hemihydrate ( Paxil/ Seroxat).
Geneva and Zenith Goldline filed ANDAs for paroxetine hydrochloride asserting that their
compounds do not infringe the Group's patents or that the patents are invalid. In addition the Group
has filed new actions against TorPharm in the Eastern District of Pennsylvania based upon new
patents issued in 1999 and 2000 covering paroxetine. The new patents were also included in the
actions against Geneva and Zenith Goldline. Proceedings in those actions have been deferred
pending a decision on GlaxoSmithKline's motion to consolidate all Pennsylvania litigation.
106. In March 2000 GlaxoSmithKline filed an action against Pentech in the US District
Court for the Northern District of Illinois for infringement of the Group's patents for paroxetine
hydrochloride. Pentech filed an ANDA for a capsule version of Paxil, asserting that its compound
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and presentation do not infringe the Group's patents or that the patents are invalid. This matter is
still in discovery.
107. In October 2000 GlaxoSmithKline filed an action against Synthon in the US District
Court for the Middle District of North Carolina for infringement of the Group's patents for
paroxetine hydrochloride and paroxetine mesylate. Synthon filed a 505(b)(2) application (a 'paper
NDA') with the US FDA using a different salt form of paroxetine than that used in the marketed
form of Paxil. This matter is still in its early stages.
108. In January 2001 GlaxoSmithKline filed an action against Alphapharm in the US
District Court for the Eastern District of Pennsylvania for infringement of the Group's patents for
paroxetine hydrochloride. Alphapharm filed an ANDA for paroxetine hydrochloride asserting that
its product would not infringe the Group's patents or that the patents are invalid. This matter is still
in its early stages.
109. GSK also made the following false and mislead statement: “With respect to all the
pending litigation in the USA relating to Paxil, the Group believes that its patents are valid and that
the third party compounds do infringe the Group's patents, and it intends to vigorously litigate its
position.”
110. On December 30, 2002 GSK announced that the United States District Court for the
Eastern District of Pennsylvania had ruled on summary judgement motions filed by TorPharm
Pharmaceuticals (a wholly owned subsidiary of Apotex) in litigation over Paxil. The court ruled in
GSK's favor on one patent, in Apotex's favour on a second patent, holding the patent
invalid; and split the decision on the remaining two patents, holding some claims in the patents
invalid but denying Apotex's motions on other claims. GSK also announced that it believed there
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were significant hurdles preventing the launch of a generic Paxil product, and reconfirmed its
published earnings guidance for 2002 and 2003.
111. These representations were false and misleading because, unknown to its investors,
GSK did not have legitimate patent protection until 2006. Instead GSK’s representations of patent
protection were based upon the illegal practice of “evergreening” its paroxetine hydrochloride
monopoly by obtaining a dozen patents over the last decade, which if unchallenged would have
extended that monopoly until 2019 -- 27 years after the expiration of the original patent. These
patents were frivolous, non-novel and redundant, concerning chemical properties of the molecule
that have nothing to do with its effectiveness. The sole purpose of these patent filings and suits was
not to protect any conceivable novel scientific discovery, but only to support GSK’s illegal efforts
to protect their monopoly profits as long as possible. GSK has unlawfully exploited hypertechnical
patent arguments repeatedly to activate the automatic stay provisions for generic drugs under the
Hatch-Waxman Act.
GENERIC MANUFACTURES
112. Apotex, Inc. (“Apotex”) is a corporation organized under the laws of the
Dominion of Canada, with its principal place of business located at 150 Signet Drive, Weston,
Ontario, Canada, M9L 1T9. Apotex, Inc. also does business as Torpharm. Apotex is engaged in
the business of manufacturing and marketing pharmaceuticals, and applied to the United States
Food and Drug Administration (“FDA”) for permission to market a generic bioequivalent to
Paxil. On September 8, 2003, Apotex brought the first generic paroxetine hydrochloride product
to the market, in four dosage strengths.
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113. Zenith Goldline Pharmaceuticals, Inc. (“Zenith”) is a corporation organized under
the laws of the State of Florida, and maintains an office at 4400 Biscayne Boulevard, Miami,
Florida, 33137. Zenith is engaged in the business of manufacturing and marketing
pharmaceuticals, and has applied to the FDA for permission to market a generic bioequivalent to
Paxil.
114. Pentech Pharmaceuticals, Inc. (“Pentech”) is a corporation organized under the
laws of the State of Illinois, and maintains an office at 1100 Lake Cook Road, Suite 257, Buffalo
Grove, Illinois, 60089. Pentech is engaged in the business of manufacturing and marketing
pharmaceuticals, and has applied to the FDA for permission to market a generic bioequivalent to
Paxil.
115. Geneva Pharmaceuticals, Inc. (“Geneva”) is a corporation organized under the
laws of the State of Colorado, and maintains an office at 2655 W. Midway Blvd., Broomfield,
Colorado, 80038-0446. Geneva is engaged in the business of manufacturing and marketing
pharmaceuticals, and has applied to the FDA for permission to market a generic bioequivalent to
Paxil.
116. Alphapharm PTY, Ltd. (“Alphapharm”) is a limited liability company
incorporated under the laws of Australia and having its principal place of business at 12-14
Queen Street, Glebe, New South Wales, 2037 Australia. Alphapharm is engaged in the business
of manufacturing and marketing pharmaceuticals, and has applied to the FDA for permission to
market a generic bioequivalent to Paxil. On March 8, 2004, Alphapharm obtained approval of its
generic bioequivalent product, in four dosage strengths.
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THE FEDERAL SCHEME FOR APPROVAL OF PIONEER DRUGS
117. Under the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq.,
approval by the FDA is required before a company may begin selling a new drug. Pre-market
approval for a new drug, often referred to as a “pioneer” or “branded” drug, must be sought by
filing a New Drug Application (“NDA”) with the FDA demonstrating that the drug is safe and
effective for its intended use. New drugs that are approved for sale in the United States by the
FDA are typically (but not necessarily) covered by patents, which provide the patent owner with
the exclusive right to sell that new or pioneer drug in the United States for the duration of the
patents involved, plus any extension of the original patent period (the “FDA Exclusivity Period”)
granted pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, 98
Stat. 1585, 21 U.S.C. § 355 (the “Hatch-Waxman Act” or the “Act”).
118. In addition to information on safety and efficacy, NDA applicants must submit to
the FDA a list of all patents that claim the drug for which FDA approval is being sought, or that
claim a method of using the drug, and with respect to which a claim of patent infringement could
reasonably be asserted against an unlicensed manufacturer or seller of the drug.
119. Once the NDA is approved, the FDA must list any patents referenced as part of
the NDA application process in a publication known as the “Approved Drug Products With
Therapeutic Equivalence Evaluations.” 21 U.S.C. § 355(b)(1). This publication is commonly
called the “Orange Book..”
120. Pursuant to 21 U.S.C. § 355©)(2), if, after its NDA is approved, the pioneer drug
manufacturer obtains a new patent that claims the drug or methods of its use, the company must
supplement its NDA by submitting information on the new patent within 30 days of issuance.
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The FDA then lists the new patent in a supplement to the Orange Book. The FDA is required to
accept as true the patent information it obtains from patent holders and to withhold its approval
of a subsequent drug application whenever the patent holder presents a litigated dispute (baseless
or not) regarding the validity or infringement of the patent. If an unscrupulous patent holder
provides false information to the FDA or files frivolous patent infringement actions to delay the
onset of generic competition, the FDA is powerless to stop it.
121. Once the FDA approves the new drug as safe and effective, it may be used in the
United States only under the direction and care of a physician who writes a prescription,
specifying the drug by name, which must be dispensed by a licensed pharmacist. The pharmacist
must, in turn, fill the prescription with the drug brand specified by the physician, unless an AB-
rated generic version of that pioneer drug which has been approved by the FDA is available.
ABBREVIATED NEW DRUG APPLICATIONS FOR GENERIC DRUGS
122. Congress enacted the Hatch-Waxman Act in 1984 to establish an abbreviated
process to expedite and facilitate the development and approval of more affordable generic drugs,
while still allowing new drug innovators to obtain an economic return on their investments and
discoveries. To effectuate this purpose, the Hatch-Waxman Act permits a generic drug
manufacturer to file an “abbreviated” new drug application (“ANDA”), which incorporates by
reference the safety and effectiveness data developed and previously submitted by the company
that manufactured the original, “pioneer” drug. The Act also provides an economic incentive to
the generic companies to be the first to file an ANDA for a particular generic drug: a 180-day
statutory period of market exclusivity, during which time the manufacturer has the right to
market its drug free from other generic competition.
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123. Information that must be included in the ANDA includes the generic company’s
position vis-à-vis the patent that the pioneer manufacturer claims applies to the drug. The
ANDA filer must make one of four certifications. Only the so-called “Paragraph IV
Certification” is relevant here. Paragraph IV requires the ANDA filer to certify that the patent
for the pioneer drug is invalid or will not be infringed by the proposed generic company’s
product. 21 U.S.C. § 355(j)(2)(A)(vii)(IV).
124. If the ANDA contains a Paragraph IV Certification, the ANDA applicant must
provide notice to the owner of each patent that is referred to in the certification, and to the holder
of the approved NDA to which the ANDA refers. See 21 U.S.C. § 355(j)(2)(B)(I). The notice
must include a detailed statement of the factual and legal basis for the ANDA applicant’s
assertion that the patent is not valid or will not be infringed by the generic product. See id.; 21
C.F.R. § 314.95.
125. The branded drug patent owner, upon receiving a Paragraph IV Certification from
an ANDA applicant, has 45 days to initiate a patent infringement suit against the applicant. See
21 U.S.C. § 355(j)(5)(B)(iii). If no action is initiated within 45 days, the process for FDA
approval of the generic product is not delayed by patent issues. However, if a patent
infringement suit is brought within the 45-day window, FDA approval of the ANDA is
automatically postponed until the earliest of the expiration of all listed patents, the expiration of
30 months from the patent holder’s receipt of notice of the Paragraph IV Certification, or a final
judicial determination of non-infringement of all patents, whichever comes first.
126. The FDA has stated that it does not evaluate the merits of the listed patent claim,
but merely acts in a ministerial role, initiating the stay provision automatically if a patent suit is
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filed. Thus branded drug patent holders need only file a patent infringement lawsuit within 45
days of receipt of a Paragraph IV Certification in order to automatically block an ANDA
applicant’s generic drug from entering the market for up to 30 months.
GENERIC DRUGS
127. Generic drugs are drugs which the FDA has found to have the same active
chemical composition and provide the same therapeutic effects as the pioneer, brand-name drugs.
Where a generic drug is completely equivalent to a pioneer or brand-name drug, the FDA assigns
the generic drug an “AB” rating. Generic drugs are normally priced substantially lower than the
brand-name drugs to which they are bioequivalent. In July 1998, the Congressional Budget
Office (“CBO”) released a study titled “How Increased Competition from Generic Drugs Has
Affected Prices and Returns In The Pharmaceutical Industry” (the “CBO Study”). The CBO
Study concluded that generic drugs save consumers and third-party payors between $8 billion
and $10 billion per year. The study involved 21 brand-name prescription drugs that first
experienced generic competition between 1991 and 1993. It determined that the generic versions
cost initially an average of 25% less than the original brand-name drugs at retail prices, and that
as the number of generic manufacturers increases, the average prescription price of the generic
alternative falls. The CBO Study showed that when one to ten firms are manufacturing and
distributing generic forms of a particular drug, the generic retail price of that drug averages about
60% of the brand-name price. When more than 10 manufacturers have entered the market, the
average generic prescription price falls to just 34 percent of the brand-name price. With 20
manufacturers, the generic price was only 20 percent of the brand-name price. Since generic
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prices tend to fall as the number of producers rises, generic manufacturers are most profitable
when they are one of the first to enter a market.
128. The Federal Trade Commission (“FTC”) estimates that average drug prices
decline some 20% within approximately two years of generic entry. As additional manufacturers
bring generic versions of the drug to market, the price continues to drop. See Federal Trade
Commission, Generic Drug Entry Prior to Patent Expiration: An FTC Study, July 2002.
129. The CBO Study also concluded that a brand-name drug loses a significant portion
of its market share to generic competitors soon after the introduction of generic competition,
even if the brand-name manufacturer lowers prices to meet competition. The study estimated that
generic drugs capture at least 44% of the brand-name drug’s market share in just the first year of
sale.
THE AUGMENTIN PATENT LITIGATION
130. March 1, 2000, SmithKline Beecham announced that it had obtained a new US
patent on its broad-spectrum antibiotic, Augmentin. This patent was completely baseless and
filed only to illegally prohibit generic drug manufactures from selling generic forms of
Augmentin.
131. Augmentin is the brand name for the combination of an antibiotic of the penicillin
class, amoxicillin, with the substance clavulanic acid. Clavulanic acid, in its salt form, acts to
potentiate the effects of antibiotics of this class by inactivating an enzyme produced as a
defensive mechanism by the bacteria that the antibiotic is designed to destroy.
132. On July 26, 2000, in an article by the Financial Times, defendant Garnier is
quoted as identifying Paxil/Seroxat and Augmentin as “stars of the show” as these two drugs
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each brought in over a billion dollars in revenue. Defendant Garnier also stated he was confident
that newly granted patents on Augmentin, would keep competition at bay until 2013.
133. On February 2, 2002, United States District Court for the Eastern District of
Virginia, Norfolk Division ruled in Geneva Pharms. v. Glaxosmithkline PLC, 189 F. Supp. 2d
377 (E.D. VA, 2002) that GSK lost certain patent protections for Augmentin.
134. In the face of it patent lose for Augmentin, GSK went on a public relations
offensive. Defendant Garnier appeared on CNBC and the following exchange occurred:
CARL: Speaking of blockbusters, you have two very important drugs, Augmentin (ph), the big
antibiotic, Paxil (ph), the antidepressant. You said that you can get mid teens growth this year if
you can defend those patents here in the U.S. Can you?
GARNIER: Yes. We are very confident we can defend our patents.
CARL: What makes you so confident? Because it has, the courts have not always been going
your way lately.
GARNIER: Of course, but in the case of Augmentin (ph), for instance, those were patents that
were issued by the PTO. Generic companies tried to challenge those patents. They asked for a
second reading at the PTO. The PTO confirmed that those patent[s] were genuine, they were rock
solid. And we feel that the courts eventually will recognize the letter of the law and give us the
added protection for Augmentin. Paxil is a more complex story, but we're still under the 30
months stay and therefore we can confidently predict that there will be no Paxil generics in the
U.S. for a while.
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135. GSK knew or should have known that its Augmentin patent was not protected
after 2000. The original patent application for Augmentin was filed on April 17, 1975, by GSK’s
predecessor in interest, SmithKline Beecham. In 1979 Jerome Goldberg, an examiner at the PTO,
issued a final restriction leading to the Augmentin patent. Goldberg stated that “Applicants
[GSK] are . . . required to elect an invention of a single disclosed composition containing
clavulanic acid and one penicillin or cephalosporin antibiotic for examination on the
merits.”
136. Despite this admonition from examiner Goldberg, GSK pursued parallel patent
applications for similar Augmentin-like compounds with the PTO. One of these, which GSK
had hoped would give them patent protection for Augmentin beyond the 17 years granted by the
original patent, was the “’380 patent.”
137. In an opinion issued on February 25, 2002, the District Court of the Eastern
District of Virginia reviewed the ‘380 patent in the context of a challenge to that patent filed by
Teva Pharmaceuticals, a generic drug manufacturer attempting to market a generic equivalent to
Augmentin. The court found that the ‘380 patent was invalid as a matter of law on the ground of
obvious-type double patenting. The court noted that in order to receive patent protection, a
newly claimed invention must be novel and distinct from all previously claimed patented
inventions the holder owns.
138. On March 13, 2002, GSK announced that it had partially lost its court battle over
Augmentin. Why it waited so long to announce this loss was not explained. Additionally, to
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minimize the loss to its stock, GSK announced that it would soon appeal this decision. This
announcement caused GSK’s stock to drop from $48.81 on March 13 to $48.27 on March 14,
and drop again to $47.62 on March 15.
139. On May 23, 2003 GSK announced the complete loss of Augmentin patent
protection via the PR Newswire. GSK also stated that it continued to believe that its patents
covering Augmentin were valid. The Company stated that it was appealing both this ruling and
previous rulings from the same court on Augmentin patents expiring in 2017 and 2018. The
press release also revised earnings due to the impact of generic competition for Augmentin. It
also stated that “[e]arnings forecasts continue to assume GSK successfully defends its intellectual
property surrounding Paxil in the US.”
140. This announcement caused GSK to lose almost 9 billion English pounds or 8.7%
of its value. The U.S. price fell from $41.47 to $38.03. Merrill Lynch downgraded its
recommendation on the stock to “neutral” on the news.
141. On November 23, 2003, the United States Court of Appeals for the Federal
Circuit issued its ruling on the Augmentin patents in Geneva Pharms., Inc. v. GlaxoSmithKline
PLC, 349 F.3d 1373 (Fed. Cir. 2003). The Court upheld the lower count’s ruling that GSK did
not have patent protection for Augmentin.
142. This clear abuse of the patent system, in contravention of express directives from
the USPTO was designed to extend GSK’s monopoly on the sale of Augmentin. GSK’s
statements concerning when its Augmentin patent would expire were false and misleading for the
reasons contained in the court’s rulings. An antitrust lawsuit was filed in the Eastern District of
Virginia on behalf of consumers and third-party payors such as self-insured unions and HMOs:
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Ryan House v. GlaxoSmithKline plc, Docket No. 2:02cv442. On July 28, 2004, the court
certified this class and preliminarily approved the settlement. On January 10, 2005, the court
gave final approval for the settlement for the class which includes purchasers from January 4,
2000 to April 30, 2004. The settlement provides for $29 million, of which 55% is to be paid to
consumers and 45% is to be paid to third-party payors.
GSK’S PAROXETINE HEMIHYDRATE PATENTS
The Original Expired Patent for Paroxetine Hydrochloride
143. On February 8, 1977, Ferrosan, a British company, obtained Patent No. 4,000,196
(“the ‘196 patent”), on a set of compounds including the drug paroxetine hydrochloride.
Paroxetine is a selective serotonin reuptake inhibitor (“SSRI”). The patent abstract states, “[t]he
invention relates to new 3-substituted 1-alkyl-4-phenylpiperidines, being useful as antidepressant
and anti-Parkinson agents, and to their production.”
144. Ferrosan’s molecule was an “anhydrate” (i.e., free of water) form of the molecule.
145. In 1980, Ferrosan licensed its paroxetine patent to GSK, which began
manufacturing and testing the drug in 1981.
146. The ‘196 patent expired in 1992.
GSK’s Paroxetine Hemihydrate Patent
147. In March 1985, a chemist in GSK’s laboratory discovered that he had produced a
different form of paroxetine, called “hemihydrate” distinguished from Ferrosan’s “anhydrous”
form in that the hemihydrous form contains a water molecule.
148. Paxil® consists of the hemihydrous form of paroxetine, while several proposed
generics contain anhydrous forms. As FDA tentative approval of anhydrous generic forms of
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Paxil® illustrates, the therapeutic effects are the same. GSK began testing the hemihydrous form
in clinical trials, but only for its effectiveness as an antidepressant, not with regard to any
therapeutic difference between hemihydrous and anhydrous forms, which has never been
claimed.
149. On or about January 26, 1988, the United States Patent and Trademark Office
(“PTO”) issued U.S. Patent No. 4,721,723, titled “Anti-Depressant Crystalline Paroxetine
Hydrochloride Hemihydrate (“the ‘723 hemihydrate patent”). GSK currently owns the ‘723
hemihydrate patent.
150. The ‘723 patent claims crystalline paroxetine hydrochloride hemihydrate as a
newly invented synthetic compound.
151. GSK submitted an NDA to the FDA, which the FDA subsequently designated
NDA No. 20-031, for a drug containing, as its active ingredient, paroxetine hydrochloride
hemihydrate. On December 29, 1992, the FDA approved GSK’s NDA for the drug, which GSK
markets as Paxil®.
152. As of December 29, 1992, the FDA listed in the Orange Book the ‘723
hemihydrate patent in connection with approved NDA No. 20-031, despite the fact that the
original ‘196 patent had already expired. Moreover, at that time, GSK had no pending
applications for any additional patents purporting to claim the drug that is the subject of NDA
No. 20-031.
153. As of December 29, 1992, GSK began to enjoy a five-year statutory monopoly in
the market for paroxetine hydrochloride hemihydrate by reason of the FDA’s determination that
the approved NDA No. 20-031 purportedly contained a new, previously-unapproved active
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ingredient. During that five-year period, the Act and applicable regulations barred the FDA from
approving any ANDA that referenced NDA No. 20-031. Therefore, the earliest date that the
FDA could have ended GSK’s paroxetine hydrochloride monopoly by approving an ANDA that
referenced NDA No. 20-031 was December 29, 1997. 21 U.S.C. § 355(j)(5)(D)(ii).
154. In May, 1995, more than two years after the FDA approved NDA No. 20-031,
GSK began filing patent applications with the U.S. Patent and Trademark Office (“PTO”) for
purportedly new anhydrous versions of paroxetine hydrochloride, even though the same form of
the drug was in the original ‘196 patent, which expired in 1992. Such patents did not begin to
issue until 1999.
155. On March 31, 1998, Apotex submitted an ANDA to the FDA, which the FDA
subsequently designated ANDA No. 75-356, for a paroxetine hydrochloride anhydrate drug, not
the hemihydrous form claimed by GSK’s ‘723 patent, which GSK referenced in NDA No. 20-
031.
156. Apotex filed ANDA No. 75-356 with substantial and statutorily required studies
to demonstrate that Apotex’s paroxetine anhydrate drug was therapeutically equivalent to the
approved NDA No. 20-031 paroxetine hydrochloride hemihydrate drug.
157. Apotex followed the Hatch-Waxman Act by addressing the only patent listed at
the time for NDA No. 20-031 – the ‘723 hemihydrate patent – with a Paragraph IV Certification,
stating that the manufacture, sale or use of Apotex’s proposed paroxetine hydrochloride
anhydrate drug would not infringe that patent. 21 U.S.C. § 355(j)(2)(A)(vii)(IV). Apotex’s
submission to the FDA contained all the information required by the FDA’s regulations.
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158. Apotex was the first applicant to file an ANDA that referenced GSK’s NDA for
Paxil® and contained a Paragraph IV Certification. This entitled Apotex to market exclusivity
on generic paroxetine hydrochloride for 180 days after either Apotex began commercial
marketing of its paroxetine hydrochloride anhydrate drug, a court ruled that Apotex’s proposed
paroxetine hydrochloride anhydrate drug would not infringe the patent subject to Paragraph IV
Certification, or that such patent was invalid or unenforceable. See 21 U.S.C. § 355(j)(5)(B)(iv).
159. Apotex further followed the Act by notifying GSK of the filing of the ANDA and
of the reasons why the manufacture, sale or use of its proposed paroxetine hydrochloride
anhydrate product did not infringe GSK’s ‘723 hemihydrate patent. See 21 U.S.C. §
355(j)(2)(B)(I).
160. Apotex’s Paragraph IV Certification on the ‘723 hemihydrate patent conferred
standing on GSK -- pursuant to the Hatch-Waxman Act -- to file an infringement action within
45 days after receiving notice of Apotex’s Paragraph IV Certification. See 21 U.S.C. §
355(j)(5)(B)(iii); 35 U.S.C. § 271(e)(2).
161. On June 26, 1998, GSK sued Apotex in the United States District Court for the
Northern District of Illinois for alleged infringement of the ‘723 hemihydrate patent, pursuant to
21 U.S.C. § 355(j)(5)(B)(iii) and 35 U.S.C. § 271(e)(2) (the “First Illinois Action”)
162. When it filed the First Illinois Action, GSK knew that such suit was baseless,
because Apotex was proposing the manufacture, sale or use of its paroxetine hydrochloride
anhydrate product, a product which, by definition, would not infringe on GSK’s ‘723
hemihydrate patent, the only patent that was listed in the Orange Book in connection with Paxil®
and NDA No. 20-031.
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163. The courts subsequently found that the First Illinois Action was baseless. On
March 3, 2003, the District Court for the Northern District of Illinois ruled that Apotex’s generic
product did not infringe the ‘723 patent, and dismissed GSK’s suit with prejudice. See
SmithKline Beecham Corp. v. Apotex Corp., 247 F. Supp. 2d 1011 (N.D. Ill. 2003) (Posner, J.)
(sitting by designation pursuant to 28 U.S.C. § 291(b)). Judge Posner characterized GSK’s
allegation of infringement as “hypertechnical,” inviting “a form of extortion,” and seeking “a 14-
year extension of the patent term without authorization in the patent statute.” Id. at 1049, 1045
&1047.
164. As reported in the April 4, 2002 edition of The Independent, on April 3, 2002,
GSK “hit its lowest level since it was created from the merger of Glaxo Wellcome and
SmithKline Beecham. The stock dropped 26p to 1,617p on concerns that an early generic version
of its leading antidepressant, Paxil, may steal market share from the pharmaceutical giant.
Traders were unsettled by news that a private Dutch generics firm called Synthon has filed an
application with the US Food and Drug Administration for a variant of Paxil, on which Glaxo is
said to have weak patent protection. Some argue that if the Dutch company manages to get its
drug to the market by 2004 it could hit [GSK]'s earnings for that year by as much as 9 per cent.”
165. As reported in the July 13, 2002 (Saturday) edition of the Financial Times,
(London,England) “[GSK] suffered another blow on Friday after the High Court partly
overturned the patent on its blockbuster antidepressant Paxil. BASF, the German chemicals
group, won the right to produce generic copies of the drug after the High Court ruled that parts of
GSK's patent covering paroxetine hydrochloride, were invalid. When trading resumed on
Monday, July 15, 2002 GSK shares sank to $36.65 from $38.15 the day before.
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166. On July 23, 2002, GSK announced that it had lost a patent case for in United
States for Paxil. GSK’s share price dropped to $32.86 from $34.02 on the news.
167. As noted in the July 25, 2002 edition in the Investors Chronicle, in an article
entitled “Time Runs out for GSK” the Company “faces substantial revenue erosion as patents on
its leading drugs near their expiration dates. Shares in [](GSK) had another dismal week despite
a decent set of second-quarter results. Clearly, investors are more preoccupied with the
company's future - in particular its ability to cope with its patent expiry problems - than its
historical performance.[] [B]ehind the good headline numbers, problems lurk. GSK has lost
around 35 per cent of its value since the start of the year when it emerged that some of these - its
best-performing drugs - would be at the mercy of cheaper generic copies.
168. On October 23, 2002, GSK announced its earnings for the quarter. The results
were surprising because GSK noted that it had reserved 145 million pounds for legal costs.
During the conference call discussing the results, defendant Garnier stated in response to a
question concerning earnings that concerning growth that: “We basically have a guidance of at
least 10% once again, we cover for everything except for a surprise with paxil that's unlikely at
this stage of the game for next year.”
169. Because of the reserve for legal costs, GSK shared dropped 6% from $41.34 to
$39.27. On October 24, 2002 GSK shares again fell, this time to $38.00. As summarized in its
headline, The Times (London) on October 24, 2002 reported that “GSK surprises City with
Pounds 145m legal hit[.]” The decline would have been worse but for the announcement a 4
billion pound stock buy-back plan that was also announced the same day.
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170. On December 30, 2002 GSK announced an Update on Paxil Patent Litigation via
PR Newswire. GSK announced that a federal judge for the United States District Court for the
Eastern District of Pennsylvania (Philadelphia) has ruled on summary judgment motions in
GSK's favor on one patent, denying the motions for invalidity and non-infringement; in Apotex's
favor on a second patent, holding the patent invalid; and split the decision on the remaining two
patents, holding some claims in the patents invalid but denying Apotex's motions on other
claims. GSK also announced that it “continues to believe there are significant hurdles that
prevent launch of a generic Paxil( R) product. Accordingly, GSK's published earnings guidance
for 2002 and 2003 remains as previously stated. GSK's anti-depressant, Paxil( R) was launched
in the US in early 1993, with patent expiry in 2006.” Share prices increased upon GSK
reconfirming its earning guidance and its portrayal of this decision as a partial victory. As
reported in The Independent (London)’s December 31, 2002, edition under a headline entitled
“Glaxo Boosted by US Patent Ruling on Anti-depressant Drug” GSK “raised hopes it could head
off potential rivals to one of its top-selling drugs yesterday and reassured investors by repeating
its earnings guidance. In the article, Steve Plag, pharmaceuticals analyst at Credit Suisse First
Boston, said: “This is clearly very good news as it means the second patent case now goes to
trial in one of the slowest courts in the US, which should mean no resolution to the Paxil case
until the end of 2003 at the earliest.”
171. On February 5, 2003, the patent trial concerning Paxil between GSK and
ApotexA started in Chicago (US). In the case, GSK claimed that patents for its best-selling anti-
depressant Paxil (paroxetine) have been infringed by a rival treatment developed by Apotex.
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172. On February 14, 2003 GSK announced that it had purchased 2 billion English
pounds of its own stock as part of the stock purchase plan announced on October 24, 2002.
173. On March 4, 2003 the court ruled that Apotex had not infringed patents on GSK’s
best-selling product Paxil. In response to the verdict, GSK’s shares slid from $35.27 to $34.15 or
3%. As reported by The Time (London) on March 5, 2003 “The loss of Paxil revenue is likely
to come down to the bottom line but the bad news is fully in the price. Market forecasts are
assuming the worst, so the stock should recover from here." This view was repeated by Nigel
Barnes, pharmaceuticals analyst at Merrill Lynch, who said: “The worst is probably over at these
sorts of levels. GSK trades at a considerable discount to the international sector and there's
considerable yield support.”
174. On May 23, 2003 GSK announced via the PR Newswire that a federal judge in the
United States Federal District Court for the Eastern District of Virginia had ruled in favor of
Geneva Pharmaceuticals, Teva Pharmaceuticals and Ranbaxy, declaring that three of GSK's U.S.
patents for its antibiotic Augmentin are invalid. GSK also stated that continues to believe its
patents covering Augmentin are valid. The Company stated that it was appealing both this ruling
and previous rulings from the same court on Augmentin patents expiring in 2017 and 2018. The
press release also revised earnings due to the impact of generic competition for Augmentin. It
also stated that “[e]arnings forecasts continue to assume GSK successfully defends its intellectual
property surrounding Paxil in the US.”
175. This announcement caused GSK to lose almost 9 billion English pounds or 8.7%
of its value. The U.S. price fell from $41.47 to $38.03. Merrill Lynch downgraded its
recommendation on the stock to “neutral” on the news.
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176. On July 1, 2003, GSK announced today that it is requesting the U.S. Food and
Drug Administration (FDA) to remove three patents related to Paxil from the register of
pharmaceutical patents maintained by the FDA and known as the “Orange Book.” This was an
admission that the patents should not have been issued in the first place.
177. On July 31, 2003 Apotex received FDA clearance to market a generic version of
GSK top-selling antidepressant Paxil. GSK share prices slipped on the news from $39.22 to
$38.31 and on August 1 declined to $37.40.
178. On November 23, 2003, the United States Court of Appeals for the Federal
Circuit issued its ruling on the Augmentin patents in Geneva Pharms., Inc. v. GlaxoSmithKline
PLC, 349 F.3d 1373 (Fed. Cir. 2003). The Court upheld the lower count’s ruling that GSK did
not have patent protection for Augmentin.
179. On February 12, 2004 GSK announced that sales of Paxil were off 40% due to
generic competition. Shares fell from $45.15 to $43.39 on the news even though GSK
announced that profits were up 14% for 2003. Prices fell to $42.52 the next day as the news was
digested by the market.
180. On April 23, 2004, the U.S. Court of Appeals for the Federal Circuit affirmed
Judge Posner, albeit on different grounds. The Court held that because GSK’s clinical testing of
the hemihydrous form of the drug in 1985 constituted a “public use” pursuant to 35 U.S.C. §
102(b), the patent claim was invalid. See SmithKline Beecham Corp. v. Apotex Corp., 2004 WL
868425 (Fed. Cir. April 23, 2004).
181. GSK knew or should have known that its Paxil patent was not valid for the
following reasons:
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182. In addition to being baseless, the First Illinois Action was intended to thwart
potential generic competitors. The mere filing of the Illinois Action triggered a statutory 30-
month statutory stay – until December, 2000 – on FDA approval of Apotex’s ANDA No. 75-356,
unless the court earlier granted a judgment of non-infringement or invalidity. 21 U.S.C. §
355(j)(5)(B)(iii).
183. In further response to Apotex’s ANDA filing, GSK submitted to the FDA for
listing in the Orange Book two newly issued patents for purportedly new anhydrous forms of
paroxetine hydrochloride.
184. Specifically, on or about February 16, 1999, the PTO issued U.S. Patent No.
5,872,132, titled “Form of Paroxetine Hydrochloride Anhydrate” (“the ‘132 Form C patent”).
GSK currently owns the ‘132 Form C patent.
185. The ‘132 Form C patent claims a particular, allegedly new, crystalline form of
paroxetine hydrochloride anhydrate designated in the patent as Form C.
186. Additionally, on or about May 4, 1999, the PTO issued U.S. Patent No. 5,900,423,
titled “Form of Paroxetine Hydrochloride Anhydrate” (“the ‘423 Form A patent”). GSK currently
owns the ‘423 Form A patent.
187. The ‘423 Form A patent claims a second allegedly new anhydrous crystalline
form of paroxetine hydrochloride.
188. Although neither the ‘132 Form C patent nor the ‘423 Form A patent claim the
paroxetine hydrochloride hemihydrate drug for which GSK submitted NDA No. 20-031 and
which the FDA approved in 1992, GSK submitted the ‘132 Form C patent and the ‘423 Form A
patent to the FDA for listing in the Orange Book in 1999. Based on GSK’s false representation
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that the ‘132 Form C patent and the ‘423 Form A patent related to NDA No. 20-013, the FDA in
fact listed the two patents in the Orange Book despite the fact that Paxil® contains the
hemihydrous form of the molecule. See 21 U.S.C. § 355(b)(1); 21 C.F.R. § 314.53(b).
189. Moreover, when it submitted to the FDA the ‘132 Form C patent and the ‘423
Form A patent, GSK knew that it was making false representations to the FDA, since Apotex,
and not GSK, had performed (and submitted with its ANDA) the clinical trial work necessary to
enable the FDA to approve a paroxetine hydrochloride anhydrate drug for marketing to the
American public. Indeed, when it wrongfully submitted the patents to the FDA, GSK had never
before sought FDA approval to market any anhydrous form of paroxetine hydrochloride and
therefore could not market an anhydrous form.
190. After the FDA listed the two 1999 patents with NDA No. 20-031 in the Orange
Book, Apotex was forced to supplement its ANDA with Paragraph IV Certifications as to the
‘132 Form C patent and the ‘423 Form A patent. In addition, pursuant to the Act, Apotex sent
the requisite notices of such certifications to GSK.
191. Thereafter, with the knowledge that its listing in the Orange Book was improper,
on August 9, 1999, GSK filed a new patent infringement action against Apotex in the United
States District Court for the Eastern District of Pennsylvania, asserting infringement of the ‘423
Form A patent (“the First Pennsylvania Action”).
192. The First Pennsylvania Action was objectively baseless, and was solely intended
to keep generic paroxetine hydrochloride off the market. It did just that, as the filing of the
litigation extended GSK’s monopoly another 30 months pursuant to the Act.
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193. In response to these events, on February 3, 2000, Apotex sought administrative
relief by filing a Citizen Petition (the “Petition”) with the FDA. In the Petition, Apotex noted
that “if an NDA holder is permitted, as GSK did here, to list for an indefinite and extended future
period any new patents that issue,” generic manufacturers such as Apotex face “exposure to
multiple lawsuits, serial stays of FDA approval, loss of generic exclusivity periods and virtually
no guarantee of market entry even if the original ‘pioneer’ patent has expired.”
194. On or about June 27, 2000, the PTO issued to GSK U.S. Patent No. 6,080,759
(“the ‘759 Patent”) for an invention titled Paroxetine “Hydrochloride Form A.”
195. The ‘759 Patent claims, inter alia, a paroxetine hydrochloride anhydrate Form A
made according to a certain process.
196. GSK submitted the ‘759 Patent for listing in the Orange Book in connection with
NDA No. 20-031.
197. On or about September 5, 2000, the PTO issued to GSK U.S. Patent No.
6,113,944 (“the ‘944 Patent”), for an invention titled “Paroxetine Tablets and Process to Prepare
Them.”
198. The ‘944 Patent claims, inter alia, a pharmaceutical composition in tablet form
containing paroxetine hydrochloride, produced on a commercial scale by a defined process.
199. GSK submitted the ‘944 Patent for listing in the Orange Book in connection with
NDA No. 20-031.
200. Apotex complied with the Act and filed an additional Paragraph IV Certification,
claiming that the ‘759 Patent was invalid, unenforceable and would not be infringed by Apotex’s
proposed generic bioequivalent. Pursuant to the Act, Apotex also notified GSK of its position
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that, inter alia, “the ‘759 patent was not properly listed with the [FDA] because GSK filed patent
information with the FDA prior to approval of NDA No. 20-031, because GSK did not apply for
or procure issuance of the ‘759 patent until long after approval of the NDA, because the ‘759
Patent does not claim the drug for which GSK obtained FDA approval, and because information
on process patents may not be submitted to [the] FDA.”
201. Similarly, with respect to the ‘944 Patent, Apotex complied with the Act and filed
and served a Paragraph IV Certification. In that certification, Apotex pointed out that GSK
procured the patent by making fraudulent misrepresentations to and concealing material facts
from the PTO. Apotex claimed that the ‘944 Patent was invalid and would not be infringed by
Apotex’s proposed generic product. Further, Apotex noted that the ‘944 Patent was improperly
submitted to the FDA for listing in the Orange Book, because “SmithKline filed patent
information with the FDA prior to approval of its NDA No. 20-031; because SmithKline did not
apply for or procure the issuance of the ‘944 patent until long after approval of the NDA; and
because Torpharm’s [Apotex’s] ANDA was filed prior to the ‘944 Patent’s issuance and listing
in the Orange Book.” Lastly, the drug for which GSK sought and received FDA approval on
December 29, 1992 was made using a different formulation process.
202. Upon receiving the foregoing Paragraph IV Certifications, GSK continued its
pattern of filing baseless litigation intended to keep generic paroxetine hydrochloride off the
market. On September 27, 2000, GSK filed yet another patent infringement action against
Apotex, this one concerning the ‘759 patent, in the United States District Court for the Eastern
District of Pennsylvania (the “Second Pennsylvania Action”). Although the Second
Pennsylvania Action was based upon an invalid patent that was improperly caused to be listed by
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the FDA in the Orange Book, GSK filed it to keep its monopoly stranglehold on the paroxetine
hydrochloride market and to prevent their competitors from providing a generic form of the drug
to the public.
203. Similarly, on January 11, 2001, after receiving the Paragraph IV Certification with
respect to the ‘944 Patent, GSK again sued Apotex for patent infringement, again in the Eastern
District of Pennsylvania (the “Third Pennsylvania Action”). As set forth in Apotex’s Paragraph
IV certification, the Third Pennsylvania Action was and is objectively baseless, and its sole
purpose was to prevent FDA consideration of Apotex’s ANDA for an additional 30 months.
204. Apotex amended its answer in this matter to include counterclaims for
monopolization, attempted monopolization and conspiracy to monopolize under Sections 1 and 2
of the Sherman Act. Its claim sets out conduct including “raising and retaining barriers to
competition; initiating and maintaining sham litigation against TorPharm on the ‘723 patent;
unlawfully obtaining patents for inventions that were not otherwise patent able through knowing
and willful fraud on the PTO; the improper listing of patents in the Orange Book that do not
claim the paroxetine hydrochloride hemihydrate drug for which GSK submitted NDA No. 20-
031, and the initiation and maintenance of sham litigation on such patents; attempts to destroy
TorPharm’s 180-day exclusivity period by unlawful schemes to trigger it; attempts to destroy
TorPharm’s 180-day exclusivity period by introducing a paroxetine hydrochloride product
simultaneously with TorPharm; and . . . unlawfully attempting to leverage its monopoly power
for paroxetine hydrochloride to further extend its monopoly once generic competition appears to
become inevitable.”
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205. GSK relied on the same fraudulent filings with the FDA and filing of serial sham
litigations to exclude Zenith from the market. Zenith filed with the FDA ANDA No. 75-691 for
paroxetine hydrochloride tablets and included the appropriate Paragraph IV Certification with
respect to the ‘723 hemihydrate patent, the ‘132 Form C patent, and the ‘423 Form A patent.
206. On February 3, 2000, GSK received a letter from Zenith, dated February 1, 2000,
and sent by certified mail, purporting to be a Notice of Certification under Section 505(j)(2)(B)
of the Act, 21 U.S.C. § 355(j)(2)(B)(I) and (ii). This letter alleges that the product for which
Zenith sought approval is paroxetine hydrochloride. This letter further alleges that the paroxetine
hydrochloride tablets do not infringe on the ‘723 hemihydrate, ‘132, or ‘423 Patents.
207. Specifically, Zenith advised GSK that, with respect to the ‘723 hemihydrate
patent, the paroxetine hydrochloride sought to be marketed by Zenith are not in hemihydrous
form. Regarding the ‘132 patent, Zenith explained how its paroxetine hydrochloride does not
infringe on any of the patent’s two claims. Finally, with respect to the ‘423 patent, Zenith noted
that it has no intention of marketing the product as claimed by the ‘423 patent.
208. Despite its knowledge that the proposed paroxetine hydrochloride did not infringe
on the ‘723 hemihydrate, ‘132 or ‘423 patents, on March 16, 2000, GSK filed patent litigation
against Zenith in the Eastern District of Pennsylvania (the “Fourth Pennsylvania Action”),
claiming infringement of the ‘723 hemihydrate, ‘132, and ‘423 Patents. For the reasons
described above, such litigation was and is objectively baseless, and intended to block Zenith
from selling its generic for at least 30 months.
209. As a result, GSK has and will continue to improperly maintain its monopoly over
the paroxetine hydrochloride market.
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210. Pentech filed with the FDA ANDA No. 75-771 for paroxetine hydrochloride
capsules and included the appropriate Paragraph IV Certification.
211. Pursuant to the Act, on March 24, 2000, Pentech sent to GSK the requisite notice
of its Paragraph IV Certification. 21 U.S.C. § 355(j)(2)(B)(i) and (ii). This notice alleges that the
product for which Pentech sought approval is paroxetine hydrochloride. This letter further
alleges that the paroxetine hydrochloride tablets do not infringe on the ‘723, ‘132 or ‘423 Patents.
212. According to Pentech, while the ‘723 hemihydrate patent’s claims are limited to
paroxetine hydrochloride hemihydrate, Pentech’s paroxetine hydrochloride was anhydrous, and
therefore, could not possibly infringe the ‘723 patent. Pentech also asserted that the ‘723 patent
was invalid and unenforceable due to the legal doctrines of anticipation and obviousness.
Similarly, Pentech asserted that its product did not infringe the ‘423 patent because it is
amorphous and not crystalline. Pentech also asserted that, under the Doctrine of Equivalents, the
‘132 patent was invalid. Finally, Pentech noted that “it appears that [GSK] may have made
material misrepresentations to the U.S. PTO in connection with ... [the] patent applications” for
the ‘423 and ‘132 patents.
213. Despite its knowledge of these facts, on or about May 11, 2000, GSK filed patent
infringement litigation against Pentech in the Northern District of Illinois (the “Second Illinois
Action”) with respect to the ‘723 hemihydrate and ‘132 Patents. For the reasons stated above,
such litigation was baseless, and intended to interfere with prospective generic competition.
214. In April 2003, Pentech settled its litigation with GSK. In exchange for the
dismissal, which was submitted under seal, Pentech negotiated the right to distribute GSK-
manufactured Paxil® in Puerto Rico immediately, and to sell the licensed product throughout the
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United States, but only when Apotex launched its generic product. “The deal represents a new
type of arrangement between brand and generic firms, the effect of which is to reduce the value
of first-to-file exclusivity.” The Pink Sheet, April 21, 2003. GSK thereby reduced the viability
of generic entry by effectively stripping Apotex of the 180-day exclusivity period.
215. Geneva filed with the FDA ANDA No. 75-566 for paroxetine hydrochloride
tablets and included the appropriate Paragraph IV Certification.
216. On May 17, 1999, GSK received a letter from Geneva, dated May 13, 1999, and
sent by certified mail, purporting to be a Notice of Certification under Section 505(j)(2)(B) of the
Act, 21 U.S.C. § 355(j)(2)(B)(i) and (ii). According to this notification, the paroxetine
hydrochloride for which Geneva sought approval does not infringe on the ‘723 hemihydrate,
‘132, or ‘423 Patents. The letter further stated that the claims of the ‘723 hemihydrate and ‘132
patents are invalid and unenforceable.
217. With regard to the ‘723 hemihydrate patent, Geneva pointed out that the products
for which it sought approval contain a different active ingredient, i.e., paroxetine hydrochloride
anhydrate, while “[a]ll claims of the ‘723 patent are limited to crystalline paroxetine
hydrochloride hemihydrate, its compositions, its uses or its manufacture.” In addition, Geneva
asserted that the invention claimed in the ‘723 patent was not a pioneer invention.
218. Regarding the ‘132 patent, Geneva pointed out that the anhydrous paroxetine
hydrochloride in the Geneva product is different from the anhydrous paroxetine hydrochloride
claimed in the ‘132 patent because of vast differences in the melting point claims of the two
products. For these and other reasons, Geneva asserted that “the manufacture, use or sale of the
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Geneva Products will not infringe, or induce or contribute to infringement of, any valid claim of
the ‘132 patent, either literally or under the doctrine of equivalents.”
219. Despite its knowledge of these facts, on or about June 9, 1999, GSK filed patent
infringement litigation against Geneva in the Eastern District of Pennsylvania (the “Fifth
Pennsylvania Action”) with respect to the ‘723 hemihydrate and ‘132 Patents. For the reasons
stated above, such litigation was and is objectively baseless, and brought by GSK for the’
purpose of extending its monopoly of the paroxetine hydrochloride market.
220. On October 5, 2000, Geneva sent to GSK notice of its Paragraph IV Certifications
with respect to the ‘927 and ‘759 patents, which Geneva claimed are invalid and/or
unenforceable. According to Geneva, the ‘927 patent covers paroxetine methanesulfonate, while
the Geneva products comprise paroxetine hydrochloride and do not involve paroxetine
methanesulfonate in any step of the preparation process.
221. As to the ‘759 patent, Geneva’s certification letter asserted that information
material to GSK’s patent was not submitted to the PTO, and that two of the claims of the ‘759
patent were invalid.
222. Despite knowledge of these facts, including its omissions of material facts to the
PTO, on or about November 22, 2000, GSK filed another patent infringement suit against
Geneva in the Eastern District of Pennsylvania with respect to the ‘759 and ‘944 Patents (the
“Sixth Pennsylvania Action”). For the reasons stated above, the Sixth Pennsylvania Action is
and was objectively baseless, and its sole purpose was to impede the introduction of a generic
competitor for another 30 months.
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223. By filing such litigation, GSK has effectively blocked Geneva from selling its
generic for at least 30 months, and, as a result, GSK has and will continue to improperly maintain
its monopoly over the paroxetine hydrochloride market.
224. Alphapharm filed with the FDA ANDA No. 75-716, for paroxetine hydrochloride
tablets and included the appropriate Paragraph IV Certification.
225. Pursuant to the Act, Alphapharm sent notice of the Paragraph IV Certification to
GSK on or about January 11, 2001 in accordance with Section 505(j)(2)(B) of the Act, 21 U.S.C.
§ 355(j)(2)(B)(i) and (ii). As explained in this notice, the ‘723 hemihydrate patent is inapplicable
and cannot be infringed because Alphapharm’s product is paroxetine hydrochloride anhydrate.
The ‘944 patent is invalid because its claims regarding the function of the drug were known prior
to any invention by GSK. According to Alphapharm, its product would not infringe the ‘132
Patent because of differences in melting points and the fact that Alphapharm’s product contains
an ingredient not covered by the ‘132 patent. In addition, Alphapharm claimed that the ‘423
patent is invalid because the form of paroxetine hydrochloride claimed therein was disclosed as
early as May, 1987 (a fact which must have been concealed from the PTO when GSK sought the
patent). Alphapharm pointed out that, in contrast to the ‘927 patent, its product does not contain
paroxetine methane sulfonate. Therefore, the ‘927 patent would not be infringed by
Alphapharm’s product. Finally, Alphapharm noted that its paroxetine hydrochloride product has
materially different ingredients than the drug covered by the ‘759 Patent. Similarly, the synthesis
of the paroxetine hydrochloride anhydrate of Alphapharm is different than, and thus not covered
by, the claims of the ‘759 patent.
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226. Despite the knowledge of these facts, on or about March 1, 2001, GSK filed
patent infringement litigation against Alphapharm in the Eastern District of Pennsylvania (the
“Seventh Pennsylvania Action”) with respect to the ‘723 hemihydrate, ‘132, ‘759 and ‘423
Patents. For the reasons stated above, the Seventh Pennsylvania Action was and is objectively
baseless, and intended to thwart the ability of GSK’s competitors to enter the marketplace with
paroxetine hydrochloride.
227. By filing such litigation, GSK has effectively blocked Alphapharm from selling
its generic for at least 30 months, and, as a result, GSK has and will continue to improperly
maintain its monopoly over the paroxetine hydrochloride market and prevent the public from
reaping the substantial benefits of generic competition.
228. GSK announced on July 1, 2003 that it had asked the FDA to delist the ‘759 and
‘927 patents from the Orange Book. GSK also requested the delisting of Patent No. 6,172,233
(the “233 Patent”). These patents, if they had gone unchallenged, would have extended GSK’s
paroxetine hydrochloride monopoly to 2019.
229. The delisting of the ‘233 patent removed the final 30-month stay on approval of
Apotex’s ANDA. On September 8, 2003, Apotex brought its generic product to market, in four
dosage strengths. Apotex’s product launch reflected its strong belief that any patent infringement
litigation brought against it by Defendants was baseless, because Apotex would be at risk of
substantial liability to Defendants if it were found to have infringed.
230. In a pharmaceutical market riddled with abuse of the patent system, Paxil® is one
of the most egregious examples of a brand-name drugmaker repeatedly abusing the 30-month
stay provision of the Hatch-Waxman Act to perpetuate a patent monopoly long past its rightful
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expiration date. Its monopolistic behavior has prompted several calls for reform. As a result of a
record five separate 30-month stays, the Federal Trade Commission (“FTC”) reports that Paxil®
has been given a total stay of 65 months after the first ANDA filing, during which time it reaped
annual sales of over $1 billion.
231. The FTC issued a report in July 2002 on generic drugs. See Federal Trade
Commission, Generic Drug Entry Prior to Patent Expiration: An FTC Study, July 2002
(available at < http://www.ftc.gov/os/2002/07/genericdrugstudy.pdf>). It listed Paxil® as one of
eight brand-name drugs whose owner listed a patent in the Orange Book after the filing of one or
more ANDAs. It characterized GSK’s late patent listings as “questionable,” singling them out as
being of the type that “raise significant listability issues.” The FTC noted that certain “product-
by-process” patents did not, in fact, contain a novel product, and thus were merely process
patents, which the Hatch-Waxman Act does not allow to be listed in the Orange Book. Thus
patents such as the ‘927 and ‘233 patents, both of which acknowledge that the product paroxetine
hydrochloride was well-known at the time of filing, should never have been listed. The FTC also
impugned Defendants’ redundant Paxil® patent filings. The FTC stated that Paxil® was one of
four products for which “the brand-name company applied for the patents more than one year
after the FDA had approved the drug product covered by the NDA,” suggesting that the patents
cannot cover the approved drug product and be valid, “due to the ‘on sale bar’ of patent law.”
232. On June 18, 2003, the FDA promulgated a final rule clarifying what types of
patents can be listed in the Orange Book, and requiring more detailed patent declarations to
justify their inclusion in the Orange Book.“ The final rule limits to one per ANDA or 505(b)(2)
application the maximum number of statutory 30-month stays of approval to which an innovator
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will be entitled when it submits multiple patents for the same NDA.” Applications for FDA
Approval to Market a New Drug, 68 Fed. Reg. 36676 (2003) (to be codified at 21 C.F.R. Part
314).
233. In November 2000, the US Federal Trade Commission (FTC) staff advised GSK
that they were conducting a non-public investigation to determine whether it was violating
Section 5 of the Federal Trade Commission Act by monopolizing or attempting to monopolize'
the market for paroxetine hydrochloride by preventing generic competition to Paxil and requested
GSK submit certain information in connection with that investigation. In October 2003 the FTC
closed its investigation on the basis of its finding that no further action is warranted.
234. Following public reference to the FTC investigation regarding Paxil, class actions
were filed in the US District Court for the Eastern District of Pennsylvania on behalf of indirect
purchasers, including consumers and third party payers, and direct purchasers. Plaintiffs claimed
that GSK monopolized a market for Paxil by bringing allegedly sham patent litigation and
allegedly abusing the regulatory procedures for the listing of patents in the FDA Orange Book.
235. So far, the Paxil antitrust cases have cost the GSK more than $165 million in class
action settlements, as well as untold millions more paid out in confidential settlements with some
of the largest drug wholesalers who opted out of the class action. A $65 million settlement was
approved by the court in Nichols v. SmithKline Beecham Corp., a suit brought on behalf of
"indirect" purchasers. The court also approved a $100 million settlement in The Stop & Shop
Supermarket Co. v. Smithkline Beecham Corp., a class action brought on behalf of direct
purchasers, such as drug wholesalers. Eight corporations which could have been members of the
direct purchaser class opted out of the case and struck their own settlements with SmithKline.
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Together, the eight companies -- CVS Meridian Inc., Rite Aid Corp., Walgreen Co., Eckerd
Corp., Albertson's Inc., The Kroger Co., Safeway Inc. and Hy-Vee Inc. -- account for slightly
more than one-third of the purchases of Paxil by direct purchasers.
236. GSK’s conduct worked a fraud on the Class in two different ways. First, GSK
misrepresented to the Class when its patents on Paxil were to run out. As shown above, once the
patents expired, GSK would lose market share and profits by reason of direct competition with
generic drugs. If the members of the Class knew that Paxil would face generic competition in
2003, instead of 2006 as proclaimed by GSK, they would not have purchased GSK securities at
the prices they did. As admitted by GSK, generic Paxil has caused Paxil sales to plummet.
237. Second, GSK’s course of conduct in engaged in anti-trust violations has left GSK
open to suit on numerous grounds. In addition to liability for anti-trust violations, GSK is also
being sued for Medicade fraud. Additionally, it is also being sued by health insurance companies
that claim they over paid millions of dollars because GSK illegally kept generic versions of Paxil
off the market.
SUPPRESSION FROM THE MARKET AND FROM PRESCRIBING PHYSICIANS OF
PAXIL’S ADDICTIVE POTENTIAL AND SEVERE WITHDRAWAL EFFECTS.
238. Despite awareness that Paxil had a greater potential for addiction than other drugs
of its class, GSK suppressed this information, which it surely possessed prior to release of the
drug in 1992. Despite studies conducted by GSK throughout the 1990s that demonstrated this
serious addictive potential GSK misconstrued the studies’ results and mislead consumers and
physicians. This disinformation campaign was quite successful and did not begin to crumble
until August 2001 when a class action lawsuit was filed on behalf of consumers who were
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addicted to the drug was filed in California. Shortly after this, the FDA ordered Paxil to change
its labeling to reflect Paxil’s addictive potential. Paxil’s share price began to decline at this point
in 2001 and has never recovered.
239. Paxil is a member of a class of drugs known as the selective serotonin reuptake
inhibitors “SSRIs.” Other members of this class include drugs such as Prozac and Zoloft, both of
which were marketed before Paxil.
240. GSK knew from pre-marketing studies that not only was Paxil more selective in
inhibiting serotonin reuptake, “stronger” in laymen’s terms, but that its half-life was much
shorter than other SSRIs. It is a well-known principle in pharmacology that drugs that affect the
central nervous system become more addictive as their half-life decreases. A simple statement of
this principle is that the “peak” of the “high” is reached more quickly and the “low” of the low is
also reached more quickly.
241. An excellent example that is known outside the medical community, in law
enforcement circles for example, that the addictive potential of the drug cocaine is affected by
this principle. The most addictive mechanism of delivery of cocaine is intravenous injection,
followed by inhalation of the “base” form i.e. “freebase” or “crack”, followed by nasal inhalation.
The reason that each of these mechanisms is more addictive than the next, in the context of the
same drug, is that the rapidity in which the drug enters and leaves the brain. That is why the
intravenous, or directly into the bloodstream route is most addictive. This spectrum of addictive
properties is approximated within the SSRI class of antidepressants, with Paxil having the
shortest half-life and the greatest potential for addiction.
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242. In the case of SSRIs, Paxil’s half-life is about 24 hours, while Prozac’s, for
example, is several days.
243. Despite knowledge within GSK of this common pharmacologic principle, the
company, in its promotional literature, advertised the following: “Paxil belongs to a class of
medications called SSRIs, which have not been shown to be associated with addiction.”
244. Since December 29, 1992, Paxil's labeling has been legally deficient. Paxil's
addictive qualities, its tendency to induce dependency, and its dangerous traits in causing
withdrawal symptoms when the patient reduces and/or abruptly terminates dosage were all facts
known to SKB during this period, but never included in Paxil's label. As a result, virtually all
U.S. physicians were ignorant of this danger.
245. Between December 29, 1992 and the present, scientific literature published by
medical researchers throughout the world documented Paxil's dangerous nature as herein
described. Some of the key articles, among many others, include:
246. In 1993 Stoker and Eric reported paroxetine withdrawal at the American
Psychiatric Association's annual meeting in San Francisco, May 22-27, 1993. The authors
conducted 2 week tapering regimes for 186 patients in 6 to 12 week double-blinded comparative
studies. Paroxetine patients fared badly. Low dose and high dose groups were both studied.
Paxil's low dose group actually fared worse than the high dose group, suffering a 42%
withdrawal rate, as opposed to 38% in the high dose group. Both occurred notwithstanding the
fact that a tapering regime was initiated during reduction of dosage. An imipramine patient group
was also studied. The imipramine group had a lower incidence of withdrawal than either
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paroxetine group. This report occurred 5 months after Paxil entered the U.S. market. Plaintiff
alleges SKB did nothing in response to this information.
247. In 1993, the Committee on Safety of Medicines ("CSM"), Great Britain's
counterpart to the FDA, reported 78 cases of withdrawal after discontinuation of paroxetine,
reporting that "such reactions have been reported more often with paroxetine than with other
SSRI's." ("Current Problems in Pharmacovigilance" (1993; 19:1). SKB refused to react to this
warning.
248. In 1994, Barr and colleagues reported 50% of paroxetine patients suffered
withdrawal syndrome despite the fact that the suffering patients tapered dosage over a 7-10 day
period; (Am J Psychiatry 151:2, February, 1994).
249. In 1994, Keuthen and colleagues reported Paxil withdrawal, indicating that
paroxetine “has been reported to cause such reactions more often than other SSRI's.” The
percentage of Paxil patients with obsessive compulsive disorder ("OCD") adverse affects was
38.5%, and such reactions appeared notwithstanding a tapering down dosage. Patients affected
reported dizziness, ranging from "mild to severe." (J Clin Psychopharmacol 1994; 14:206-7).
250. I n 1995, Oehrberg and colleagues reported that 34.5% of paroxetine patients
reported adverse events on discontinuation, most commonly dizziness -- compared to only 13.5%
of placebo patients. (British Journal of Psychiatry 1995; 167: 374-379.) SKB did not respond to
this report.
251. In 1996, Coupland and colleagues reported that withdrawal occurred on SSRI
reduction of dosage "despite slowly tapered withdrawal." The authors warned that SSRI
withdrawal occurs more frequently with short-half-life SSRI's such as paroxetine and fluvoxamine
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than with Zoloft or Prozac. Paxil patients suffered tremendous withdrawal reactions in these studies.
Of Paxil's 50 patients suffering withdrawal, 16% suffered dizziness, 12% suffered paresthesia, 12%
suffered lethargy, 6% suffered nausea, 2% dysphoria, 4% anxiety, 4% vivid dreams, 4% insomnia,
16% movement related adverse symptoms, and 20% suffered more than one adverse event. (J Clin
Psychopharmacol 1996 Oct;16(5):356-62.).
252. In 1996, Coupland and colleagues reported that withdrawal occurred on SSRI
reduction of dosage "despite slowly tapered withdrawal." The authors warned that SSRI withdrawal
occurs more frequently with short-half-life SSRI's such as paroxetine and fluvoxamine than with
Zoloft or Prozac. Paxil patients suffered tremendous withdrawal reactions in these studies. Of Paxil's
50 patients suffering withdrawal, 16% suffered dizziness, 12% suffered paresthesia, 12% suffered
lethargy, 6% suffered nausea, 2% dysphoria, 4% anxiety, 4% vivid dreams, 4% insomnia, 16%
movement related adverse symptoms, and 20% suffered more than one adverse event. (J Clin
Psychopharmacol 1996 Oct;16(5):356-62.).
253. In 1996, Price and colleagues reported on the British data base of adverse effects on
withdrawal for SSRI medications. By far, paroxetine was the largest inducer of withdrawal. The
most prevalent reactions cited were dizziness, paraesthesia, tremor, anxiety, nausea, and palpitation.
The authors stated that while the overall safety profiles of the SSRI's were similar, "withdrawal
reactions with paroxetine constitute a greater (5.1%) proportion of reports than with the other SSRI's
(0.06% to 0.09%). (Br J Clin Pharmacol 1996 Dlec;42(6):757-63.) SKB failed to act on this report.
254. In February, 1996, Australia's "Adverse Drug Reactions Advisory Committee"
("ADRAC") published results of a study showing that Paxil had the highest rate of SSRI
withdrawal adverse events in that country. Even though Zoloft outsells Paxil in Australia, the latter
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had more than three (3) times the number of adverse complaints as Zoloft. Complaints on Paxil
exceeded Prozac by a rate of greater than 4 to 1. In 1998, Dr. Roger Lane's article, Withdrawal
symptoms after discontinuation of selective serotonin reuptake inhibitors (SSRIs), was published in
the Journal of Serotonin Research (1996, 3, 75-83). After listing the physical symptoms caused by
withdrawal, Dr. Lane observed that of all the SSRIs, paroxetine caused severe withdrawal
symptoms the most often.
255. In 1997, Dr. Haddad reported that the highest incidence of discontinuation
reactions among the SSRI's was paroxetine. (J Clin Psychiatry 1997; 58Suppl7:17-1; discussion
220.) SKB refused to act on this report.
256. In 1997, Lejoyeux and colleagues provided extensive review of the literature on
antidepressant discontinuation, concluding that "they ... (withdrawal symptoms) ... are much
more common with the shorter acting SSRI such as paroxetine, than with the longer acting agent
fluoxetine. Because the symptoms of antidepressant discontinuation include changes in mood, affect,
appetite, and sleep, they are sometimes mistaken for sign of a relapse into depression." (J Clin
Psychiatry 1997;58Suppl7:11-5.) SKB did nothing in response to this article.
257. In 1997, Mackay and colleagues reported on British experience with SSRI's,
reporting on a study done by the Drug Safety Research Unit, Bursledon Hall, Southhampton. A
patient population of 13,741 was screened. It was concluded "Withdrawal symptoms were
significantly more frequent with paroxetine than the other three SSRI's." The report indicated
"agitation, anxiety, tremor, dizziness, loss of balance nausea, vomiting, paraesthesia, and
restlessness are all associated with withdrawal." (Pharmacoepidemiology & Drug Safety,
1997;6:No.4. 235-46.). In late 1997, SKB falsified the results of this study. In an internal document,
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SKB's corporate leadership fabricated the results of this British study and told SKB sales
representatives in the United States that the British study showed that all of the SSRI's were the same as
to withdrawal. This false message was sent to the sales representatives for the express purpose of
conveying this misrepresentation to all physicians in the United States.
258. In 1997, Stahl and seven (7) colleagues documented Paxil's leading withdrawal status
in the world. The authors investigated and reported upon the World Health Organization ("WHO")
database. From the year of introduction for each of the SSRI's, all case reports for Paxil, Prozac, and
Zoloft were retrieved. Sales figures were also retrieved. Paxil's rate of withdrawal reactions were
higher than Prozac and Zoloft for each of the 16 countries surveyed, and also for those countries for
which a detailed analysis was conducted (U.S., U.K., and Australia). (Eur J Clin Pharmacol
1997;53(34):163-9.) SKB showed no sensitivity to this report, taking no action.
259. In 1997, Young and Currie of Newcastle reported on their survey indicating that a
sizeable minority of physicians were aware of the existence of antidepressant withdrawal reactions.
This included psychiatrists, 28% of whom expressed no awareness that antidepressant medications
could induce discontinuation reactions. The conclusion of the authors was that "education about
discontinuation reactions ... is needed for both psychiatrists and family practice physicians." (J Clin
Psychiatry 1997;58 Suppl &:28-30.) SKB disregarded this study by insisting that all physicians
understand "discontinuation" and that no further labeling on Paxil withdrawal was needed.
260. In 1998 Dr. Thompson of Southhampton reported on withdrawal reactions in
antidepressant medications, citing paroxetine, fluoxetine, and sertraline. He discussed
emerging complications in this medical area and their relevance. (J Clin Psychiatry 1998
Oct;59(10):541-8.)
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261. In 2000, Belloeuf and colleagues reported paroxetine withdrawal syndrome on
their patient population. (Ann Med Interne (Paris) 2000 Apr;151 SupplA:A52-3.)
262. In 2000, Dr. Haddad sounded the alarm on professional unawareness of the
serious withdrawal problem, stating that there is widespread "misdiagnosis of antidepressant
discontinuation symptoms" and that "increased professional awareness of discontinuation
symptoms is necessary to prevent misdiagnosis and inappropriate treatment." (Acta Psychiatri
Scand 2000 Dec; 102(6):466-7; discussion 467-8.) SKB likewise refused to heed this report,
continuing to withhold needed labeling changes regarding Paxil withdrawal.
263. In 2000, Hindmarch and colleagues concluded, with respect to a study involving
four SSRIs, that cognitive and psychomotor performance was adversely affected after treatment was
interrupted over 4-7 days. Particularly cited was paroxetine, in which it was stated abrupt
discontinuation of treatment with paroxetine leads to deterioration in various aspects of health and
functioning. The authors made clear their opinion that Paxil was the worst of all, stating that these
effects "are not evident in patients receiving (Prozac), (Zoloft), and (Celexa), suggesting they are not
an SSRI class phenomenon." (Int Clin Psychopharmacol 2000 Nov;15(6):305-18.) SKB refused to act
on this report.
264. On September 6, 2001, the GSK shares dropped from $45.14 to $44.10 on the
news that a class action lawsuit alleging Paxil caused withdraw symptoms was filed.
265. In December of 2001, the FDA ordered GSK to begin warning consumers that
they might have trouble discontinuing Paxil. The company then rewrote the label to note
that the drug sometimes causes “discontinuation effects.” GSK continued to argue that Paxil
is not addictive, taking the position that to be addictive it must cause withdrawal symptoms
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that produce “drug-seeking behavior.” This is in marked contrast to the definition of
addiction in Merriam Webster which is linked from the National Institute of Health’s
website:
Main Entry: adAdicAtionPronunciation: - dik-sh nFunction: noun: compulsive physiological need for and use of a habit-forming substance (as heroin, nicotine, or alcohol)characterized by tolerance and by well-defined physiologicalsymptoms upon withdrawal ; broadly : persistent compulsiveuse of a substance known by the user to be physically,psychologically, or socially harmful -- compareHABITUATION, SUBSTANCE ABUSE (emphasis added)
266. In fact the Paxil prescribing information on GSK’s website
[http://us.gsk.com/products/assets/us_paxil.com] as of 08/09/05 continues to mislead
physicians and consumers. It states:
DRUG ABUSE AND DEPENDENCE
Controlled Substance Class: PAXIL is not a controlled substance. Physical and Psychologic Dependence: PAXIL has not beensystematically studied in animals or humans for its potential for abuse,tolerance or physical dependence. While the clinical trials did notreveal any tendency for any drug-seeking behavior, these observationswere not systematic and it is not possible to predict on the basis of thislimited experience the extent to which a CNS-active drug will bemisused, diverted, and/or abused once marketed. Consequently,patients should be evaluated carefully for history of drug abuse, andsuch patients should be observed closely for signs of misuse or abuseof PAXIL (e.g., development of tolerance, incrementations of dose,drug-seeking behavior).
267. In the 1990s, physicians had three choices amongst the SSRIs for the treatment
of major depressive disorder “MDD”: Paxil, Prozac, and Zoloft. Given that Paxil was not
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only the newest entrant to the market, but also the one of the three that had the highest
potential for addiction, it was an unattractive choice for the treatment of MDD. GSK
recognized this, and began to seek approval for the use of the drug in other, less serious
indications. The company secured permission to market Paxil for the treatment of panic
disorder and obsessive-compulsive disorder. In 1996, sales of the drug had climbed 54% to
$291 million.
268. GSK continued to seek new markets for its drug, looking for ever less
medically serious conditions to treat with Paxil. To that end, in 1999 GSK was granted
approval to market Paxil for the treatment of the previously rare “social anxiety disorder.”
GSK hired a PR firm, Cohn & Wolfe, who “developed a plan to educate reporters,
consumers, and, in some cases, physicians, in an effort to encourage diagnosis and
treatment.” [Emphasis added PR News Journal. Quoted in New York Times, October 16,
2002.]
269. As part of this marketing effort, the “Social Anxiety Disorder Coalition” was
established by the pharmaceutical industry, with an 800 number for potential customers to
call. The coalition also promoted the story of singer/entertainer Donny Osmond, who
recounted his struggles with social anxiety disorder. As the New York Times stated on
October 16, 2002 “Glaxo Smith Kline has steadily and energetically added to the list of
disorders Paxil can be used to treat, and spent billions of dollars to make sure the buying
public knows where to turn in case anxiety or melancholy sets in.”
270. In an indication of what motivated this search for new uses for Paxil, Barry
Brand, SmithKline’s product director for Paxil, stated the following: “Every marketer’s
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dream is to find an unidentified or unknown market and develop it. That’s what we were
able to do with Paxil.” NYT 10/16/2002, quoting “Advertising Age.” This “unidentified or
unknown market” was exploited with Paxil advertisements that asked “What if you were
allergic to people?” and “Your life is waiting.”
271. In the weeks following the tragedy of September 11, 2001, Glaxo modified
their advertising campaign in an apparent attempt to capitalize on post-9/11 anxiety. One
commercial featured a woman sitting at a kitchen table stating “Your worst fears - the what-
ifs . . I can’t control it. Another stated: I’m always thinking something terrible is going to
happen.” And a third woman “It’s like a tape in my mind. It just goes over and over and
over.”
272. By advertising directly to consumers and portraying Paxil as a drug that can
treat many levels of anxiety or depression with little or no risk, GSK circumnavigated their
toughest audience, or those who were most familiar with the psychiatric literature:
psychiatrists themselves. GSK recognized that awareness of Paxil’s addictive potential was
not well-known amongst primary care doctors, even following the label change of 2001. By
advertising directly to consumers, GSK created a demand for Paxil amongst the general
public, the vast majority of whom would ask their non-psychiatrist primary care physician
about the drug. According to a survey in 2000 by Prevention, 71% of patients who asked for
a drug they had seen advertised left with a prescription.
273. SKB has directly deceived the public on Paxil clinical studies as they pertain
to addiction, dependency, and withdrawal. In the same cartoon style pamphlets noted above,
SKB asks the following question: “Can I become Addicted to Paxil?” SKB then answers
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that question with the following: “Paxil has been studied both in short-term and long-term
use and is not associated with dependence or addiction.” The answer is false and misleading
because it suggests that the studies systematically probed the dependency and addiction
issue, and that Paxil did not have these side effects.
274. Despite the extensive documented history of withdrawal reactions and
dependency/withdrawal syndrome associated with Paxil and an ever increasing number of
Paxil withdrawal complaints, SKB adopted a policy of strategic ambiguity. The policy is a
public relations ploy. The strategy recognizes that certain code words must be placed in the
public arena to make it appear that SKB is confronting Paxil safety issues forthrightly. One
part of that strategy is labeling “withdrawal” as “discontinuation.” In this, SKB attempts to
nullify the negative connotation of “withdrawal” and redefines it with misleading
terminology. This strategy is a fraud on its face. There is no word “discontinuation” in the
medial dictionary. All medical dictionaries properly define “withdrawal” as the operative
word to describe the condition. The American Psychiatric Association, the official authority
on diagnosing such symptoms, likewise specifies “withdrawal” as the proper word.
275. The prices of GSK’s stock and ADRs were inflated during the Class Period.
These prices declined as the falsity of defendants’ statements came to light.
VIOLATION OF THE FALSE CLAIMS ACT
276. Finally, GSK has also violated the Federal False Claims Act numerous times,
which has artificially raised reported profits. The first law suit against GSK for violation of
the Federal False Claims Act was filed on November 16, 2001. On this day, GSK was
trading at $53.96. News of the suits leaked out over the following days, and was publicly
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revealed on December 10, 2001, in an article in the National Law Journal. On December 11,
2001 GSK had sunk to $49.40. The lawsuit alleged that GSK was charging the government
higher prices for drugs than private entities.
277. On April 16, 2003 GSK announced that it would its federal civil False Claims
Act liabilities and pay $87,600,922 to the United States, 49 states, the District of Columbia,
and Public Health Service entities as civil damages for losses suffered by the Medicaid
programs and the Public Health Service entities due to GSK's conduct in repackaged and
privately labeled Paxil, an anti- depressant, and Flonase, a nasal spray for Kaiser at
discounted prices but that it had failed to report these lower prices as "best prices" to the
government. This news cause GSK to fall from $39.1 on April 14 to $37.6 on April 16.
This statement ws mislaeding in that these were not all of GSK’s liabilities under the act.
278. GSK is still paying False Claims Act Claims. On September 20, 2005, it was
reported that GSK would pay $150 million to settle claims it overcharged the government for
two anti-nausea drugs. GSK engaged in a scheme to inflate the price of Zofran and Kytril for
the Medicare and Medicaid programs, which reimburse health care providers based on the
manufacturers' prices, the government said. The drugs, typically administered in doctors'
offices or hospitals, are used mainly to counter nausea brought on by chemotherapy and
radiation. The company charged health care providers less for the drugs, knowing the
providers would get to pocket the difference and would be more likely to prescribe them
again, the Justice Department said.
DEFENDANT’S INSIDER TRADING
279. While Garnier was issuing were issuing the materially false and misleading
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statements alleged throughout this Complaint, he took advantage of his knowledge of the
adverse facts that were not disclosed to the public. The extent of his trades, the timing of his
trades and the nature of his trading habits all establish that he had possession of the material
adverse facts alleged herein. Specifically, Garnier sold more than 200,000 shares of GSK
stock for proceeds of over $9.9 million. Specifically, Garnier sold the following amounts of
GSK shares at artificially inflated prices throughout the Class Period while in possession of
material non-public information that was not disclosed to the investment community at the
time of such transaction:
DATE SHARES PROCEEDS
02/19/04 142,250 $ 6,143,293 12/14/04 79,054 $ 3,774,037
NO SAFE HARBOR
280. The statutory safe harbor provided for forward-looking statements under
certain circumstances does not apply to any of the allegedly false statements pleaded in this
Complaint. Many of the specific statements pleaded herein were not specifically identified
as “forward-looking statements” when made, and many were representations about the
Company’s present status. To the extent there were any forward-looking statements: (a) there
were no meaningful cautionary statements identifying the important then-present factors that
could cause actual results to differ materially from those in the purportedly forward-looking
statements; and (b) the particular speakers of such forward-looking statements knew that the
particular statements were false or misleading, and/or the forward-looking statements were
authorized and/or approved by an executive officer of the Company, who knew that those
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statements were false when made.
281. Any purported warnings contained in the press releases and statements
quoted herein were generic and unparticularized boilerplate statements of risk, and thus
lacked the meaningful cautionary language necessary to insulate any purportedly forward-
looking statements.
COUNT I
Violation of § 10(b) of the 1934 Act Against all Defendants
282. Plaintiff repeats the allegations set forth above.
283. Defendants violated § 10(b) and Rule 10b-5 by:
a. Employing devices, schemes, and artifices to defraud;
b. Making untrue statements of material facts and omitting to state
material facts necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading;
c. Engaging in acts, practices, and a course of business that operated as a
fraud or deceit upon the Class in connection with their purchase or acquisition of GSK stock
and ADRs.
284. Class members were damaged. In reliance on the integrity of the market,
they paid artificially inflated prices for GSK stock and ADRs.
285. The undisclosed adverse information concealed by defendants during the
Class Period is the type of information which, because of SEC regulations, regulations of the
national stock exchanges and customary business practice, is expected by investors and
securities analysts to be disclosed and is known by corporate officials and their legal and
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financial advisors to be the type of information which is expected to be and must be
disclosed.
286. Plaintiff and the Class have suffered damages in that, in reliance on the
integrity of the market, they paid artificially inflated prices for GSK stock and ADRs.
Plaintiff and the Class would not have purchased GSK stock and ADRs at the prices they
paid, or at all, if they had been aware that the market prices had been artificially and falsely
inflated by defendants’ misleading statements.
COUNT II
Violations of Section 20(a) of the 1934 Act Against All Defendants
287. Plaintiff repeats the allegations set forth above.
288. Garnier acted as a controlling person of GSK within the meaning of § 20(a)
of the 1934 Act as alleged herein. By virtue of his high-level position, participation in
and/or awareness of GSK's operations and/or intimate knowledge of its internal financial
condition and business practices, Garnier had the power to influence and control and did
influence and control, directly or indirectly, the decision-making of GSK, including the
content and dissemination of the various statements which plaintiff contends are false and
misleading. GSK controlled Garnier and all of its employees. Garnier was provided with or
had unlimited access to copies of GSK's internal studies, reports, press releases, public
filings and other statements alleged by plaintiff to be misleading prior to and/or shortly after
these statements were issued and had the ability to prevent the issuance of the statements or
cause the statements to be corrected.
289. In particular, Garnier had direct involvement in or intimate knowledge of
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the day-to-day operations of GSK and, therefore, is presumed to have had the power to
control or influence the particular transactions giving rise to the securities violations as
alleged herein, and exercised the same.
290. As set forth above, the defendants violated §10(b) of the 1934 Act and Rule
10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their positions
as controlling persons, these defendants are liable pursuant to §20(a) of the 1934 Act.
291. As a direct and proximate result of the wrongful conduct of defendants,
plaintiff and other members of the Class suffered damages in connection with their purchase
of GSK ADRs and common stock during the Class Period.
PRAYER
WHEREFORE, plaintiff prays for judgment as follows: declaring this action to be a
proper class action; awarding damages, including interest; awarding expenses, costs and
attorneys' fees; and such equitable/injunctive or other relief as the Court may deem proper.
JURY DEMAND
Plaintiff demands a trial by jury.
Dated: September 26, 2005STULL, STULL & BRODY
By: s/ Jules Brody (JB-9151)Aaron Brody (AB-5850)Tzivia Brody (TB-7268
6 East 45 Street th
New York, New York 10017(212) 687-7230
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STULL, STULL & BRODYTimothy J. Burke10940 Wilshire Blvd., Suite 2300Los Angeles, California 90024(310) 209-2468
Lead Counsel for Plaintiffs
WEISS & LURIEJoseph H. Weiss (JW-4534)551 Fifth Avenue, Suite 1600New York, New York 10176(212) 682-3025
THE WHITEHEAD LAW FIRMC. Mark Whitehead, III610 Barone StreetNew Orleans, Louisiana 70113(504) 586-8899
Counsel for Plaintiffs