SETTLEMENT REACHED WITH PHARMACEUTICAL COMPANY

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October 27, 2010

LITTLE ROCK -- Attorney General Dustin McDaniel announced today that Arkansas has joined with other states and the federal government to reach an agreement in principle with pharmaceutical manufacturer GlaxoSmithKline (GSK) to settle allegations that the company introduced adulterated drugs into interstate commerce.

As a result, GSK will pay the states and the federal government $600 million in civil damages and penalties for Medicaid and other federally-funded health care programs. Arkansas's share of the settlement will be $690,220.49.

Additionally, the GSK subsidiary SB Pharmaco of Puerto Rico, where the drugs were manufactured, has agreed to plead guilty to a felony violation of the U.S. Food, Drug, and Cosmetic Act, and has agreed to pay $150 million in criminal fines and forfeitures.

"I am pleased with the efforts of the states working collectively to reach this settlement, which will rightfully reimburse the Arkansas Medicaid program for these improper actions," McDaniel said.

The civil settlement resolves allegations of poor manufacturing practices in the GSK facility located in Cidra, Puerto Rico. The investigation grew out of a false claims lawsuit that alleged GSK knowingly manufactured, distributed and sold four products - Paxil CR, Avandamet, Kytril and Bactroban - whose strength, purity and/or quality fell below the standards required by the FDA.

This settlement agreement reimburses the federal government and the states for the amounts paid by the Medicaid program as a result of GSK's conduct. Additionally, GSK has agreed to the terms of a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services, Office of the Inspector General, which will require scrutiny of GSK's future manufacturing practices.

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