Pharmaceutical giant GlaxoSmithKline recently agreed to pay the government $3 billion in a record health care fraud settlement. Its public response followed the usual pattern for official contrition. Chief executive Andrew Witty expressed the company's "regret" and gave assurances that "we have learned from the mistakes." Investors have to hope he is right, despite cause for doubt: this is the fourth such settlement in the past few years. Since shareholders -- and other constituencies -- often suffer when firms draw the wrong conclusions from their failures, it is worth asking just what "mistakes" Glaxo made.
According to the government, Glaxo employed illegal marketing tactics to boost sales of various drugs and withheld critical safety data about one of its most popular medications. Like other pharma companies, Glaxo pressed doctors to prescribe a number of its drugs for purposes not approved by the Food and Drug Administration. It enticed many of the doctors to embrace these "off-label" uses by offering them perks such as free spa privileges, ski trips, and concert tickets.
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