n he supreme court of the united states -...

No. 15-1078

WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002

IN THE

Supreme Court of the United States ————

GLAXOSMITHKLINE LLC, Petitioner,

v. ALLIED SERVICES DIVISION WELFARE FUND, UFCW

LOCAL 1776 AND PARTICIPATING EMPLOYERS HEALTH AND WELFARE FUND, AND UNITED BENEFIT FUND,

Respondents. ————

On Petition for a Writ of Certiorari to the United States Court of Appeals

for the Third Circuit ————

BRIEF IN OPPOSITION

———— JAMES R. DUGAN IITHE DUGAN LAW FIRM 365 Canal Street Suite 1000 New Orleans, LA 70130 (504) 648-0180

THOMAS M. SOBOL HAGENS BERMAN SOBOL

SHAPIRO LLP 55 Cambridge Parkway, Suite 301 Cambridge, MA 02142 (617) 482-3700

SAMUEL ISSACHAROFFCounsel of Record

40 Washington Square South New York, NY 10012 (212) 998-6580 [email protected]

ROBERT KLONOFF 10015 SW Terwilliger Blvd Portland, OR 97219 (503) 768-6935 [email protected]

Attorneys for Respondents

April 29, 2016

(i)

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................ iii

INTRODUCTION ................................................ 1

STATEMENT OF THE CASE ............................ 5

A. Petitioner’s Alleged Misconduct and the Claims of the Respondent Third-Party Payors ........................................................ 5

1. The Products at Issue .......................... 5

2. Third-Party Payors and Their Formularies ......................................... 8

3. Respondents’ Allegations .................... 9

4. Petitioner’s Motion to Dismiss ............ 12

5. The Rulings Below ............................... 12

a. District Court Decision .................. 12

b. Third Circuit Decision ................... 14

i. Injury ......................................... 14

ii. Proximate Cause ....................... 16

REASONS TO DENY THE WRIT ...................... 18

I. THE “NO INJURY” ISSUE RAISED BY PETITIONER DOES NOT WARRANT REVIEW .................................................... 19

A. The Eleventh Circuit Decision in Ironworkers Is Indefensible ................ 19

B. Petitioner’s Other Claims of Conflict on the “No Injury” Point are Meritless .............................................. 22

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TABLE OF CONTENTS—Continued

Page

C. The Complaints Assert RICO Injury ... 24

II. PETITIONER’S RICO PROXIMATE CAUSE ISSUE ALSO DOES NOT WARRANT REVIEW ................................ 25

A. No Conflict Exists With Respect to RICO Proximate Cause ........................ 25

B. The Complaints Properly State Claims .................................................. 29

C. The Rulings Below on Proximate Cause are Correct ................................ 32

III. PETITIONER’S ATTEMPT TO SEEK A FREE PASS TO DEFRAUD PRIVATE INSURERS WOULD UNDERMINE IMPORTANT POLICY CONSIDERA-TIONS UNDERLYING RICO .................. 33

CONCLUSION .................................................... 36

APPENDIX

APPENDIX A: Criminal Plea Agreement, United States v. GlaxoSmithKlein, LLC (July 27, 2012) ........................................................... 1a

APPENDIX B: Avandia Civil Settlement Agreement, United States v. GlaxoSmithKlein LLC (July 2, 2012) .............. 37a

APPENDIX C: U.S. Dep’t of Justice Press Release, GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data (July 2, 2012) .................................................... 58a

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TABLE OF AUTHORITIES

CASES Page(s)

Aetna, Inc. v. Pfizer, Inc., 712 F.3d 52 (1st Cir. 2013) ....................... 27

Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) ....................... 16, 25, 26, 33

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................... 1, 3, 18, 29

BCS Servs., Inc. v. Heartwood 88, LLC, 637 F.3d 750 (7th Cir. 2011) ..................... 27

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ............................. 1, 3, 4, 29

Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) ..................................passim

Desiano v. Warner-Lambert Co., 326 F.3d 339 (2d Cir. 2003) ...................... 33

Emp’r Teamsters-Local Nos. 175/505 Health & Welfare Trust Fund v. Bristol Myers Squibb Co., 969 F. Supp. 2d 463, 475 (S.D. W. Va. 2013) .......................................................... 32

Harden Manufacturing Co. v. Pfizer, Inc., 712 F.3d 60 (1st Cir. 2013) ....................... 27

Health Care Services Corp. v. Olivares, No. 10-cv-221, 2011 WL 4591913 (E.D. Tex. Sept. 2, 2011), adopted, 2011 WL 4591915 (E.D. Tex. Sept. 30, 2011) .......... 22

Heindel v. Pfizer, Inc., 381 F. Supp. 2d 364 (D.N.J. 2004) ........... 32

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TABLE OF AUTHORITIES—Continued

Page(s)

Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010) ........................... 16, 25, 26, 33

Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) .......................passim

In re Neurontin Marketing and Sales Practices Litig., 712 F.3d 21 (1st Cir. 2013), cert denied sub nom. Pfizer Inc. v. Kaiser Foundation Health Plan, Inc., 134 S.Ct. 786 (2013) .................................passim

In re Testosterone Replacement Therapy Products Liab. Litig., 2016 WL 427553 (N.D. Ill. Feb. 3, 2016) .......................................................... 21, 28

Ironworkers Local Union 68 v. AstraZenica Pharms., 634 F.3d 1352 (11th Cir. 2011) ................passim

Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., 712 F.3d 21 (1st Cir. 2013), cert denied sub nom. Pfizer Inc. v. Kaiser Foundation Health Plan, Inc., 134 S.Ct. 786 (2013). ................................................. 27

McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008) ..................... 32

Prohias v. Pfizer, Inc., 485 F. Supp. 2d 1329 (S.D. Fla. 2007) ..... 32

Rivera v. Wyeth-Ayerst Labs., 283 F.3d. 315 (5th Cir. 2002) .................... 32

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Page(s)

Sergeants Benevolent Ass’n Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, 20 F. Supp. 3d 305 (E.D.N.Y. 2014), aff’d, 806 F.3d 71 (2d Cir. 2015) ............... 32

State Farm Mutual Automobile Ins. Co., 2011 WL 4389915 (S.D. FL Sept. 2011) ... 22

UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010) ...................... 32

United Food & Commercial Workers Central Penn. & Regional Health & Welfare Fund v. Amgen, Inc., 400 F. App’x 255 (9th Cir. 2010) .............. 28

Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004) ...................... 23, 24

STATUTES

28 U.S.C. § 1292(b) ....................................... 32

Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. (“RICO”) ............................................passim

§ 1964(c) .................................................... 21

RULES

Fed. R. Civ. P. 12(b)(6) ................................. 30

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COURT FILINGS Page(s)

Avandia Civil Settlement Agreement, United States v. GlaxoSmithKlein LLC (July 2, 2012), available at https://www.justice.gov/sites/default/files/opa/legacy/2012/07/02/avandia-agree ment.pdf .................................................... 2

Br. Amici Curiae of Washington Legal Foundation, et al., In re Neurontin (Oct. 4, 2013), No. 13-289 .................................. 27

Criminal Plea Agreement, United States v. GlaxoSmithKlein, LLC (July 27, 2012), available at https://www.justice.gov/sites /default/files/opa/legacy/2012/07/02/plea-agreement.pdf ........................................... 2

Pet. for a Writ of Cert., In re Neurontin (Aug. 30, 2013), No. 13-289 ...................... 27, 28

OTHER AUTHORITIES

Centers for Medicare and Medicaid Services, National Health Expenditures By Type of Service and Source of Funds Report, CY 1960-2014, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealth expendData/NationalHealthAccounts Historical.html .......................................... 34

EUGENE GRESSMAN, ET AL., SUPREME COURT PRACTICE (9th ed. 2007) ............................ 32

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Page(s)

U.S. Dep’t of Justice Press Release, GlaxoSmith- Kline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data (July 2, 2012), https://www. justice.gov/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failure-report ........ 2

S. COMM. ON FINANCE, 111TH CONG., STAFF REPORT ON GLAXOSMITHKLINE AND THE DIABETES DRUG AVANDIA, S. PRT. NO. 111–41 (2010) ............................................ 7

Steven E. Nissen and Kathy Wolski, Effect of Rosiglitazone on the Risk of Myocardial Infarction and Death from Cardiovascular Causes, NEJM 356:2457-2471 (2007) ........................................ 6, 7, 10, 17

INTRODUCTION

This Petition should sound familiar. GlaxoSmith-Kline (“GSK”) and its amici reprise themes thought to have worked under wildly different circumstances: (1) that under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the allegations of a complaint must be “plausible,” Pet. 311; and (2) that a class action poses a blackmail threat of forcing innocent defendants to settle, thereby “threatening virtually limitless liability in many cases in which the drug worked and none of the TPP’s beneficiaries is alleged to have been injured.” Pet. 4 (emphasis in original).2

In other words, even though the Third Circuit has done nothing more than uphold the denial of a motion to dismiss, Petitioner and its amici urge the Court to intervene now so that an innocent defendant will not be forced, by the threat of a mega-verdict, to settle a

1 All references to the Petition for Certiorari are designated “Pet. __.” Materials in the Petition Appendix are designated “Pet. __a.” References to the Respondents’ Appendix are designated “RA __a.”

2 See also Br. of Product Liability Advisory Council (PLAC) as Amicus Curiae at 19 (warning about the “incentive to settle even groundless civil RICO actions [which] is compounded in alleged class actions”); Id. at 18 (calling Respondents’ lawsuit “mischief” and claiming that Petitioner was exonerated by the FDA); Br. of Pharmaceutical Research and Mfrs. of Am. and Nat’l Ass’n of Mfrs. as Amici Curiae at 4 (noting the “‘in terrorem effect’ of the Third Circuit’s decision”); Br. of Washington Legal Foundation (WLF) as Amicus Curiae at 2 (describing this case as an example of “opportunistic plaintiffs seeking to force the settlement of doubtful claims by defendants unable to cope with the threat of treble damages and the unfavorable publicity that arises from being labeled a ‘racketeer’”).

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facially implausible lawsuit. There is one overriding problem with this account of innocents adrift in the land of rapacious lawsuits: Petitioner and all three of its amici must withhold the fact—reported all over the public record3—that Petitioner pled guilty to criminal charges and agreed to pay the government $3 billion in what is the largest settlement ever against a pharmaceutical company—based heavily on the very drug and very conduct at issue in this case.

Specifically, on July 2, 2012, Petitioner pled guilty to multiple counts of interstate commerce in misbranded drugs and to criminal failure to report clinical results of its drugs’ adverse effects. See RA 1a-36a.4 Petitioner also settled civil charges from federal and state authorities that Petitioner withheld information on the dangers of its pharmaceuticals, artificially inflated the prices of its pharmaceuticals by falsely claiming greater efficacy than competing products, promoted dangerous off-label use of its pharmaceuticals, and needlessly placed patients at risk in order to prop up the profitability of its products. See RA 37a-57a.5

3 Cf. Pet. 6 n.2 (discussing judicial notice). 4 Appendix A, Criminal Plea Agreement, United States v.

GlaxoSmithKlein, LLC (July 27, 2012), https://www.justice.gov/ sites/default/files/opa/legacy/2012/07/02/plea-agreement.pdf.

5 Appendix B, Avandia Civil Settlement Agreement, United States v. GlaxoSmithKlein LLC (July 2, 2012), https://www.jus tice.gov/sites/default/files/opa/legacy/2012/07/02/avandia-agree ment.pdf; see also Appendix C, U.S. Dep’t of Justice Press Release, GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data (July 2, 2012), https://www.justice.gov/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failure-report.

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If the government claims against Petitioner sound familiar, it is because they should. The present case involves the identical fraudulent conduct, the same misrepresentations, the same indifference to patient welfare, and the same criminal irresponsibility. There is only one difference: this action concerns the consequences of the same conspiratorial activity when directed at private health insurers instead of public health insurers. At bottom, the claim of the Third-Party Payers (“TPPs”) is that the same conspiratorial conduct that criminally defrauded public health authorities was aimed at them as well and caused the insurers the same harm of paying excess prices for excessive sales of a compromised product.

The only question at this stage of the litigation is whether allegations of the same conduct that gave rise to criminal and civil penalties when directed against public authorities state a claim under which relief can be granted for private parties under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §1961 et seq. (“RICO”). At issue is simply whether a TPP footing the bill for insured pharmaceutical benefits has standing to complain that a pharmaceutical company willfully and deceptively represented formulary drugs’ efficacy and safety, and whether the fraudulent deception is actionable under the facts alleged.

To be clear, this Petition arises from the refusal of the courts below to dismiss the RICO claims as a matter of law. Put more bluntly, following Twombly and Iqbal, the issue is whether it is plausible to claim that private insurers were injured by the same conduct that gave rise to criminal sanctions and $3 billion in penalties when directed at government insurers. The hubris of the argument that the

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allegations are not plausible in light of the criminal plea is staggering. Of necessity, a criminal conviction appears to guarantee that the “[f]actual allegations [are] enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Indeed, Respondents cannot identify a post-Twombly case in which any court found civil allegations implausible when there had already been a criminal conviction on the underlying conduct. “Plausibility” after a criminal conviction seems a given.

Petitioner has no credible rejoinder to this argument. It is now in the precarious position of arguing the implausibility of the claim that its conduct had any effect on either the volume of Avandia sales or the price at which it sold, despite having pleaded guilty to conspiring to realize just those ends. Why else, after all, did Petitioner engage in this criminal conduct? Was that unlawful conduct so carefully calibrated as to affect only sales to patients with public rather than private health insurance? Is that rejoinder plausible?

Alternatively, the Petition argues that somehow the TPPs, who cover essentially all of prescription drug sales not insured by the government, lack RICO standing. First, the Petition relies on a repudiated Eleventh Circuit opinion, Ironworkers Local Union 68 v. AstraZenica Pharms., 634 F.3d 1352 (11th Cir. 2011), for the proposition that a defrauded party has no standing under RICO if that party could kick the can down the road, passing the cost of the fraudulent conduct down the chain of consumption to other innocent parties. Alternatively, Petitioner claims that there is no RICO standing unless the racketeering activity was directed at the complaining party, in this case at the insurers rather than at the doctors and

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patients that made the purchasing decisions. Those arguments cannot be sustained in light of this Court’s decisions in Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992), and Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008).

Petitioner questions evidence of malfeasance, reliance on misrepresentations, cohesiveness of a TPP class, and a meandering trail of other issues. None of this is germane to a motion to dismiss. This is not an appeal from a summary judgment, or a trial, or even a class certification, despite the fact that most of Petitioner’s authorities arise in those contexts. This is merely a motion to dismiss, judged under the standard of whether the complaint plausibly states a cause of action. At this stage, plausibility seems incontestable.

The Petition should therefore be denied.

STATEMENT OF THE CASE

A. Petitioner’s Alleged Misconduct and the Claims of the Respondent Third-Party Payors

1. The Products at Issue

On May 25, 1999, the Food and Drug Administration (FDA) approved sales of Avandia, a drug for treatment of Type II diabetes that Petitioner claimed to be more effective and safer than existing products. Pet. 3a. Avandia generated billions of dollars in revenue based on regular use by more than a million consumers. Pet. 5a-6a. A one-month supply costs between $90 and $220, with TPPs covering up to $140 of that cost. Pet. 6a.

6

This litigation concerns the serious cardiac side effects of Avandia. Within 12 years of Avandia’s release, all three branches of government had condemned GSK for the conduct alleged in this case:

In 2001, the FDA instructed Petitioner to change its marketing to cease “minimizing the risk of heart attacks and heart-related dis-eases” in Avandia. Pet. 4a.

In 2006, the FDA ordered Petitioner to update its warnings to reflect new concerns about heart attacks and heart-related chest pain in some Avandia users. Pet. 4a.

In 2007, after a study in The New England Journal of Medicine (“NEJM”) by Steven E. Nissen and Kathy Wolski (the “Nissen study”) documented significant additional risks of myocardial infarction and an increase in the risk of death from heart disease in Avandia users, Petitioner attempted to dispute the study’s methodology and findings, and re-leased its own favorable study. Petitioner launched a “marketing campaign designed to sway doctor and consumer confidence” in the face of the Nissen study, including full-page ads in more than a dozen newspapers and pro-motional materials targeted at prescribing physicians. Pet. 4a.6

6 Petitioner obtained a leaked copy of the Nissen study prior to

its publication in NEJM. Pet. 36a. Rather than address the safety risks detailed in that study, Petitioner launched an assault on the study and a marketing campaign. Id. That assault included premature release of its own study aimed at counteracting the Nissen study. Pet 36a-37a.

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In May 2007, the FDA urged Petitioner to include a “black box” warning to the Avandia label about the risk of congestive heart failure. Pet. 4a. Petitioner did so in August 2007. Pet. 4a-5a. Three months later, the FDA ordered a second black box warning summarizing the Nissen study and stating that Avandia was as-sociated with a heightened risk of myocardial ischemic events, including angina and myocar-dial infarction. Pet. 5a.

In February 2010, the U.S. Senate Finance Committee, having reviewed over 250,000 pages of documents,7 issued a report conclud-ing that Petitioner was aware of the cardiac risks of Avandia years before the knowledge of those risks became public but failed to notify the FDA and the public. Pet. 5a. The Commit-tee referenced Petitioner’s attack of the Nissen study and the intimidation of physicians who had spoken out about the risks of Avandia. Pet. 5a.

In September 2010, the FDA restricted use of Avandia to new patients who could not control their blood sugar with other drugs and who had chosen, based on their doctor’s advice, not to take a competing drug (Actos). Pet. 5a. For existing users, doctors had to advise patients of heart-related risks before continuing use. Pet. 5a.

7 S. COMM. ON FINANCE, 111TH CONG., STAFF REPORT ON

GLAXOSMITHKLINE AND THE DIABETES DRUG AVANDIA, S. PRT. NO. 111–41, at 1 (2010).

8

In October 2010, Respondents filed suit against Petitioner.

In 2011, the DOJ filed a criminal information alleging multiple violations of federal law, including failure to report studies and safety data regarding Avandia’s cardiovascular risks. RA 61a-62a.

In 2012, GSK settled government civil and criminal claims over Avandia in “the largest health care fraud settlement in U.S. history and the largest payment ever by a drug com-pany.” RA 58a. Civil charges that “false and misleading representations” had “knowingly caused false or fraudulent claims for Avandia” to be submitted to public healthcare insurers, were settled for more than $650 million. RA 39a.

2. Third-Party Payors and Their Formu-laries

Respondents are TPPs who allege significant out-of-pocket harm as a result of Petitioner’s mis-representations and omissions concerning Avandia’s efficacy and safety risks. Pet. 1a-2a. They seek to represent a class of TPPs who covered the cost of Avandia for their insureds following Avandia’s FDA approval. Pet. 2a.

A TPP’s coverage of prescription drugs for members and their dependents depends on whether the drug is listed in the TPP’s “formulary.” Pet. 3a. Formularies are prepared by Pharmacy Benefit Managers (“PBMs”) who evaluate drug efficacy and cost of specific drugs, and those formularies represent the list of drugs approved for TPP insureds. If a listed drug is given preferred status, the manufacturer may charge

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more and the TPP covers a greater percentage of the cost (and the insured pays a lower co-pay). Pet. 3a.

3. Respondents’ Allegations

In their October 2010 complaints, Respondents sued under RICO and state consumer laws based on predicate acts of mail and wire fraud, tampering with witnesses, and using interstate facilities to conduct unlawful activity. Pet. 6a. Only the RICO issues were certified for interlocutory appeal; the state law claims are not before this Court and will proceed regardless of the disposition of the RICO claims. Pet. 9a & n.11.

The gravamen of the RICO and state law claims is fraud and misrepresentation—the same allegations that led to the guilty plea by Petitioner and the $3 billion settlement involving Avandia and two anti-depressants. In particular, and dovetailing with the government charges, Respondents allege:

Petitioner promoted Avandia with false and misleading marketing,8 including claims that Avandia was safer than other available diabetes medications. Pet. 2a; see also RA 41a (U.S. allegations that Petitioner’s marketing materials were inconsistent with FDA-ap-proved labeling).

8 Respondents cite the “failure to inform physicians that no

placebo-controlled clinical trials support a representation of drug efficacy [as] a violation of a pharmaceutical company’s obligation to disclose.” Pet. 85a (citations omitted); see also RA 39a (government allegation that “GSK misleadingly represented that Avandia had a ‘positive lipid profile,’ and trained its sales force to promote the positive lipid profile as one of three core selling messages, despite having no well-controlled studies sufficient to establish those representations”).

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Petitioner knowingly mischaracterized rele-vant scientific evidence, as found by the Senate Finance Committee. Pet. 36a-37a. Two other studies undertaken by Petitioner in the wake of the Nissen study “focused largely on market-ing questions and failed to address questions of myocardial infarction-related risk or benefit directly” Pet. 221a (citing NEJM editorial).

Petitioner deliberately concealed Avandia’s “significant safety risks.” Pet. 7a. Petitioner “suppress[ed] the dissemination of any critical information about Avandia” from the public, prescribing physicians, and PBMs. Pet. 152a. The same allegations are repeated in the crim-inal charges against GSK.9

Petitioner also concealed scientific evidence that was contrary to the company’s marketing message. See RA 40a (government allegation that “GSK did not publish . . . scientific data about Actos because it was unhelpful to GSK’s marketing message on lipids.”).

Respondents suffered concrete financial loss as “a foreseeable and natural consequence” of Petitioner’s schemes: “Plaintiff and the Class were denied the opportunity to make fully informed decisions about whether and how to include Avandia on their formularies,” and, as a result, the TPPs “paid for more prescriptions

9 RA 61a-62a (criminal charges for “fail[ing] to include certain

safety data about Avandia, a diabetes drug, in reports to the FDA that are meant to allow the FDA to determine if a drug continues to be safe for its approved indications and to spot drug safety trends”).

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than they otherwise would have paid for and/or paid for Avandia that would have been sold at a lower price had market forces been allowed to operate unfettered by Defendants’ violations.” Pet. 177a-178a.10 Petitioner’s ille-gal actions in the promotion and marketing of Avandia resulted in ill-gotten gains for Peti-tioner. Pet. 140a (“Although more effective, safer, and less expensive alternatives are available, [GSK’s] promotion and marketing of Avandia’s safety and effectiveness has been highly successful, resulting in [GSK] receiving billions of dollars in profits, representing ill-gotten gains to which [GSK was] not enti-tled.”).11

Respondents seek direct out-of-pocket losses for themselves and the other class members as a result of Petitioner’s alleged misconduct. Specifically, in reliance on GSK’s fraudulent representations, Respondents listed Avandia in their formularies and paid for Avandia at favorable rates. Pet. 7a. Because Avandia was in fact worth less—given the inflated claims of efficacy and the grave heart-related risks it posed—Respondents paid excessive amounts for Avandia, and their insureds paid lower co-pays.

10 See also RA 42a (government allegation that “GSK made false representations concerning the lipid profile, effect on cardi-ovascular biomarkers, and the overall safety of Avandia to state Medicaid agencies on which state Medicaid agencies relied to their detriment in making formulary and prior authorization de-cisions”).

11 See also RA 41a (“GSK made false and misleading representations ... to physicians and other health care providers in violation of [federal law], and through the sale and distribution of a misbranded product, GSK obtained proceeds and profits to which it was not entitled.”).

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Pet. 7a. Avandia’s fraud further caused physicians to prescribe Avandia to more patients than they otherwise would have, had those physicians known the truth. Pet. 7a. (These distinct measures of harm are referred to as Respondents’ “excess price” and “quantity effect” claims. Pet. 7a.)

4. Petitioner’s Motion to Dismiss

Petitioner moved to dismiss the RICO claims because Respondents (1) failed to allege cognizable injury to themselves, and (2) failed to show that any such injury was proximately caused by Petitioner. Respondents also moved to dismiss the various state-law claims. Pet. 7a, 42a.

5. The Rulings Below

a. District Court Decision

The district court dismissed Respondents’ unjust enrichment claim, but denied the motion to dismiss the RICO claims and various state consumer protection claims. Pet. 31a-62a. The court relied on the detailed allegations that Petitioner “was misleading the public, as well as the PBMs and TPPs, with regard to Avandia’s safety”; that Petitioner “intended to mislead PBMs and TPPs, so they would include and prioritize Avandia on their formularies and cover prescriptions for Avandia without restrictions”; that the “intervening acts of physician prescribers were not independent and unforeseeable to [petitioner]”; and that, indeed, “the marketing campaign was designed to mislead physicians, so as to increase the number of Avandia prescriptions written and covered by TPPs.” Pet. 43a (emphasis in original).

Moreover, the district court credited the complaint’s allegations “that doctors are more likely to prescribe

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drugs which are included on a patient’s insurer’s formulary,” and that absent Petitioner’s actions, “many patients would have been prescribed” another drug, metformin, which “is significantly cheaper and carries less risk than Avandia.” Pet. 44a. Thus, Respondents alleged that “they suffered a concrete economic injury, which is unaffected by whether any given patient who ingested Avandia became ill, and which may be redressed by economic damages.” Pet. 44a. Accordingly, the court concluded that Respondents’ “claims sufficiently allege an economic injury at this pleading stage of the litigation.” Pet. 44a. By contrast, questions of how much money would be saved had doctors prescribed alternative medications were “more relevant to summary judgment or the calculation of damages.” Pet. 44a n.25. Respondents’ “claims of injury” were “sufficient” for pleading purposes. Id.

With regard to proximate cause, the district court relied on Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992), to find that the Respondents had alleged that Petitioner’s misrepresentations increased the number of prescriptions written by doctors and filled by patients (because doctors otherwise would have prescribed other drugs), and that “[Petitioner’s] misrepre-sentations led TPPs to include and prioritize Avandia on their drug formularies without restrictions.” Pet. 45a. As a result, Respondents “paid for Avandia” instead of “covering the cost of less risky and less costly alternatives . . . .” Id. Thus, Respondents’ “injuries were foreseeable and natural consequences of [Petitioner’s] scheme to mislead the public, including physicians and insurers, with regard to Avandia’s safety.” Id. The court further found that “[Respondents] have adequately alleged that

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[Petitioner] misrepresented the safety of Avandia, and that these misrepresentations influenced the inclusion of Avandia on the formularies.” Pet. 46a (citing examples of Petitioner’s misleading statements).

Consequently, Petitioner’s marketing to physicians, not insurers, “d[id] not break the causal chain”: “Where misrepresentations are directed at prescribing doctors, rather than TPPs, but a TPP, as payor, is a ‘primary and intended victim’ and the injury to the insurer is foreseeable, the doctor’s independent actions do not break the causal chain.” Pet. 47a. Moreover, there was no risk of double recovery because the physicians themselves did not pay for Neurontin prescriptions. Id. And, allowing the TPPs as the injured parties to pursue such claims “would have a deterrent effect on similar, wrongful conduct.” Id. The court cautioned, however, that “because the named TPP’s did not act to remove Avandia from their formularies or even restrict their coverage of Avandia in light of research published and widely publicized in 2007,” there may be “potential difficulty in proving causation in the next stage of the litigation.” Pet. 51a.

The district court certified the RICO issues (but not the state consumer protection claims) for interlocutory review, which the Third Circuit granted. Pet. 8a-9a.

b. Third Circuit Decision

i. Injury

In the Third Circuit, Petitioner argued that Respondents suffered no cognizable injury because the allegations were predicated on the possibility “that the drugs purchased by the TPPs will prove to be unsafe or ineffective,” and the TPPs “do not allege that they

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received unsafe or ineffective prescriptions . . . .” Pet. 14a. The court rejected the argument, reasoning that “the injury suffered by the TPPs here is not contingent on future events” because damages “do not depend on the effectiveness of the Avandia that they purchased” but on “the inflationary effect that [Petitioner’s] allegedly fraudulent behavior had on the price of Avandia.” Pet. 15a (emphasis in original). As the court noted, “[i]f we accept the plausible allegations in the complaint as true, the fraudulent behavior alleged in [the] complaint has already occurred, and its effect on the price of Avandia is not contingent on future events.” Pet. 16a.

The court also rejected Petitioner’s reliance on Ironworkers Local Union 68 v. AstraZenica Pharms., 634 F.3d 1352 (11th Cir. 2011). The court noted that Ironworkers “found that plaintiff insurance companies suffered no injury because they adjust[] their premiums upward to reflect the projected value of claims for payment of medically unnecessary or inappropriate prescriptions of formulary drugs—even those caused by fraudulent marketing.” Pet. 18a (quoting Ironworkers, 634 F.3d at 1368) (internal quotation marks omitted). First, the court found, this rationale was procedurally improper: “Although [Petitioner] says that the TPPs ‘presumably’ adjusted their premiums in this way, we are not entitled to make such a presumption at the motion-to-dismiss stage.” Pet. 18a. Moreover, the Third Circuit pointed out that the Eleventh Circuit’s rationale that fraud cannot be challenged if the costs are passed on “lacks a limiting principle.” Pet. 18a. Ironworkers would foreclose retailers as a matter of law from recovering from shoplifters (or banks recovering from a robber) because the merchant’s (or bank’s) business model presumably accounts for thefts. Pet. 18a n.45.

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ii. Proximate Cause

The Third Circuit’s proximate cause analysis turned on Holmes, Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006), Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010), and Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 (2008). The court found Bridge most analogous because the “‘alleged injury . . . [was] the direct result of petitioners’ fraud . . . .’” Pet. 23a (quoting 553 U.S. at 658). By contrast, “[t]he Court in Holmes, Anza, and Hemi was concerned that the conduct causing plaintiffs’ injuries was different than the conduct allegedly constituting a RICO violation.” Pet. 23a (emphasis added). As alleged, the presence of intermediaries does not break the causal chain, and even Petitioner “does not argue that a doctor’s decision to prescribe Avandia or a patient’s decision to take Avandia caused [Respondents’] injuries.” Pet. 24a.

Accordingly, the court rejected Petitioner’s argu-ment that “the presence of intermediaries, doctors and patients, destroy[ed] proximate causation because they were the ones who ultimately decided whether to rely on [Petitioner’s] misrepresentations.” Pet. 27a. Bridge foreclosed that argument because, as in Bridge, Respondents were the “‘primary and intended victims of the scheme to defraud’ and [Respondents’] injury was a ‘foreseeable and natural consequence of [the] scheme . . . .’” Pet. 27a (quoting 553 U.S. at 658).

As in Bridge, “[t]he conduct that allegedly caused Respondents’ injuries is the same conduct forming the basis of the RICO scheme alleged in the complaint—the misrepresentation of the heart-related risks of taking Avandia that caused TPPs and PBMs to place Avandia in the formulary.” Pet. 24a. More specifically, “[t]he injury alleged by the TPPs is an economic injury independent of any physical injury suffered by

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Avandia users.” Pet. 24a. Quantifying the injury under either theory of damages is “for another day.” Pet. 25a.

The court rejected Petitioner’s other arguments as inappropriate for a motion to dismiss. First, Petitioner argued that the TPPs “cannot establish causation because they continued to cover Avandia prescriptions after its safety risks were publicly exposed in May 2007.” Pet. 25a. The court concluded, however, that this argument rested “on two faulty assumptions”: (1) that Respondents “did not change their coverage of Avandia in 2007,” and (2) that Respondents “knew the full scope of [Petitioner’s] alleged fraud based on the Nissen study.” Pet. 25a. Neither premise could be assumed to be true at this stage, especially “[v]iewing [the] facts in the light most favorable to plaintiffs.” Pet. 26a.

Second, the court rejected Petitioner’s argument that the complaints failed to allege that alternative prescriptions would have been less expensive. To begin with, Respondents’ “excess price” theory did not depend on less expensive alternatives, since the TPPs “may be able to show that Avandia cost too much regardless of whether cheaper drugs existed on the market.” Pet. 26a. Moreover, the complaints did in fact “identify metformin as a cheaper alternative drug,” and such identification was not deficient merely because Respondents did not include a price comparison with yet another Type II diabetes drug, Actos. Pet. 26a. “It is sufficient that a plaintiff identify in the pleadings a specific alternative drug that doctors would have prescribed and that would have cost less.” Pet. 27a.

The court concluded that, at the motion to dismiss stage, this case presented none of “the three

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fundamental causation concerns expressed in Holmes”: lack of direct injury, risk of duplicative recovery, and the availability of a better plaintiff. Pet. 28a-29a. Many of the issues raised by Petitioner “will resurface in the future,” and the court was not “opin[ing] on the likelihood of [Respondents’] success down the road.” Pet. 29a.

REASONS TO DENY THE WRIT

The courts below faithfully followed this Court’s seminal RICO decisions. Especially in light of Peti-tioner’s criminal plea and civil penalties involving the same drug, it stretches credulity for Petitioner to ar-gue that the allegations here do not pass the Twombley/Iqbal “plausibility” test.

Other appellate court decisions have similarly rejected the arguments Petitioner raises here, including the First Circuit’s decisions in In re Neurontin Marketing and Sales Practices Litig., in which Justice Souter, the author of Holmes, sat on the panel by designation. Indeed, in Neurontin (as in most of Petitioner’s authorities), the posture of the three cases was post-jury verdict or summary judgment. Tellingly, in Neurontin the courts similarly rejected motions to dismiss for conduct that led to a criminal plea and civil fines to the government. 712 F.3d 21, 31, cert denied sub nom. Pfizer Inc. v. Kaiser Foundation Health Plan, Inc., 134 S.Ct. 786 (2013). By contrast, Petitioner repeatedly asserts conflicts with cases that do not involve motions to dismiss. Thus, in the end, Petitioner is left relying on nothing more that the Eleventh Circuit’s decision in Ironworkers.

As discussed below, Ironworkers is a fatally flawed case that has been either ignored or expressly

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repudiated. And the reasoning in Ironworkers cannot be squared with Bridge. Indeed, as the court below noted, the reasoning of Ironworkers would lead to absurd results; virtually any injury can be recast as no injury because the injured party could have anticipated the problem and passed the cost down the line. Pet. 18a. It is hard to fathom that the Eleventh Circuit en banc would adhere to such a flawed and criticized decision. Were Ironworkers the case before this Court on certiorari, that ruling would warrant summary reversal. But a decision rejecting a fatally flawed case that flatly conflicts with Bridge should be of no concern to this Court.

With respect to proximate cause, Petitioner has failed to identify any cases that would apply a conflicting legal standard at the motion to dismiss stage. Instead, Petitioner invokes an inapposite string of cases dealing with the sufficiency of evidentiary proof at trial, summary judgment, or class certification. These authorities have no bearing on whether a claim is stated at the pleading stage.

I. THE “NO INJURY” ISSUE RAISED BY PETITIONER DOES NOT WARRANT RE-VIEW

A. The Eleventh Circuit Decision in Iron-workers Is Indefensible

The centerpiece of the Petition is that this Court should grant review to embrace the Eleventh Circuit’s RICO injury approach in Ironworkers. Thus, Ironworkers is the opening salvo of the entire Petition. Pet. 1-2. Then, in its Reasons for Granting the Writ, the Petition again leads with Ironworkers. Pet. 13. For Petitioner, Ironworkers is the silver bullet for certiorari.

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Ironworkers also involved TPPs who sought damages because of fraudulently induced payments for more expensive prescriptions. The Eleventh Circuit held, in the context of a motion to dismiss, that the plaintiffs had not adequately alleged RICO injury. The reasoning was based entirely on the panel’s extra-record assumptions that were unsupported by the pleadings or any proper use of judicial notice. Thus, in its explication of “standards of practice in the medical profession,” the panel noted that “[t]ypically, insurers adjust premiums to compensate for known risks assumed under [their] coverage.” 634 F.3d at 1364. And, at the motion to dismiss stage, the panel was confident that one such risk assumed by TPPs is “fraud within the health care industry.” Id. at 1368. Stunningly, RICO does not apply because fraud is held to be a built-in feature of health care.

Thus, if a TPP suffers a financial loss as a result of a drug company’s fraud, the TPP has only itself to blame and cannot recover. Per the Eleventh Circuit, “[i]f . . . the insurers’ estimates fell short of actual payments, their own business mistakes caused their loss.” Id. at 1369. Despite clear financial loss, recovery is barred under Ironworkers because TPPs should just expect criminal fraud as a structural feature of the health care industry. RICO plaintiffs can offer no factual evidence in support of their claims and should just go along with the system, passing the costs of fraud down the line of consumption.

Ironworkers is fatally flawed. As the Third Circuit noted in addressing the Eleventh Circuit’s assumption about how the health care industry works, “we are not entitled to make such a presumption at the motion-to-dismiss stage.” Pet. 18a. Further, Ironworkers “lacks a limiting principle” and could apply to anyone, such as

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a business, or a bank, that can pass costs downstream (e.g., to consumers). Pet. 18a. Thus, claims against shoplifters or bank robbers would be barred because the merchant or bank could have anticipated the thefts and simply charged more to its customers. Pet. 18a n. 45.

Under the Eleventh Circuit’s view, the only parties with RICO standing would be the last-in-line indirect purchasers of the fraudulently misrepresented medications. Such a rule would put RICO at direct variance from the antitrust laws in which direct purchasers are counted on to enforce the statutory mandate. As this Court observed in Holmes, “Congress modeled Sec. 1964(c) on the civil-action provision on the civil-action provision of the federal antitrust laws . . . .” 503 U.S. at 267. The reason is clear; in both contexts, “directly injured victims can generally be counted on to vindicate the law as private attorneys general . . . .” Id. at 269-70.

The Third Circuit is not the only court that has refused to credit Ironworkers. In a comprehensive MDL decision issued after the decision below, a district court specifically considered and rejected Ironworkers. In re Testosterone Replacement Therapy Products Liab. Litig., 2016 WL 427553 (N.D. Ill. Feb. 3, 2016). The court agreed with the Third Circuit that Ironworkers made presumptions that were inappropriate at the motion-to-dismiss stage. Id. at *14. And, like the Third Circuit, the MDL judge recognized that the decision was potentially limitless because it “could apply to any company with the ability to adjust its pricing in anticipation of being defrauded . . . .” Id.

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Indeed, Ironworkers has not been followed even within the Eleventh Circuit.12 Apart from one magis-trate’s decision adopted by a district court,13 we know of no case that has embraced the theory of injury adopted in Ironworkers. It is, in short, an outlier case that has been either ignored or roundly criticized. Most likely the decision will fade into oblivion, even within the Eleventh Circuit. But if the case does resurface in the Eleventh Circuit, it is likely, given the Third Circuit’s searing criticism, that the Eleventh Circuit en banc will repudiate it. (Rehearing en banc was not sought in Ironworkers itself, so the full court has never considered the case.) There is simply no need for the Court to grant review to condemn a case that is already on life support.

B. Petitioner’s Other Claims of Conflict on the “No Injury” Point are Meritless

Apparently recognizing that Ironworkers is at best tenuous authority, Petitioner devotes five pages in a futile effort to demonstrate that “[s]everal other decisions have applied similar logic.” Pet. 16-20. The

12 In State Farm Mutual Automobile Ins. Co., 2011 WL 4389915 (S.D. FL Sept. 2011), the district court refused to apply Ironworkers in large part, because the plaintiff in the district court litigation “did not unconditionally agree to pay for [certain diagnostic tests] regardless of medical necessity or fraud.” 2011 WL 4389915, at *9. Of course, that rationale is not a distinction but instead is a repudiation of the case. Nothing in the complaint in Ironworkers suggested that the plaintiff there had agreed to pay for fraud; the Eleventh Circuit merely assumed such an agreement based on its unsupported guesswork about the health care industry.

13 Health Care Services Corp. v. Olivares, No. 10-cv-221, 2011 WL 4591913 (E.D. Tex. Sept. 2, 2011) (magistrate recommendation), adopted, 2011 WL 4591915 (E.D. Tex. Sept. 30, 2011).

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phrase “similar logic” is carefully chosen because not a single case cited in those five pages applies the Ironworkers approach.

The five pages are a hodgepodge of citations. Most of the purportedly conflicting cases are from district courts (many within the Third Circuit), and most do not involve the motion to dismiss stage. Instead of setting out the facts, procedural context, and reasoning of the cases, Petitioner simply offers snippets and parentheticals, making it impossible to understand how the cases support Ironworkers. Simply throwing up string cites, without any analysis, does not demonstrate a conflict.

At the end of the five pages, the reason for Petitioner’s obfuscation becomes clear. Buried in a footnote, Petitioner finally discloses why it has not discussed these cases in detail: none of the authorities discussed in those pages turns on RICO injury. Rather, the cases “were decided under the auspices of RICO’s proximate-causation requirement rather than injury.” Pet. 20 n.7. As discussed below, there is no certworthy issue for RICO proximate cause, and there is certainly no certworthy issue for RICO injury based on proximate cause cases.14

14 Inexplicably, after conceding in a footnote that the cases are

not on point for RICO injury, Petitioner then chastises the Third Circuit in text for “not even acknowledg[ing] this authority . . . .” Pet. 21. Petitioner then criticizes the Third Circuit for instead relying on its own decision in Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004), because that case involved antitrust. Pet. 21-22. But this Court has repeatedly noted the relationship between RICO and antitrust theories. See, e.g., Holmes, 503 U.S. at 267-68; see also Pet. 14a n.32 (“RICO’s standing requirements were modeled on antitrust law.”). Thus, the Third Circuit

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C. The Complaints Assert RICO Injury

The Third Circuit’s logic that Respondents have alleged RICO injury is unassailable. As Bridge makes clear, monetary injury provides a valid predicate for RICO injury. See Bridge, 553 U.S. at 644 (finding RICO injury where parties lost “their fair share of liens and the attendant financial benefits”). Here, the allegations of the complaint explain in a logical and coherent way the direct and immediate financial impact of the fraud. Among other things, Respondents alleged that Petitioner misled the public, PBMs, and TPPs regarding Avandia’s safety. Pet. 46a, 141a-142a. Its purpose was to cause the PBMs and TPPs to include and prioritize Avandia on their formularies and cover prescriptions for Avandia without restrictions. Pet. 34a, 129a. Respondents further alleged that the intervening acts of physician prescribers were foreseeable to Petitioner and that Petitioner’s marketing scheme was intended to mislead physicians into prescribing the drug, which the TPPs then had to cover. Pet. 45a, 129a. But for the fraud, many doctors would have prescribed different—and cheaper—medication. Pet. 7a, 45a, 127a, 199a. Thus, Respondents alleged a concrete financial injury, which did not depend on whether any given patient who ingested Avandia became ill. At the pleading stage, those allegations are plainly sufficient.

correctly viewed Warfarin as a relevant precedent. In all events, Petitioner does not explain how the Third Circuit’s purportedly erroneous reference to a prior Third Circuit case creates a certworthy issue.

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II. PETITIONER’S RICO PROXIMATE CAUSE ISSUE ALSO DOES NOT WAR-RANT REVIEW

Petitioner’s proximate cause argument has two parts. Neither justifies review. First, despite claims of conflict, there are none to be found. Second, in light of the criminal pleas and government settlement, the argument that the complaints do not plausibly plead proximate cause strains credulity.

A. No Conflict Exists With Respect to RICO Proximate Cause

It is difficult to understand Petitioner’s conflict argument. The result reached below is dictated by this Court’s decision in Bridge. The Third Circuit conducted a meticulous review of this Court’s cases and concluded that Holmes, Anza, and Hemi involved a different factual context—i.e., the conduct causing plaintiffs’ injuries was not the same as the conduct that formed the basis for the RICO claim. Pet. 19a-23a. By contrast, the court found this Court’s decision in Bridge to be squarely on point. Pet. 23a-24a.

In Bridge, the alleged fraud involved a county tax lien auction in which the plaintiffs, bidders at the auction, claimed they were harmed by defendants’ fraudulent scheme to secure more bidders. Defendants argued that, while the county arguably relied on the bids, plaintiffs could not show reliance of their own, and thus proximate cause was lacking. This Court unanimously rejected the argument, reasoning that the “alleged injury—the loss of valuable liens—[was] the direct result of petitioners’ fraud [because] . . . [i]t was a foreseeable and natural consequence of petitioners’ scheme to obtain more liens for themselves

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that other bidders would obtain fewer liens.” 553 U.S. at 658 (quoted in Pet. 23a).

As the Third Circuit noted, this case is on all fours with Bridge. As in Bridge, Petitioner relies “on the presence of intermediaries” (in this case, physicians and patients) in the chain of causation. Pet. 24a. But as was true in Bridge, “[t]he conduct that allegedly caused [Respondents’] injuries is the same conduct forming the basis of the RICO scheme alleged in the complaint—the misrepresentation of the heart-related risks of taking Avandia that caused TPPs and PBMs to place Avandia in the formulary.” Pet. 24a.

The Third Circuit further found that Anza and Hemi were not on point. In Anza, plaintiff alleged that a competing business caused it harm by defrauding the State tax authority and using the proceeds to offer lower prices and attract more customers. The Court held that the cause of plaintiff’s harm was “a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State).” 547 U.S. at 458. Defrauding the State tax authority may have enabled the harm, but it did not cause it—respondents could have used the illegally obtained proceeds for any number of purposes.

In Hemi, the City of New York claimed that out-of-state cigarette sellers failed to file state tax forms which in turn might have informed City authorities of lost tax income. The Court rejected this boomerang theory of indirect effects as even more attenuated than in Anza: “the City’s theory of liability rest[ed] not just on separate actions, but separate actions carried out by separate parties.” Hemi, 559 U.S. at 11 (emphasis in original). The City’s injury, meanwhile, arose most directly from purchasers who were legally obligated to

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pay the cigarette tax on their own, but failed to do so. Therefore, the causal chain was too attenuated.15

Also instructive are the First Circuit’s three related decisions in In re Neurontin Marketing and Sales Practices Litig. In those cases, which involved either a jury verdict or summary judgment, the First Circuit likewise relied on Bridge in rejecting the very same proximate cause argument that Petitioner advances here. See Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., 712 F.3d 21, 37 (1st Cir. 2013) (jury verdict); Harden Manufacturing Co. v. Pfizer, Inc., 712 F.3d 60, 67 (1st Cir. 2013) (summary judgment); Aetna, Inc. v. Pfizer, Inc., 712 F.3d 52, 58 (1st Cir. 2013) (same). Even in the much more difficult contexts of post-trial review and summary judgment—as opposed to the more forgiving context of motions to dismiss, where well-pleaded allegations are accepted as true—the First Circuit rejected the proximate cause argu-ment. The panel in all three cases included Justice Souter, sitting by designation, who wrote the seminal Holmes decision and joined the Court’s Bridge decision.

On certiorari, the Neurontin defendants raised the same purported proximate cause conflict that they raise here. Pet. For a Writ of Cert. at 12-26, In re Neurontin, (Aug. 30, 2013) No. 13-289; see also WLF Amicus Br. at 7-8, 10-13, 15-20 (largely verbatim repetition of WLF’s amicus brief in support of certiorari in Neurontin, (Oct. 4, 2013), No. 13-289, at 7-9, 11-13, 15-20). And there, Petitioners had the benefit of being able to point to actual deficiencies in the factual

15 Accord, e.g., BCS Servs., Inc. v. Heartwood 88, LLC, 637 F.3d

750, 756 (7th Cir. 2011) (“The doctrine of proximate cause . . . protects the ability of primary victims of wrongful conduct to obtain compensation . . . .”).

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record. Yet, this Court denied review. Petitioner here claims that this case “presents a far better vehicle for review” than Neurontin, Pet. 29 n. 10, but in fact the opposite is true. A robust record is a stronger vehicle for considering the highly fact-intensive issues of proximate cause than a motion to dismiss. Cf. Holmes, 503 U.S. at 272 n.20 (“infinite variety” of proximate cause issues does not lend itself to categorical “black-letter rule”) (citation omitted).

Nothing has changed since the Court’s denial of review in In re Neurontin. There and here, Petitioner’s lead authority in support of a conflict on proximate cause is the conclusory, unpublished decision in United Food & Commercial Workers Central Penn. & Regional Health & Welfare Fund v. Amgen, Inc., 400 F. App’x 255 (9th Cir. 2010). See Pet. 24-30; cf. Neurontin Pet. for Cert., No. 13-289, at 23-24, 26 (discussing same case law).16

Unable to show that the Third Circuit’s motion to dismiss analysis of proximate cause conflicts with any other decision, Petitioner and the Pharmaceutical Research amicus claim that the First Circuit’s Neurontin decisions (and, in turn, the decision below) conflict with Bridge and Holmes. See Pet. 29 (Neurontin “significantly over-reads Bridge.”); Br. of Pharmaceutical Research et al. at 18-19 (Neurontin “misconstrued” this Court’s proximate cause jurisprudence); see also WLF Amicus Br. at 10-19 (accusing the Third Circuit of misreading this Court’s RICO cases, just as it accused the First Circuit in Neurontin of doing so in its earlier amicus brief). The

16 See also In re Testosterone Replacement Therapy Products

Liab. Litig., 2016 WL 427553, at *12-14 (reviewing case law on proximate cause and concluding that the cases are reconcilable).

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frontal attack on Neurontin is puzzling. As noted, Justice Souter, who was on the panel (sitting by designation) in Neurontin, was the author of Holmes and joined the Court’s decision in Bridge. It is difficult to take seriously the argument that a Justice who was an architect of the controlling jurisprudence somehow totally misconstrued that law when later sitting on the First Circuit.

B. The Complaints Properly State Claims

Iqbal instructs courts, in assessing plausibility, to use “common sense” and notes that plausibility is established when the facts alleged “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 556 U.S. at 663. Petitioner’s argument that the allegations in the complaint are implausible—viewed in light of the historic criminal and civil penalties agreed to by Petitioner—is the antithesis of common sense. If ever there was a plausible fraud scenario, it is one that tracks allegations that compelled the very same party to agree to historic criminal and civil sanctions. Indeed, Respondents have found no post-Twombly/Iqbal case in which a court found civil allegations implausible in the face of a criminal conviction involving the same conduct. See Neurontin, 712 F.3d at 21 (upholding civil trial verdict following criminal pleas that, like here, did not include admission of fraudulent marketing).

Desperate to find a pleading defect, the Petition is filled with demands for additional facts, which Petitioner says were essential to survive a motion to dismiss. These include:

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“Factual detail about the alleged misrepresen-tations [Respondents] received [and] how the TPPs relied on them,” Pet. 3;

Allegations that “Avandia was ineffective, that it injured any of their beneficiaries, or that the physicians who prescribed Avandia to their beneficiaries stopped prescribing Avandia when additional risk information became available in 2007 or any time thereafter,” Pet. 8;

Allegations that a specific competing product, Actos, “was cheaper” or that “the TPPs would only have covered metformin,” Pet. 18.

While questions of factual sufficiency may be relevant at summary judgment or for review of a jury verdict, they have nothing to do with legal sufficiency of a complaint under Rule 12(b)(6).

Indeed, the motion-to-dismiss context underscores why most of Petitioner’s authorities—which involve post-trial verdicts, summary judgment, or class certification—are not relevant and cannot be relied upon for a supposed conflict. Desperate to obscure the procedural posture of this appeal, the Petition is filled with fact-intensive assertions that are simply not relevant to the appeal of a denial of a motion to dismiss. For example,

Petitioner notes that the FDA “dramatically shifted course” in its approach to Avandia, and no longer requires a black-box warning about the risk of heart attacks. Pet. 5-6. This course of events may be relevant to summary judg-ment or trial, but it is irrelevant at the motion to dismiss stage.

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Petitioner observes that in some circum-stances TPPs may not be injured by price inflation because they “make actuarial calcula-tions” that control for the risk of mispriced drugs. Pet. 15. This factual question may be relevant to calculating damages at a later stage in the litigation, but disputes over the quantum of damages are irrelevant for a mo-tion to dismiss.

Petitioner asserts that “it cannot be assumed that GSK’s alleged fraud allowed it charge [sic] more for the drug than some theorized ‘market’ price.” Pet. 22. According to Petitioner, “the pricing of an innovative product with no equiv-alent counterpart is influenced by many fators.” Pet. 22. Again, this argument may be relevant to later stages of the litigation, but it is irrelevant at the motion to dismiss stage.

Petitioner speculates that “doctors receive in-formation from numerous sources and may prescribe drugs for reasons unrelated to the drug manufacturer’s alleged misrepresenta-tions.” Pet. 30. This factual assertion is like-wise inappropriate for a motion to dismiss.

Moreover, even though the Petitioner derides the Third Circuit for citing a case “involving the certifiability and fairness of a class settlement in an antitrust suit,” Pet. 21 (emphasis original), the Petition repeatedly relies on cases decided at the class certification or summary judgment stages, where the court had the benefit of a fully developed factual

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record.17 Indeed, some of the purportedly conflicting cases cited in the Petition do not even involve RICO.18

In short, Petitioner’s reliance on summary judgment, class certification, and non-RICO cases ignores a crucial point: the question here is whether the district court erred in denying a motion to dismiss in a RICO case. Clearly, the answer is no.19

C. The Rulings Below on Proximate Cause are Correct

As both courts below found, Respondents alleged that Petitioner’s misrepresentations increased the

17 See, e.g., McLaughlin v. American Tobacco Co., 522 F.3d 215

(2d Cir. 2008) (cited at Pet. 19-20) (class certification stage); UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010) (cited at Pet. 27) (presenting both class certification and sum-mary judgment questions); Sergeants Benevolent Ass’n Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, 20 F. Supp. 3d 305 (E.D.N.Y. 2014) (cited at Pet. 27) (same), aff’d, 806 F.3d 71 (2d Cir. 2015).

18 See, e.g., Rivera v. Wyeth-Ayerst Labs., 283 F.3d. 315 (5th Cir. 2002) (cited at Pet. 16) (class certification stage of a case not involving RICO); Heindel v. Pfizer, Inc., 381 F. Supp. 2d 364 (D.N.J. 2004) (cited at Pet. 18) (summary judgment stage of a case not involving RICO); Prohias v. Pfizer, Inc., 485 F. Supp. 2d 1329 (S.D. Fla. 2007) (cited at Pet. 18) (not a RICO case); Emp’r Team-sters-Local Nos. 175/505 Health & Welfare Trust Fund v. Bristol Myers Squibb Co., 969 F. Supp. 2d 463, 475 (S.D. W. Va. 2013) (cited at Pet. 27) (same).

19 Moreover, the questions raised in the Petition apply only to the RICO claim since Petitioner did not seek section 1292(b) cer-tification on the state-law claims. Thus, regardless of the out-come, review by this Court would be an inefficient use of re-sources, since the case will continue regardless. See, e.g., EUGENE GRESSMAN, ET AL., SUPREME COURT PRACTICE at 248 (9th ed. 2007) (citing denial of certiorari on federal question where petitioner would also be liable under state law).

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number of prescriptions written by doctors and filled by patients; that those misrepresentations led TPP’s to include and prioritize Avandia on their drug formularies without restrictions; and that, as a result, Respondents paid for Avandia instead of cheaper alternatives. Moreover, this chain of events was foreseeable to Petitioner and, indeed, was the natural result of its fraudulent scheme. Pet. 27a, 35a. The scenario set forth in the complaints is on all fours with the causation chain that was unanimously upheld in Bridge, by the First Circuit in Neurontin, and by the Second Circuit in Desiano v. Warner-Lambert Co., 326 F.3d 339, 348 (2d Cir. 2003) (finding sufficient allegation of proximate cause where TPP overpaid for drug, regardless of health effects on ultimate patient/consumer). And this scenario is readily distinguishable from Anza and Hemi.

III. PETITIONER’S ATTEMPT TO SEEK A FREE PASS TO DEFRAUD PRIVATE IN-SURERS WOULD UNDERMINE IM-PORTANT POLICY CONSIDERATIONS UNDERLYING RICO

Petitioner ignores the important policy implications of barring suit here as a matter of law. The Third Circuit’s ruling ensures that the party with the greatest interest in seeking relief will have the legal authority to do so. As this Court noted in Holmes, “directly injured victims can generally be counted on to vindicate the law as private attorneys general . . . .” 503 U.S. at 269-70. That is exactly what has happened here.

There is a structural vulnerability in American health care that Petitioner exploited, and now seeks an unlimited license to exploit in the future. Ultimately, the decision on which medication to use

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and to buy is made by the patient/consumer and his or her doctor. But only 18 percent of the $263 billion spent on retail prescription drugs in the United States in 2012 was paid out of pocket, including copays.20 Patients and doctors look to the availability of drugs on the formularies of the insurance plans, but the decisions on which drugs to offer and at what price is made by the PBMs, the large drug administrators. Only at the end of this chain are the various insurers, ranging from government programs like Medicaid to large insurers like Aetna, to smaller local insurers, such as Allied Services Division Welfare Fund, the lead Respondent in this case.

The allegations in this case boil down to a scheme to pump up the desirability of Avandia, and its price, by directing fraudulent misrepresentations to those in the chain of consumption—from the PBMs to the doctors to the patients. But there is only one meaningful source of money to be had from this scheme, and that comes from the insurers.

For the public insurers, who cover about 38 percent of the prescription drug costs in this country,21 the criminal law, qui tam laws, and other public fraud statutes protect their interest against schemes such as this one. By contrast, the private insurers, who cover 44 percent of prescription drug costs,22 cannot initiate

20 See Centers for Medicare and Medicaid Services, National

Health Expenditures By Type of Service and Source of Funds Report, CY 1960-2014, available at https://www.cms.gov/ Research-Statistics-Data-and-Systems/Statistics-Trends-and-Re ports/NationalHealthexpendData/NationalHealthAccountsHistorical.html

21 Id. 22 Id.

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a criminal prosecution, and must rely instead on RICO to protect against fraud. What possible policy would be advanced by giving the government insurers protection against fraud, and leaving the private insurers defenseless? None whatsoever, particularly as this country struggles to balance the complicated role of public and private insurance in the health care sector.

The Third Circuit, following this Court’s direction in Holmes and Bridge, found that the core purposes of RICO are met here:

a) The TPPs are the direct and intended targets of the fraud.

b) Placing enforcement capacity in the hands of the direct targets furthers the aim of incentiviz-ing private enforcement.

c) Placing enforcement authority in the hands of the actual parties that pay will avoid double li-ability.

Pet. 28a-29a. This is well settled law, one discredited Eleventh Circuit opinion notwithstanding. That law furthers the important public policy of policing against health care fraud, regardless of whether the direct and intended victim is a government insurer or a private one.

36

CONCLUSION

The Petition should be denied.

Respectfully submitted,

JAMES R. DUGAN IITHE DUGAN LAW FIRM 365 Canal Street Suite 1000 New Orleans, LA 70130 (504) 648-0180

THOMAS M. SOBOL HAGENS BERMAN SOBOL

SHAPIRO LLP 55 Cambridge Parkway, Suite 301 Cambridge, MA 02142 (617) 482-3700

SAMUEL ISSACHAROFFCounsel of Record

40 Washington Square South New York, NY 10012 (212) 998-6580 [email protected]

ROBERT KLONOFF 10015 SW Terwilliger Blvd Portland, OR 97219 (503) 768-6935 [email protected]

Attorneys for Respondents

April 29, 2016

APPENDIX

1a APPENDIX

[LOGO] U.S. Department of Justice Carmen M. Ortiz United States Attorney District of Massachusetts

Main Reception: (617) 748-3100

John Joseph Moakley United States Courthouse 1 Courthouse Way Suite 9200 Boston, Massachusetts 02210

June 27, 2012

Geoffrey E. Hobart Matthew J. O’Connor Covington & Burling, LLP 1201 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2401

Re: United States v. GlaxoSmithKline LLC

Dear Counsel:

This letter sets forth the Agreement between the United States Attorney for the District of Massachusetts (“the U.S. Attorney”) and the United States Department of Justice (“collectively, the “United States”) and your client, GlaxoSmithKline LLC (“GSK”), in the above-referenced case. The Agreement is as follows:

1. Change of Plea

At the earliest practicable date, GSK shall waive indictment and plead guilty to a three-count

Appendix A 2a

Information attached to this Agreement as Exhibit A. Count One charges GSK with delivery into interstate commerce of a misbranded drug, Paxil, in violation of 21 U.S.C. §§ 331(a), 333(a)(1) and 352(a). Count Two charges GSK with delivery into interstate commerce of a misbranded drug, Wellbutrin, in violation of 21 U.S.C. §§ 331(a), 333(a)(1), and 352(f). Count Three charges GSK with failure to report data relating to clinical experience, along with other data and infor-mation, regarding Avandia to the FDA as required by law, in violation of 21 U.S.C. §§ 331(e), 333(a)(1), and 355(k)(1). GSK expressly and unequivocally admits that it committed the crimes charged in the Infor-mation, and is in fact guilty of those offenses. GSK also agrees to waive venue, to waive any applicable statute of limitations, and to waive any legal or procedural defects in the Information.

2. Penalties

GSK faces the following maximum penalties with respect to the counts of conviction:

a. Count One (21 U.S.C. §§ 331(a), 333(a)(1), 352(a) regarding Paxil):

i. A fine of $200,000, or twice the gross gain derived from the offense or twice the gross loss to a person other than the defendant, whichever is greater. See 18 U.S.C. §§ 3571(c)(5) and (d). Given GSK’s gross gain from the offense in Count One was $99,855,000, the maxi-mum possible fine in connection with this Count is $199,710,000;

ii. A term of probation of not more than five (5) years. See 18 U.S.C. § 3561(c)(2);

Appendix A 3a

iii. Restitution to any victims of the offense. See 18 U.S.C. § 3563; and

iv. A mandatory special assessment of $125. See 18 U.S.C. § 3013(a)(1)(B)(iii).

b. Count Two (21 U.S.C. §§ 331(a), 333(a)(1), 352(f) regarding Wellbutrin):

i. A fine of $200,000, or twice the gross gain derived from the offense or twice the gross loss to a person other than the defendant, whichever is greater. See 18 U.S.C. §§ 3571(c)(5) and (d). Given GSK’s gross gain from the offense in Count Two was $346,521,000, the maximum possible fine in connection with this Count is $693,042,000;




c. Count Three (21 U.S.C. §§ 331(e), 333(a)(1), 355(k)(1) regarding Avandia):

i. A fine of $200,000, or twice the gross gain derived from the offense or twice the gross loss to a person other than the defendant, whichever is greater. See 18 U.S.C. §§ 3571(c)(5) and (d). Given GSK’s gross gain from the offense in Count Three was $151,633,000, the maximum

Appendix A 4a

possible fine in connection with this Count is $303,266,000;




3. Fed. R. Crim. P. 11(c)(1)(C) Plea

This plea agreement is made pursuant to Fed. R. Crim. P. 11(c)(1)(C), and GSK’s plea will be tendered pursuant to that provision. In accordance with Fed. R. Crim. P. 11(c)(1)(C), if the District Court (“Court”) accepts this plea agreement, the Court must include the agreed disposition in the judgment. If the Court rejects any aspect of this plea agreement or fails to impose a sentence consistent herewith, this Agree-ment shall be null and void at the option of either the United States or GSK, with the exception of Paragraph 12 (Waiver of Defenses) which shall remain in full effect. GSK expressly understands that it may not withdraw its plea of guilty unless the Court rejects this Agreement under Fed. R. Crim. P. 11(c)(5) or fails to impose a sentence consistent herewith.

GSK may seek sentencing by the District Court immediately following the Rule 11 plea hearing. The United States does not object to the Court proceeding to sentence GSK immediately following the Rule 11 plea hearing or in the absence of a Presentence Report in this case. GSK understands that the decision whether to proceed immediately following the plea hearing with the sentencing proceeding, and to do so

Appendix A 5a

without a Presentence Report, is exclusively that of the United States District Court.

4. Sentencing Guidelines

The parties agree that while the fine provisions of the United States Sentencing Guidelines (“U.S.S.G.”) do not apply to organizational defendants for misde-meanor violations of the Food, Drug and Cosmetic Act, see U.S.S.G. § 8C2.1, the agreed upon fine is consonant with those guidelines and takes into account GSK’s conduct under 18 U.S.C. §§ 3553 and 3572, as follows:

a. The parties agree that the base fine is $598,009,000 in that such amount was the reasonably estimated pecuniary gain to the organization from the offenses See U.S.S.G. §§ 8C2.4(a), 8C2.3;

b. Pursuant to U.S.S.G. § 8C2.5, the culpability score is eight (8), which is determined as follows:

i. Base culpability score is five (5) pursuant to U.S.S.G. § 8C2.5(a);

ii. Add five (5) points pursuant to U.S.S.G. § 8C2.5(b)(1)(A); and

iii. Deduct two (2) points for GSK’s full cooperation and acceptance of respon-sibility for its criminal conduct pursuant to U.S.S.G. § 8C2.5(g)(2).

c. Pursuant to U.S.S.G. § 8C2.6, the appropri-ate multiplier range associated with a culpability score of eight (8) is 1.6 to 3.2; and

d. Thus, the advisory Guideline Fine Range is $956,814,400 to $1,196,018,000. See

Appendix A 6a

U.S.S.G. §§ 8C2.7(a), (b); 18 U.S.C. §§ 3571(c), (d).

The U.S. Attorney may, at her sole option, be released from her commitments under this Agree-ment, including, but not limited to, her agreement that Paragraph 5 constitutes the appropriate disposition of this case, if at any time between GSK’s execution of this Agreement and sentencing, GSK:

(a) Fails to admit a complete factual basis for the plea;

(b) Fails to truthfully admit its conduct in the offenses of conviction;

(c) Falsely denies, or frivolously contests, rele-vant conduct for which GSK is accountable under U.S.S.G. § 1B1.3;

(d) Gives false or misleading testimony in any proceeding relating to the criminal conduct charged in this case and any relevant conduct for which GSK is accountable under U.S.S.G. § 1B1.3;

(e) Engages in acts which form a basis for finding that GSK has obstructed or impeded the administration of justice under U.S.S.G. § 3C1.1;

(f) Commits a crime; or

(g) Attempts to withdraw its guilty plea.

5. Agreed Disposition

Pursuant to Fed. R. Crim. P. 11(c)(1)(C), the United States and GSK agree that the appropriate disposition of this case is as follows, and will result in imposition of a reasonable sentence that is sufficient, but not

Appendix A 7a

greater than necessary, taking into consideration all of the factors set forth in 18 U.S.C. §§ 3553(a) and 3572:

a. a criminal fine in the amount of $956,814,400 to be imposed as follows:

i. Count One: $159,768,000

ii. Count Two: $554,433,600

iii. Count Three: $242,612,800

GSK shall pay this fine within one week of the date of sentencing;

b. a mandatory special assessment in the amount of $375 pursuant to 18 U.S.C.§ 3013;

c. forfeiture in the amount of $43,185,600 to be paid within one week of the date of sentencing;

d. The United States agrees that it will not seek a separate restitution order as to GSK as part of the resolution of the Information and the Parties agree that the appropriate resolution of this case does not include a restitution order for the following reasons:

i. Counts One and Two: In light of the pending civil actions, including United States et al. ex rel. Thorpe, et al. v. GSK et al., Civ. No. 11- 10398 {D. Mass.), and the Civil Settlement Agreement between GSK and the United States and others (which is being signed contemporane-ously with this Plea Agreement, and is attached hereto as Exhibit B), which requires payment of $1,042,612,800 plus

Appendix A 8a

interest from December 1, 2011, the parties agree that the complication and prolongation of the sentencing process that would result from an attempt to fashion a restitution order outweighs the need to provide restitution to the non-federal victims, if any, in this case, given that numerous unknown individuals and insurance companies purchased Paxil and Wellbutrin, that many of those persons and companies have obtained restitution in private actions, and that tracing reimbursements to the various unknown insurance companies and pa-tients and determining the apportion-ment of payment pertaining to the prod-ucts at issue would be extraordinarily difficult, if not impossible. See, 18 U.S.C. § 3663(a)(3); Cf. 18 U.S.C. § 3663(a)(1)(B)(ii).

ii. Count Three: No identifiable economic loss appears to have been suffered by the federal Food and Drug Administration (“FDA”), and the parties were unable to determine any economic loss to others directly and proximately caused by this offense of conviction in this case. In addition, in light of the Civil Settlement Agreement between the United States and GSK (being signed contemporane-ously with this Plea Agreement, and attached hereto as Exhibit C) which requires the payment of $657,387,200, plus interest from December 1, 2011, the parties agree that the complication and prolongation of the sentencing process

Appendix A 9a

that would result from an attempt to fashion a restitution order outweighs the need to provide restitution to any non-federal victims in this case if any such victims exist given that establishing causation of loss to others by the delay in providing this particular information to the FDA would be extraordinarily diffi-cult, if not impossible. Cf. 18 U.S.C. § 3663(a)(1)(B)(ii).

e. The United States agrees that it will not seek a term of probation in light of (i) the Compliance Measures and Certifications attached hereto as Addendum A; and (ii) the Corporate Integrity Agreement entered into between GSK and the Office of Inspector General of the Department of Health and Human Services, attached as Exhibit D.

6. No Further Prosecution of GSK

Pursuant to Fed. R. Crim. P. 11(c)(1)(A), the United States agrees that, other than the charges in the attached Information, it shall not further prosecute GSK for any additional federal criminal charges with respect to the conduct covered by the Information, conduct that was the subject of the grand jury investigation in the District of Massachusetts, or facts currently known to the United States regarding:

(a) GSK’s sales, marketing and promotion of Imitrex, Lamictal, Lotronex, Flovent, Paxil, Valtrex, Wellbutrin, and Zofran between January 1998 and December 2004;

(b) GSK’s sales, marketing and promotion of Advair between January 1998 and June 2010;

Appendix A 10a

(c) GSK’s communications with and reporting to the FDA in connection with Advair, Paxil, and Wellbutrin between July 1998 and December 2004;

(d) GSK’s sales, marketing and promotion of Avandia, Avandamet, and Avandaryl between January 2000 and December 2010; and

(e) GSK’s communications with and reporting to the FDA in connection with Avandia, Avandamet, and Avandaryl.

This declination is expressly contingent upon:

(1) the guilty plea of GSK to the attached Information being accepted by the Court and not withdrawn or otherwise challenged; and

(2) GSK’s performance of all of its obliga-tions as set forth in this Agreement and the attached Civil Settlement Agreements.

If GSK’s guilty plea is not accepted by the Court or is withdrawn for any reason, or if GSK should fail to perform any obligation under this Agreement or the Civil Settlement Agreements, this declination of prosecution shall be null and void.

The United States expressly reserves the right to prosecute any individual, including but not limited to present and former officers, directors, employees, and agents of GSK, in connection with the conduct encompassed by this plea agreement, within the scope of the grand jury investigation, or known to the United States.

Appendix A 11a

7. Payment of Mandatory Special Assessment

GSK shall pay the mandatory special assessment to the Clerk of the Court on or before the date of sentencing.

8. Waiver of Right to Appeal and to Bring Other Challenge

a. GSK has conferred with its attorneys and understands that it has the right to challenge its convictions in the United States Court of Appeals for the First Circuit (“direct appeal”). GSK waives any right it has to challenge its conviction on direct appeal or in any future proceeding;

b. GSK has conferred with its attorneys and understands that defendants ordinarily have a right to appeal their sentences and may sometimes challenge their sentences in future proceedings. GSK understands, how-ever, that once the Court accepts this Rule 11(c)(1)(C) plea agreement, the Court is bound by the parties’ agreed-upon sentence. GSK may not contest the agreed-upon sentence in an appeal or challenge the sentence in a future proceeding in federal court. Similarly, the Court has no authority to modify an agreed-upon sentence under 18 U.S.C. § 3582(c), even if the Sentencing Guidelines are later modified in a way that appears favorable to GSK. Given that a defendant who agrees to a specific sentence cannot later challenge it, and also because GSK desires to obtain the benefits of this Agreement, GSK agrees that it will not

Appendix A 12a

challenge the sentence imposed in an appeal or other future proceeding. GSK also agrees that it will not seek to challenge the sentence in an appeal or future proceeding even if the Court rejects one or more positions advocated by any party at sentencing; and

c. The United States agrees that it will not appeal the imposition by the Court of the sentence agreed to by the parties as set out in Paragraph 5, even if the Court rejects one or more positions advocated by a party at sentencing.

9. Probation Department Not Bound By Agreement

The sentencing disposition agreed upon by the parties and their respective calculations under the Sentencing Guidelines are not binding upon the United States Probation Office.

10. Forfeiture

GSK will forfeit to the United States assets subject to forfeiture pursuant to 21 U.S.C. § 334 and 28 U.S.C. § 2461(c) as a result of its guilty plea.

GSK admits that the value of the quantities of Paxil and Wellbutrin that were misbranded and distributed in violation of 21 U.S.C. § 331, totaled at least $43,185,600 in United States currency. GSK acknowl-edges and agrees that the quantities of Paxil and Wellbutrin which were misbranded and distributed in violation of 21 U.S.C. § 331 cannot be located upon exercise of due diligence, or have been transferred or sold to, or deposited with, a third party, placed beyond the jurisdiction of the Court, substantially diminished

Appendix A 13a

in value, or commingled with other property which cannot be divided without difficulty. Accordingly, GSK agrees that the United States is entitled to forfeit as “substitute assets” any other assets of GSK up to the value of the now missing directly forfeitable assets.

GSK agrees that, no later than one week after sentencing, it shall remit the amount of $43,185,600 in United States currency to the United States Marshals Service pursuant to wire instructions provided by the United States Attorney’s Office. GSK and the United States agree that this payment shall satisfy any and all forfeiture obligations that GSK may have as a result of its guilty plea.

Forfeiture of substitute assets shall not be deemed an alteration of GSK’s sentence. The forfeitures set forth herein shall not satisfy or offset any fine, restitution, cost of imprisonment, or other penalty imposed upon GSK, nor shall the forfeiture be used to offset GSK’s tax liability or any other debt owed to the United States.

GSK agrees to consent to the entry of orders of forfeiture for the $43,185,600 in United States cur-rency, and waives the requirements of Federal Rules of Criminal Procedure 32.2 and 43(a) regarding the notice of the forfeiture in the charging instrument, entry of a preliminary order of forfeiture, announce-ment of the forfeiture at sentencing, and incorporation of the forfeiture in the judgment. GSK acknowledges that it understands that the forfeiture of assets is part of the sentence that may be imposed in this case and waives any failure by the Court to advise it of this, pursuant to Rule 11(b)(1)(J), at the time the guilty plea is accepted.

Appendix A 14a

In addition to all other waivers or releases set forth in this Agreement, GSK hereby waives any and all claims arising from or relating to the forfeitures set forth in this section, including, without limitation, any claims arising under the Double Jeopardy Clause of the Fifth Amendment, or the Excessive Fines Clause of the Eighth Amendment, to the United States Constitution, or any other provision of state or federal law.

The United States District Court for the District of Massachusetts shall retain jurisdiction to enforce the provisions of this section.

11. Civil and Administrative Liability

By entering into this Agreement, the United States does not compromise any civil or administrative liability, including but not limited to any False Claims Act or tax liability, which GSK may have incurred or may incur as a result of its conduct and its plea of guilty to the attached Information.

GSK’s civil liability to the United States in connec-tion with certain of the matters under investigation by the United States is resolved in the attached Civil Settlement Agreements, according to the terms set forth in those Agreements.

12. Waiver of Defenses

If GSK’s guilty plea is not accepted by the Court for whatever reason, if GSK’s guilty plea is later withdrawn or otherwise successfully challenged by GSK for whatever reason, or if GSK breaches this Agreement, GSK hereby waives, and agrees it will not interpose, any defense to any charges brought against it which GSK might otherwise have under the

Appendix A 15a

Constitution for pre-indictment delay, any statute of limitations, or the Speedy Trial Act, except any such defense that GSK may already have for (a) conduct occurring before October 19, 2000, as further described in the parties’ tolling agreement dated December 1, 2011, and attached hereto as Exhibit E; and (b) conduct occurring before May 1, 2010, as further described in the parties’ tolling agreement dated September 21, 2011, attached hereto as Exhibit F. This waiver is effective provided that charges are filed within six months of the date on which such guilty plea is rejected, withdrawn, or successfully challenged, or a breach is declared by the United States.

13. Breach of Agreement

If the United States determines that GSK has failed to comply with any material provision of this Agree-ment (which shall not include a failure to comply with the provisions in Addendum A, any alleged breach of which is governed solely by the terms of Addendum A), the United States may, at its sole option, be released from its commitments under this Agreement in its entirety by notifying GSK, through counsel or otherwise, in writing. The United States may also pursue all remedies available under the law, even if it elects not to be released from its commitments under this Agreement. GSK recognizes that no such breach by GSK of an obligation under this Agreement shall be grounds for withdrawal of its guilty plea. GSK understands that should it breach any material provision of this Agreement, the United States will have the right to use against GSK before any grand jury, at any trial or hearing, or for sentencing purposes, any statements which may be made by

Appendix A 16a

GSK, and any information, materials, documents or objects which may be provided by it to the government subsequent to this Agreement, without any limitation.

GSK understands and agrees that this Rule 11(c)(1)(C) plea agreement and its agreed upon criminal disposition:

a. are wholly dependant upon GSK’s timely compliance with the material provisions of the attached Civil Settlement Agreements; and

b. failure by GSK to comply fully with the material terms of this Agreement (which, as described above, shall not include a breach of the provisions of Addendum A) or the attached Civil Settlement Agreements will constitute a breach of this Agreement.

In the event GSK at any time hereafter breaches any material provision of this Agreement (other than a failure to comply with the provisions in Addendum A, which, as described above, shall not constitute a breach of this Agreement), GSK understands that (1) the United States will as of the date of that breach be relieved of any obligations it may have in this Agreement and the attached Civil Settlement Agreements, including but not limited to the promise not to further prosecute GSK as set forth in this Agreement; and (2) GSK will not be relieved of its obligation to make the payments set forth in this Agreement and the attached Civil Settlement Agreements, nor will it be entitled to return of any monies already paid. Moreover, in the event of a material breach of this Agreement, GSK understands and agrees that the United States may pursue any and

Appendix A 17a

all charges that might otherwise have been brought but for this Agreement, and GSK hereby waives, and agrees it will not interpose, any defense to any charges brought against it which it might otherwise have under the Constitution for pre-indictment delay, any statute of limitations, or the Speedy Trial Act, except any such defense that GSK may already have for conduct occurring before October 19, 2000 as further described in the tolling agreement attached as Exhibit E, and for conduct occurring before May 1, 2010, as further described in the tolling agreement attached as Exhibit F.

Any breach of the provisions of Addendum A shall not constitute a breach of this Agreement and shall be resolved solely under the breach provision of that Addendum.

14. Who Is Bound By Agreement

With respect to matters set forth in Paragraph 6, this Agreement is binding upon GSK and the Office of the United States Attorney for the District of Massachusetts, the United States Attorney’s Offices for each of the other 92 judicial districts of the United States, and the Consumer Protection Branch of the Civil Division of the Department of Justice. The non-prosecution provisions in Paragraph 6 are also binding on the Criminal Division of the United States Department of Justice, with the exception of any investigations of GSK that are or may be conducted in the future by the Fraud Section of the Criminal Division regarding possible violations of the Foreign Corrupt Practices Act and related offenses in connection with the sales and marketing of GSK’s products to foreign customers, which investigations are specifically excluded from the release in

Appendix A 18a

Paragraph 6. A copy of the letter to United States Attorney Carmen M. Ortiz from the Assistant Attorney General, Criminal Division, Department of Justice, authorizing this Agreement is attached as Exhibit G. GSK understands that this Agreement does not bind any state or local prosecutive authorities, the Tax Division of the U.S. Department of Justice or the Internal Revenue Service of the U.S. Department of the Treasury.

15. Corporate Authorization

GSK’s acknowledgment of this Agreement and execution of this Agreement on behalf of the limited liability company is attached as Exhibit H. GSK shall provide to the U.S. Attorney and the Court a certified copy of a resolution of the governing authority of GSK, affirming that it has authority to enter into the Plea Agreement and has (1) reviewed the Information in this case and the proposed Plea Agreement; (2) consulted with legal counsel in connection with the matter; (3) authorized execution of the proposed Plea Agreement; (4) authorized GSK to plead guilty to the charge specified in the Information; and (5) authorized the corporate officer identified below to execute the Plea Agreement and all other documents necessary to carry out the provisions of the Plea Agreement. A copy of the resolution is attached as Exhibit I. GSK agrees that either a duly authorized corporate officer or a duly authorized attorney for GSK, at the discretion of the Court, shall appear on behalf of GSK and enter the guilty plea and will also appear for the imposition of sentence.

16. Complete Agreement

This Agreement and the attachments hereto, to-gether with an additional Civil Settlement Agreement

Appendix A 19a

and attachments thereto that is set forth as Exhibit J (civil agreement regarding pricing), and the side letter with GlaxoSmithKline plc (attached as Exhibit K), set forth the complete and only agreement between the parties relating to the disposition of this case and are the complete and only agreements between the parties. No promises, agreements, or conditions have been entered into other than those set forth or referred to in the above-identified documents. This Agreement supersedes prior understandings, if any, of the parties, whether written or oral. This Agreement cannot be modified other than in a written memorandum signed by the parties or on the record in court.

If this letter accurately reflects the Agreement between the United States and your client, GSK, please have the authorized representative of GSK sign the Acknowledgment of Agreement below. Please also sign below as Witness. Return the original of this letter to Assistant U.S. Attorneys Sara Miron Bloom and Susan G. Winkler of the United States Attorney’s Office for the District of Massachusetts.

Very truly yours,

/s/ Carmen M. Ortiz CARMEN M. ORTIZ UNITED STATES ATTORNEY DISTRICT OF MASSACHUSETTS Sara Miron Bloom Susan G Winkler Shannon T. Kelley Amanda Strachan Brian Perez-Dapple Assistant U.S Attorneys

Appendix A 20a

STUART F. DELERY ACTING ASSISTANT ATTORNEY GENERAL CIVIL DIVISION DEPARTMENT OF JUSTICE Patrick Jasperse Jill Furman Mark, L. Josephs David Frank Timothy Finley Trail Attorneys Consumer Protection Branch U.S. Department of Justice

Appendix A 21a

ADDENDUM COMPLIANCE MEASURES AND

CERTIFICATIONS

GlaxoSmithKline LLC (“GSK”) agrees that, prior to entering its plea of guilty, it has instituted and will maintain policies and procedures to prevent further violations of the Federal Food, Drug and Cosmetic Act (“FDCA”) in its sales, marketing and promotion of prescription pharmaceutical products, and specifically for at least five years following entry of the plea, will do the following:

I. COMPLIANCE MEASURES

A. Compensation and Incentives Not Based on Sales

GSK will maintain policies and procedures that shall (1) be designed to ensure that financial incentives do not inappropriately motivate prescriber-facing field sales professionals or their direct managers to engage in improper promotion, sales, and marketing of GSK’s prescription pharmaceutical products; and (2) include mechanisms, where appro-priate to exclude from incentive compensation sales that may indicate off-label promotion of prescription pharmaceutical products. These policies and proce-dures are collectively referred to as the “Patient First Program.” Pursuant to the Patient First Program, which GSK has already implemented, GSK shall not provide financial reward (through compensation, including incentive compensation or otherwise) or discipline (through tangible employment action) to its prescriber-facing field sales professionals or their direct managers based upon the volume of sales of GSK products within a given employee’s own territory

Appendix A 22a

or the manager’s district. Instead, GSK will evaluate its sales representatives based on business acumen, customer engagement, and scientific knowledge about GSK’s products.

B. Full, Fair and Accurate Reporting of Scientific Data

For at least the next five years, GSK will continue to maintain standards, policies and practices (con-sistent with GSK’s Policy 408) regarding full, fair, and accurate reporting and transparency in scientific data in the following ways:

(1) GSK will, in relation to GSK-sponsored studies of prescription pharmaceutical products, publicly disclose: (a) at the time of primary publication of a human research study, the full clinical study protocol (with the removal of any personally identifiable information), (b) a protocol summary before enrollment begins and after completion of the study, a summary of primary and secondary efficacy endpoints, and safety results for interventional human subject research studies (in which participants are admin-istered medical care, medicinal products, and/or medical/scientific procedures as described in a research protocol), (c) a summary protocol and, after completion, a summary of the results for observa-tional studies designed to inform safety, efficacy, or effectiveness (including cost-effectiveness); and (d) a protocol sum-mary or plan for analysis and, after completion, a summary of results for

Appendix A 23a

meta-analyses and pooled analyses designed to inform appropriate, effective, or safe use.

(2) GSK will register summary results from all applicable GSK-sponsored clinical trials of GSK prescription pharmaceuti-cal products, and report results of such clinical trials on the National Institutes of Health sponsored website (www. clinicaltrials.gov) in compliance with all federal requirements, and any changes to those requirements.

(3) GSK will seek to publish the results of GSK-sponsored research studies, certain GSK-sponsored observational research studies and certain GSK-sponsored meta-analyses and pooled analyses, in peer-reviewed, searchable journals. GSK will also continue its operating practices that require, among other requirements, implementation of data dissemination plans that establish prospective pub-lication strategies for GSK-sponsored research and address requirements for appropriateness, accuracy, and balance in publications of GSK-sponsored research. In all publications about GSK-sponsored research, GSK shall acknowledge its role as the funding source.

(4) GSK will require all GSK-sponsored research to be approved by its medical and/or research organizations. GSK will maintain its current policy that no sales, marketing or other commercial personnel

Appendix A 24a

may participate in the design, conduct, or publication of GSK-sponsored research, with limited exceptions relating to non-interventional health outcome studies (for which a relevant GSK medical group has oversight). GSK will continue to assure its human subject research and resulting publications are intended to foster increased understanding of scien-tific, clinical or medical issues.

(5) GSK will require as a condition of its funding that all researchers disclose in any publication of GSK-sponsored research GSK’s support and any financial interest the researcher may have in GSK (including any interest in any GSK prescription pharmaceutical product). GSK will require all authors of journal articles about GSK-sponsored research to adhere to International Committee of Medical Journal Editors (ICMJE) require-ments regarding authorship except when a journal requires an alternative procedure.

(6) GSK will, by September 1, 2012, require that its employees and medical writing contractors complete, and GSK will maintain for ten years, as to any publica-tion regarding GSK-sponsored research on which the employee or contractor is listed as an author, a certification that the publication provides a fair, accurate, and balanced summary of the GSK-sponsored research.

Appendix A 25a

(7) GSK will require that a person will be represented as an “author” on any GSK publication of GSK-sponsored research only if he or she has made substantial contributions to the study and has final approval of the version to be published.

(8) GSK will properly report adverse event data to the FDA. GSK will maintain policies and procedures designed to ensure that all periodic reports to the FDA contain all required information and data regarding clinical studies. GSK will require investigators to report study-related information and data, including data about adverse events before receiv-ing final payment from GSK.

C. Payer Related Obligations

For a period of at least five years from the entry of the plea, GSK will adopt and maintain policies and procedures governing its strategies and practices in contracting, Payer negotiations and interactions, providing of discounts and rebates, and interactions relating to formularies and co-pay status and amounts (“Payer-Related Functions”), which policies shall provide that GSK will perform these functions in compliance with all applicable laws and federal and state health care program requirements, and shall be consistent with GSK U.S. Commercial Practices Policy regarding “Administration of Contracts with Payers.”

D. No Sales and Marketing Role in Independent Medical Education

GSK will maintain policies that prohibit commercial involvement in independent medical education

Appendix A 26a

(“IME”) programs, while also ensuring that this programming is focused on genuine educational need and scientific development. GSK will require that the content, organization, and operation of the IME program (including the faculty, educational methods, materials, and venue) be independent of GSK’s control. GSK’s commercial organization (including the sales and marketing departments) will have no involvement in, or influence over, the review and approval of independent medical education grants.

E. Require Confirmation That Requests for Information Were Unsolicited

GSK will maintain its policy that prohibits sales personnel from engaging in off-label promotion (directly or indirectly) and requiring sales personnel to refer all requests for information about off-label uses to Medical Affairs personnel. GSK will require sales personnel to obtain a signature from the medical professional who verbally requested written infor-mation regarding off-label uses in order to confirm the information requested and that the request was unsolicited.

II. NOTIFICATION OF SETTLEMENT

Within ninety (90) days of the public announcement of the settlement, GSK will send a letter to health care providers that GSK currently details regarding the products at issue in this resolution, the terms of the resolution, and a link to a website that will contain all of the relevant public resolution documents relating to this matter.

Within ninety (90) days of the public announcement of the settlement, GSK will send a letter to all payers with whom GSK currently has contracts or enters into

Appendix A 27a

contracts for formulary access or rebates (including all state Medicaid programs) regarding the products at issue in this resolution, the terms of the resolution, and a link to a website that will contain all of the relevant public resolution documents relating to this matter.

III. CERTIFICATIONS AND REPORTING TO THE UNITED STATES

In addition to any commitment to provide any certifications and reports to other government agencies or entities, GSK shall provide the following reports and certifications to the United States Depart-ment of Justice for a period of five years commencing on the date of sentencing. The certifications and reports shall be sent to:

Chief, Health Care Fraud Unit U.S. Attorney’s Office One Courthouse Way, Suite 9200 Boston, MA 02210

and

Director, Consumer Protection Branch Civil Division Department of Justice 450 5th Street, NW Washington, DC 20530

A. Annual GSK’s U.S. President Certification

The President of GSK’s North America Pharma division (“GSM’s U.S. President”) shall conduct a review of the effectiveness of GSK’s Compliance Program as it relates to the marketing, promotion, and sale of prescription pharmaceutical products during the preceding year. The first review period shall run

Appendix A 28a

from the date of sentencing through December 31, 2013. Thereafter, the reviews will be conducted on an annual basis. Based on his or her review, GSM’s U.S. President shall submit to the United States a signed certification stating that, to the best of his or her knowledge, during the period [insert time period]: (1) GSK’s Compliance Program continued to include the compliance policies and procedures set forth in the section of this Addendum entitled “COMPLIANCE MEASURES,” and (2) to the extent that a Reportable Incident (as that term is defined below) has been determined to have occurred, GSK has fully complied with the Reportable Incident reporting requirements of this Addendum. The certification by GSK’s U.S. President shall summarize the review described above that he or she conducted to provide the required certification. If GSK’s U.S. President is unable to provide any part of this certification regarding GSK’s compliance, he or she shall provide an explanation of why he or she is unable to provide such certification. This certification shall be provided within 60 calendar days following the end of each review period.

B. Annual Board of Directors Resolution

The Board of Directors of GlaxoSmithKline plc, or a designated Committee thereof (the “Board”), shall conduct a review of the effectiveness of GSK’s Compliance Program as it relates to the marketing, promotion, and sale of prescription pharmaceutical products. This review shall be conducted on an annual basis and shall include, but not be limited to, updates and reports by GSK’s Compliance Officer and other compliance personnel. The Board shall evaluate the effectiveness of the Compliance Program, including, among other means, by receiving updates about

Appendix A 29a

the activities of the Compliance Officer and other compliance personnel and updates about adoption and implementation of policies, procedures, and practices designed to ensure compliance with applicable Federal health care program and FDA requirements. The first review will cover the time period from the date of sentencing through December 31, 2013. Thereafter the reviews will be conducted on an annual basis. Based on its review, the Board shall submit to the United States a resolution that summarizes its review and oversight of GSK’s compliance with Federal health care program requirements and FDA requirements and, at a minimum, includes the following language:

The Board of Directors has made a reasonable inquiry into the operations of GSK’s Compli-ance Program for the time period [insert time period], including the performance of the Compliance Officer and the compliance personnel who are Covered Persons under the Corporate Integrity Agreement (“CIA”) between GSK and the Office of Inspector General of the United States Department of Health and Human Services (“OIG-HHS”). The Board has concluded that, to the best of its knowledge, GSK has implemented an effective Compliance Program to meet Fed-eral health care program requirements, FDA requirements, and the requirements of the Addendum to the Plea Agreement.

If the Board is unable to provide any part of this statement, it shall include in the resolution an expla-nation of the reasons why it is unable to provide such a statement about the effectiveness of GSK’s Compli-ance Program. This resolution shall be provided

Appendix A 30a

within 60 calendar days following the end of each review period.

C. Reportable Incidents

Fifteen days after the end of each calendar quarter (that is, by January 15 for the calendar quarter ending December 31, April 15 for the calendar quarter ending March 31, July 15 for the calendar quarter ending June 30, and October 15 for the calendar quarter ending September 30) GSK shall submit a report to the United States in writing stating whether any Reportable Incidents have been determined to have occurred during the preceding calendar quarter, and providing updated information about Reportable Incidents that occurred during any other calendar quarters. A Reportable Incident is any matter that a reasonable person would consider a probable violation of the FDCA, 21 U.S.C. §§ 331(a) or (k), related to the misbranding of a prescription pharmaceutical product within the meaning of 21 U.S.C. § 352; anchor a probable violation of 21 U.S.C. §§ 331(e) and 355(k) related to the failure to provide required reports for prescription pharmaceutical products, including reports of data relating to clinical experience and other information as required by the FDA. A Reportable Incident may be the result of an isolated event or a series of occurrences. The written report to the United States shall include: (i) a complete description of the Reportable Incident, including the relevant facts, identity of persons involved, and legal authorities implicated; (ii) a description of GSK’s actions taken to investigate and correct the Reportable Incident; and (iii) a description of any further steps GSK plans to take to address the Reportable Incident and prevent it from recurring. Any Reportable Incident determined to have occurred by GSK shall be promptly reported to

Appendix A 31a

the President of GSK’s North America Pharma division. The first calendar quarter for which a report shall be due under this Paragraph is the quarter ending December 31, 2012.

D. SEC Filings

Within seven (7) days of filing, GSK shall submit copies of each Securities and Exchange Commission Form 6-K.

E. DEFINITIONS

For the purpose of this addendum, the following terms shall have the following meaning:

1. The term “certification” shall mean a statement sworn to under the pains and penalties of perjury and which shall set forth that the representations contained therein may be provided to, relied upon and material to the government of the United States, and that a knowing false statement could result in criminal or civil liability for the signatory.

2. The term “Compliance Officer” refers to the Vice President and Compliance Officer for GSK’s North America Pharma division. For at least the term of this Addendum, the Compliance Officer shall be a member of GSK’s senior management of the North America Phanna division and GSK’s U.S. Compliance Committee. Not later than thirty (30) days after the date of sentencing, GSK shall notify the United States in writing of the name of the Compliance Officer and provide a written

Appendix A 32a

description of that person’s responsibili-ties with respect to complying with the FDCA and FDA’s regulations and guid-ance documents relating to the marketing, promotion, and sale of prescription phar-maceutical products. GSK shall, in writing, report to the United States any changes in the identity of or any material changes in the position and responsibili-ties of the Chief Compliance Officer within fifteen (15) days of any such change.

3. The term “U.S. Compliance Committee” refers to the North America Pharma Risk Management & Compliance Board which, in conjunction with the Compliance Officer, assists in the implementation and enhancement of the Compliance Program. For at least the term of this Addendum, this committee shall, at a minimum, include the Chief Compliance Officer and other members of North America Pharma division senior management with respon-sibilities concerning the marketing, promotion, and sale of GSK’s prescription pharmaceutical products. Not later than thirty (30) days after the date of sentenc-ing, GSK shall notify the United States in writing of the names of the members of the U.S. Compliance Committee and provide a written description of their responsibili-ties with respect to complying with the FDCA and FDA’s regulations and guid-ance documents relating to the marketing, promotion, and sale of prescription pharmaceutical products. GSK shall, in

Appendix A 33a

writing, report to the United States any changes in the composition of the U.S. Compliance Committee. This report shall be provided within fifteen (15) days of any such change.

4. The term “Compliance Program” refers to the policies, procedures, practices, and other measures that GSK has established or will establish to address regulatory compliance issues relating to the market-ing, promotion and sale of prescription pharmaceutical products, including GSK’s compliance with FDCA and FDA regula-tions and guidance documents.

5. The term “prescription pharmaceutical products” means drugs marketed, pro-moted, or sold in the United States and intended for use by humans which must be used under the supervision of a practitioner licensed by law to administer such drugs. 21 U.S.C. § 353(b)(1).

6. The term “Payers” refers to entities that provide a drug health benefit program for prescription pharmaceutical products, including but not limited to government payers (e.g., Medicaid and Medicare) or individuals or entities under contract with or acting on behalf of government payers and commercial health plans.

IV. BREACH OF THIS ADDENDUM

GSK recognizes that each of the terms in this Addendum constitutes a material term of this Addendum. As a contractual remedy, GSK and the

Appendix A 34a

United States agree that failure to comply with the obligations set forth in this Addendum may lead to the imposition of the following monetary penalties (hereafter referred to as “Stipulated Penalties”) in accord with the following provisions.

A. A Stipulated Penalty of $20,000 per day for each day GSK (1) fails to maintain each of the compliance measures set forth in Subsection I, above (if more than one compliance measure fails to be maintained, the Stipulated Penalty will apply separately to each compliance measure); or (2) fails to timely supply any of the certifications or reports required in Subsection III, above. With regard to the certifications and reports, the Stipulated Penalty will begin to accrue on the day after the date the obligation was due, subject to the provisions for extension of time for compliance and the opportunity to cure set forth below.

B. GSK may submit a timely written request for an extension of time to provide any certification or report required in Subsection In. A written request is timely if received by the Chief of the Healthcare Fraud Unit for the U.S. Attorney’s Office for the District of Massachusetts at least five business days prior to the date by which the certification or report is due. Timely requests for extension will not be unreasonably denied. If an extension of time is granted in writing, Stipulated Penalties shall not accrue until one day after GSK fails to meet the revised deadline. If not granted, Stipulated Penalties shall not begin to accrue until three business days after GSK receives the United States’ written denial of

Appendix A 35a

such request or the original due date, whichever is later.

C. Upon the United States’ sole reasonable deter-mination that GSK has failed to comply with any of the obligations described herein, the United States shall notify GSK in writing of GSK’s failure to comply and the United States’ exercise of its contractual right to demand payment of the Stipulated Penalties (the “Demand Letter”). The Demand Letter shall set forth: (i) the provision breached; (ii) the date of the breach; (iii) a description of the breach sufficient to permit GSK to cure (as described below); and (iv) the amount of Stipulated Penalties claimed by the United States as of the date of the Demand Letter. Within fourteen (14) days after receipt of the Demand Letter, or such other period as the United States may agree in writing, GSK shall cure the breach to the United States’ reasonable satisfaction (“Cure Period”). If GSK cures the breach within the Cure Period, no Stipulated Penalties shall be due. If GSK fails to cure the breach during the Cure Period, Stipulated Penalties calculated from the date of breach to the date of payment shall be immediately pay-able to the United States. The Stipulated Penal-ties shall be paid by electronic fund transfer according to wire instructions that will be provided by the United Sates. A joint reasonable determination by the United States Attorney for the District of Massachusetts and the Assistant Attorney General for the Civil Division regarding GSK’s failure to comply with any of the obliga-tions described herein will be final and non-appealable. GSK agrees that the United States

Appendix A 36a

District Court for the District of Massachusetts shall have jurisdiction over any action to collect such a penalty.

Appendix B 37a

SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) is en-tered into by and among the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General (“OIG-HHS”) of the United States Department of Health and Human Services (“HHS”), the TRICARE Management Activity (“TMA”), the United States Department of Veteran Affairs (“VA”), and the United States Office of Personnel Management (“OPM”) (collectively the “United States”), and GlaxoSmithKline LLC (“GSK”), through their authorized representa-tives. Collectively, all of the above will be referred to as “the Parties.”

PREAMBLE

As a preamble to this Agreement, the Parties agree to the following:

A. GlaxoSmithKline LLC is a Delaware limited liability company and an indirect subsidiary of GlaxoSmithKline plc, a public limited company incorporated under English law with headquarters in Brentford, England. At all relevant times, GSK developed, manufactured, distributed, marketed and sold pharmaceutical products in the United States, including drugs sold under the trade names Avandia, Avandamet, and Avandaryl (collectively, the “Covered Drugs”), which were medications for treatment of Type 2 diabetes.

B. On such date as may be determined by the Court, GSK will enter a plea of guilty pursuant to Fed. R. Crim. P. 11(c)(1)(C) (the “Plea Agreement”) to an Information to be filed in United States of America v. GlaxoSmithKline LLC, Criminal Action No. [to be

Appendix B 38a

assigned] (District of Massachusetts) (the “Criminal Action”) that will allege violations of Title 21, United States Code, Sections 331(a), 333(a)(1) and 352, namely, the introduction into interstate commerce of the misbranded drugs Wellbutrin and Paxil, and a violation of Title 21, United States Code, Sections 331(e), 333(a)(1), and 355(k)(1), namely, that GSK failed to report data relating to clinical experience, along with other data and information, regarding Avandia to the Food and Drug Administration (“FDA”) in mandatory reports, in violation of the Food, Drug and Cosmetic Act (“FDCA”).

C. GSK has entered into or will be entering into separate settlement agreements, described in Para-graph 1(b) below (hereinafter referred to as the “Medicaid State Settlement Agreements”) with certain states and the District of Columbia in settlement of the Covered Conduct described in Preamble Para-graph E, below. States with which GSK executes a Medicaid State Settlement Agreement in the form to which GSK and the National Association of Medicaid Fraud Control Units (“NAMFCU”) Negotiating Team have agreed, or in a form otherwise agreed to by GSK and an individual State, shall be defined as “Medicaid Participating States.”

D. The United States alleges that GSK caused claims for payment for the Covered Drugs to be submitted to the Medicare Program, Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395kkk (“Medicare”); the Medicaid Program, Title XIX of the Social Security Act, 42 U.S.C.§§ 1396-1396w-5 (“Medicaid”); the TRICARE program, 10 U.S.C. §§ 1071-1110b; the Federal Employees Health Bene-fits Program (“FEHBP”), 5 U.S.C.§§ 8901-8914; the

Appendix B 39a

Federal Employees Compensation Act Program, 5 U.S.C. § 8101, et. seq.; and caused purchases of the Covered Drugs by the Veterans Affairs Program, 38 U.S.C. § 1701-1743 (collectively, the “Government Health Care Programs”).

E. The United States contends that it and the Medicaid Participating States have certain civil claims, as specified in Paragraph 2, below, against GSK for engaging in the following conduct at certain times between January 2000 and December 2010 (hereinafter referred to as the “Covered Conduct”):

(i) GSK promoted Avandia to physicians and other health care providers with false and misleading representations about Avandia’s lipid profile, effect on cardiovascular biomarkers, and the overall safety of Avandia and as a result, GSK knowingly caused false or fraudulent claims for Avandia to be submitted to, or caused purchases by, one or more of the Government Health Care Programs. This alleged conduct included:

(a) GSK communicated messages to physicians regarding the effect of Avandia on diabetics’ lipid profiles that were based upon inadequate scientific data. At times between 2001 and April 2005, GSK misleadingly represented that Avandia had a “positive lipid profile,” and trained its sales force to promote the positive lipid profile as one of three core selling messages, despite having no well-controlled studies sufficient to establish those representations. More-over, those representations were inconsistent with the FDA-approved label for Avandia which included information that Avandia was associated with statisti-cally significant increases in low density lipoprotein particles (“LDL” or the “bad” cholesterol), high density lipoprotein particles (“HDL” or the “good” cholesterol),

Appendix B 40a

and total cholesterol. Lipid information was particu-larly important for diabetics, a patient population that was at a significantly increased risk of suffering from cardiac-related illnesses.

(b) GSK represented that use of Avandia resulted in more “light and fluffy” or “buoyant” LDL, despite having no well-controlled studies sufficient to establish those representations. At times between 2001 and April 2005, GSK falsely stated in certain sales brochures that data showing more buoyant LDL particles came from “a randomized, placebo-controlled, pharmacodynamic study,” when it did not; GSK also promoted the light and fluffy LDL theory to physicians by bringing “popcorn lunches” to physicians’ offices to highlight the purported change in density of the LDL particles.

(c) In 2001, GSK conducted a small, random-ized control trial of Actos, a competitor diabetes drug, that suggested that treatment with Actos resulted in more buoyant LDL particles. GSK did not publish this scientific data about Actos because it was unhelpful to GSK’s marketing message on lipids. In March 2001, a GSK Vice President, Metabolism Therapeutic Area, North American Medical Affairs directed that the results of this Actos study not be published, stating that the trial was done “way under the radar” and that “[pier Sr Mgmt request, these data should not see the light of day to anyone outside of GSK.” When later concerned that Actos’ manufacturer intended to publish new clinical trial results regarding Actos’ lipid profile, GSK, as part of the “lipid war games,” again instructed sales representatives to emphasize Avandia’s purportedly favorable lipid profile with physicians.

Appendix B 41a

(d) Some GSK sales aids also contained certain implied cardiovascular claims for which GSK did not have adequate scientific support, such as the message that Avandia may reduce cardiovascular risk by decreasing insulin resistance. That message was inconsistent with the FDA approved label for Avandia which always contained a warning on congestive heart failure associated with use of the drug, and later contained additional cardiovascular warnings regard-ing use of the drug. From 2001 to 2005, GSK sponsored the CardioAlliance, a program through which cardiolo-gists gave speeches to other doctors about the avail-able Avandia data, including data suggesting cardio-vascular benefits from Avandia therapy. Some of the CardioAlliance materials included information about the relationship between insulin resistance and cardiac risk factors and stated that Avandia has “beneficial effects on cardiovascular risk factors” and the “potential to reduce cardiovascular disease” but failed to disclose that GSK did not have cardiovascular outcome data for Avandia. In purpose and effect, GSK paid cardiologists to influence endocrinologists and general practitioners to prescribe Avandia on the suggestion that the drug may be cardioprotective, despite having no cardiovascular outcome data regard-ing Avandia.

(ii) GSK made false and misleading representa-tions about Avandia’s lipid profile, effect on cardio-vascular biomarkers, and the overall safety of Avandia in labeling used during the promotion of Avandia to physicians and other health care providers in violation of the FDCA, 21 U.S.C. §§ 331(a) and 352(a), and through the sale and distribution of a misbranded product, GSK obtained proceeds and profits to which it was not entitled; and

Appendix B 42a

(iii) GSK made false representations concerning the lipid profile, effect on cardiovascular biomarkers, and the overall safety of Avandia to state Medicaid agencies on which state Medicaid agencies relied to their detriment in making formulary and prior authorization decisions.

The United States contends that engaging in the Covered Conduct gives rise to civil liability under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et. seq.; or common law.

F. The United States also contends that it has certain administrative claims against GSK as speci-fied in Paragraphs 3 through 6, below, for engaging in the Covered Conduct.

G. This Agreement is made in compromise of disputed claims. This Agreement is neither an admis-sion of facts or liability by GSK. GSK expressly denies the allegations of the United States as set forth herein that it engaged in any wrongful conduct in connection with the Covered Conduct, except as to such admis-sions GSK makes in connection with the Plea Agree-ment. This Agreement is not a concession by the United States that its claims are not well founded. Neither is this Agreement, nor the performance of any obligation arising under it, including any payment, nor the fact of settlement, intended to be, or shall be understood as, an admission of liability or wrongdoing, or other expression reflecting the merits of the dispute by GSK, except as set forth in this paragraph.

H. To avoid the delay, expense, inconvenience and uncertainty of protracted litigation of these claims, the Parties desire to reach a final settlement as set forth below.

Appendix B 43a

TERMS AND CONDITIONS

NOW, THEREFORE, in reliance on the representa-tions contained herein and in consideration of the mutual promises, covenants, and obligations in this Agreement, and for good and valuable consideration, receipt of which is hereby acknowledged, the Parties agree as follows:

1. GSK agrees to pay to the United States and the Medicaid Participating States, collectively, the sum of six hundred fifty seven million three hundred eighty seven thousand two hundred dollars ($657,387,200), plus interest at the rate of 1.625% per annum from December 1, 2011, and continuing until and including the day before payment is made under this Agreement (collectively, the “Settlement Amount”). The Settle-ment Amount shall constitute a debt immediately due and owing to the United States and the Medicaid Participating States on the Effective Date of this Agreement. This debt shall be discharged by payments to the United States and the Medicaid Participating States, under the following terms and conditions:

(a) GSK shall pay to the United States the sum of five hundred eight million one hundred sixty one thousand sixty three dollars ($508,161,063), plus interest accrued thereon at the rate of 1.625% per annum from December 1, 2011, continuing until and including the day before payment is made (“Federal Settlement Amount”). The Federal Settle-ment Amount shall be paid by electronic funds transfer pursuant to written instructions from the United States no later than seven (7) business days after (i) this Agreement is fully executed by the Parties and delivered to GSK’s attorneys; or (ii) the Court accepts a Fed. R. Crim. P. 11(c)(1)(C) guilty plea as

Appendix B 44a

described in Preamble Paragraph B in connection with the Criminal Action and imposes the agreed upon sentence, whichever occurs later.

(b) GSK shall pay to the Medicaid Participating States the sum of one hundred forty nine million two hundred twenty six thousand one hundred thirty seven dollars ($149,226,137), plus interest accrued thereon at the rate of 1.625 % per annum from December 1, 2011, continuing until and including the day before payment is made (“Medicaid State Settlement Amount”). The Medicaid State Settlement Amount shall be paid by electronic funds transfer to an interest bearing account pursuant to written instructions from the NAMFCU Negotiating Team and under the terms and conditions of the Medicaid State Settlement Agreements that GSK will enter into with the Medicaid Participating States.

(c) If GSK’s agreed-upon guilty plea pursuant to Fed. R. Crim. P. 11(c)(1)(C) in the Criminal Action described in Preamble Paragraph B is not accepted by the Court or the Court does not impose the agreed-upon sentence for whatever reason, this Agreement shall be null and void at the option of either the United States or GSK. If either the United States or GSK exercises this option, which option shall be exercised by notifying all Parties, through counsel, in writing within five (5) business days of the Court’s decision, the Parties will not object and this Agreement will be rescinded. If this Agreement is rescinded, GSK will not plead, argue or otherwise raise any defenses under the theories of statute of limitations, laches, estoppel or similar theories, to any civil or administrative claims, actions or proceedings arising from the Covered Conduct that are brought by the United States within

Appendix B 45a

90 calendar days of rescission, unless such defenses were available to GSK prior to the effective date of this Agreement and excluding time periods covered by the tolling agreement dated September 21, 2011.

2. Subject to the exceptions in Paragraph 6 below (concerning excluded claims), in consideration of the obligations of GSK set forth in this Agreement, conditioned upon GSK’s payment in full of the Settlement Amount, the United States (on behalf of itself, its officers, agencies, and departments) agrees to release GSK, together with its predecessors, current and former parents, direct and indirect affiliates, divisions, subsidiaries, successors, transferees, and assigns and their current and former directors, officers, and employees, individually and collectively, from any civil or administrative monetary claim that the United States has or may have for the Covered Conduct under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a; the Food, Drug and Cosmetic Act, 21 U.S.C. § 301, et seq.; any statutory provision creating a cause of action for civil damages or civil penalties for which the Civil Division of the Department of Justice has actual and present authority to assert and compromise pursuant to 28 C.F.R. Part 0, Subpart I, 0.45(d), and common law claims for fraud, payment by mistake, breach of contract, disgorgement and unjust enrichment.

3. In consideration of the obligations of GSK in this Agreement and the Corporate Integrity Agreement (CIA) entered into between OIG-HHS and GSK, and conditioned upon GSK’s full payment of the Settle-ment Amount, the OIG-HHS agrees to release and

Appendix B 46a

refrain from instituting, directing, or maintaining any administrative action seeking exclusion from Medicare, Medicaid, and other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f) against GSK under 42 U.S.C. § 1320a-7a (Civil Mone-tary Penalties Law) or under 42 U.S.C. § 1320a-7(b)(7) (permissive exclusion for fraud, kickbacks, and other prohibited activities) for the Covered Conduct, or under 42 U.S.C. § 1320a-7(b)(1) based on GSK’s agreement to plead guilty to the charges set forth in the Information in the Criminal Action referenced in Paragraph B above, except as reserved in Paragraph 6 (concerning excluded claims), below, and as reserved in this Paragraph. The OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude GSK from Medicare, Medicaid, and other Federal health care programs under 42 U.S.C. § 1320a-7(a) (mandatory exclusion) based upon the Covered Conduct. Nothing in this Paragraph precludes the OIG-HHS from taking action against entities or persons, or for conduct and practices, for which claims have been reserved in Paragraph 6, below.

4. In consideration of the obligations of GSK set forth in this Agreement, conditioned upon GSK’s full payment of the Settlement Amount, TMA agrees to release and refrain from instituting, directing, or maintaining any administrative action seeking exclu-sion or suspension from the TRICARE Program against GSK under 32 C.F.R. § 199.9 for the Covered Conduct, except as reserved in Paragraph 6 (concern-ing excluded claims), below, and as reserved in this Paragraph. TMA expressly reserves authority to exclude GSK under 32 C.F.R. §§ 199.9 (f)(1)(i)(A), (f)(1)(i)(B), and (f)(1)(iii), based upon the Covered

Appendix B 47a

Conduct. Nothing in this Paragraph precludes TMA or the TRICARE Program from taking action against entities or persons, or for conduct and practices, for which claims have been reserved in Paragraph 6, below.

5. In consideration of the obligations of GSK in this Agreement, conditioned upon GSK’s full payment of the Settlement Amount, OPM agrees to release and refrain from instituting, directing, or maintaining any administrative action against GSK under 5 U.S.C. § 8902a or 5 C.F.R. Part 970 for the Covered Conduct, except as reserved in Paragraph 6 (concerning excluded claims), below, and except if excluded by the OIG-HHS pursuant to 42 U.S.C. § 1320a-7(a) or required by 5 U.S.C. § 8902a(b), or 5 C.F.R. Part 970. Nothing in this Paragraph precludes OPM from taking action against entities or persons, or for conduct and practices, for which claims have been reserved in Paragraph 6, below.

6. Notwithstanding any term of this Agreement, specifically reserved and excluded from the scope and terms of this Agreement as to any entity or person are the following claims of the United States:

(a) Any civil, criminal, or administrative liability arising under Title 26, U.S. Code (Internal Revenue Code);

(b) Any criminal liability;

(c) Except as explicitly stated in this Agreement, any administrative liability, including man-datory exclusion from Government Health Care programs;

Appendix B 48a

(d) Any liability to the United States (or its agencies) for any conduct other than the Covered Conduct;

(e) Any liability based upon such obligations as are created by this Agreement;

(f) Any liability for express or implied warranty claims or other claims for defective or defi-cient products and services, including quality of goods and services;

(g) Any liability for personal injury or property damage or for other consequential damages arising from the Covered Conduct;

(h) Any liability for failure to deliver items or services due; or

(i) Any liability of individuals (including current or former directors, officers, employees, or agents of GSK) who receive written notifica-tion that they are the target of a criminal investigation, are criminally indicted, charged, or convicted, or who enter into a criminal plea agreement related to the Covered Conduct.

7. GSK waives and shall not assert any defenses it may have to any criminal prosecution or administra-tive action relating to the Covered Conduct that may be based in whole or in part on a contention that under the Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Agreement bars a remedy sought in such criminal prosecution or administrative action. Nothing in this paragraph or any other provision of this Agreement constitutes an agreement by the United States concerning the characterization of the Settlement

Appendix B 49a

Amount for purposes of the Internal Revenue laws, Title 26 of the United States Code.

8. GSK fully and finally releases the United States, its agencies, employees, servants, and agents from any claims (including attorneys’ fees, costs, and expenses of every kind and however denominated) which GSK has asserted, could have asserted, or may assert in the future against the United States, its agencies, employees, servants, and agents, related to the Covered Conduct or arising from the United States’ investigation, settlement of this matter, and prosecution of the Criminal Action.

9. The Settlement Amount shall not be decreased as a result of the denial of claims for payment now being withheld from payment by any Medicare carrier or intermediary or any state payer, related to the Covered Conduct; and GSK agrees not to resubmit to any Medicare carrier or intermediary or any state payer any previously denied claims related to the Covered Conduct, and agrees not to appeal any such denials of claims.

10. GSK agrees to the following:

(a) Unallowable Costs Defined: that all costs (as defined in the Federal Acquisition Regulations (FAR) 48 C.F.R. § 31.205-47 and in Titles XVIII and XIX of the Social Security Act, 42 U.S.C. §§ 1395-1395kkk and 1396-1396w-5, and the regulations and official program directives promulgated thereunder) incurred by or on behalf of GSK, its present or former officers, directors, employees, shareholders, and agents in connection with the following shall be “Unallowable Costs” on government contracts and under the Government Health Care Programs:

Appendix B 50a

(1) the matters covered by this Agreement and the related Plea Agreement;

(2) the United States’ audit and civil and criminal investigation of the matters covered by this Agreement;

(3) GSK’s investigation, defense, and any correc-tive actions undertaken in response to the United States’ audit and civil and criminal investigation in connection with the matters covered by this Agreement (including attorneys’ fees);

(4) the negotiation and performance of this Agreement, the Plea Agreement, and the Medicaid State Settlement Agreements;

(5) the payments GSK makes to the United States or any State pursuant to this Agree-ment, the Plea Agreement, or the Medicaid State Settlement Agreements;

(6) the negotiation of, and obligations under-taken pursuant to the CIA to: (i) retain an independent organization to perform annual reviews as described in Section III of the CIA; and (ii) prepare and submit reports to OIG-HHS. However, nothing in this paragraph 10.a.(6) that may apply to the obligations undertaken pursuant to the CIA affects the status of costs that are not allowable based on any other authority applicable to GSK.

(b) Future Treatment of Unallowable Costs: These Unallowable Costs shall be separately deter-mined and accounted for by GSK, and GSK shall not charge such Unallowable Costs directly or indirectly to any contracts with the United States or any State

Appendix B 51a

Medicaid Program, or seek payment for such Un-allowable Costs through any cost report, cost statement, information statement, or payment request submitted by GSK or any of its subsidiaries or affiliates to the Medicare, Medicaid, TRICARE, or FEHBP Programs.

(c) Treatment of Unallowable Costs Previously Submitted for Payment: GSK further agrees that within 90 days of the Effective Date of this Agreement, it shall identify to applicable Medicare and TRICARE fiscal intermediaries, carriers, and/or contractors, and Medicaid, and FEHBP fiscal agents, any Unallowable Costs (as defined in this Paragraph) included in payments previously sought from the United States, or any State Medicaid Program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by GSK or any of its subsidiaries or affiliates, and shall request, and agree, that such cost reports, cost statements, information reports, or payment requests, even if already settled, be adjusted to account for the effect of the inclusion of the Unallowable Costs. GSK agrees that the United States, at a minimum, shall be entitled to recoup from GSK any overpayment plus applicable interest and penalties as a result of the inclusion of such Unallow-able Costs on previously-submitted cost reports, information reports, cost statements, or requests for payment.

Any payments due after the adjustments have been made shall be paid to the United States pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States reserves its rights to disagree with any calculations submitted by

Appendix B 52a

GSK or any of its subsidiaries or affiliates on the effect of inclusion of Unallowable Costs (as defined in this Paragraph) on GSK’s or any of its subsidiaries’ or affiliates’ cost reports, cost statements, or information reports.

(d) Nothing in this Agreement shall constitute a waiver of the rights of the United States to examine or reexamine GSK’s books and records to determine that no Unallowable Costs have been claimed in accordance with the provisions of this Paragraph.

11. This Agreement is intended to be for the benefit of the Parties only. The Parties do not release any claims against any other person or entity, except to the extent provided for in Paragraph 2 above or 12 below (waiver for beneficiaries paragraph).

12. GSK agrees that it waives and shall not seek payment for any of the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, legally responsible individu-als, or third party payors based upon the claims defined as Covered Conduct.

13. GSK expressly warrants that it has reviewed its financial situation and that it is currently solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and 548(a)(l)(B)(ii)(I), and will remain solvent following payment of the Settlement Amount. Further, the Parties warrant that, in evaluating whether to execute this Agreement, they (a) have intended that the mutual promises, covenants and obligations set forth herein constitute a contemporaneous exchange for new value given to GSK, within the meaning of 11 U.S.C. § 547(c)(1); and (b) conclude that these mutual promises, covenants and obligations do, in fact, consti-tute such a contemporaneous exchange. Further, the

Appendix B 53a

Parties warrant that the mutual promises, covenants, and obligations set forth herein are intended to and do, in fact, represent a reasonably equivalent exchange of value that is not intended to hinder, delay, or defraud any entity to which GSK was or became indebted to on or after the date of this transfer, within the meaning of 11 U.S.C. § 548(a)(1).

14. Each party shall bear its own legal and other costs incurred in connection with this matter, including the preparation and performance of this Agreement.

15. The Parties each represent that this Agreement is freely and voluntarily entered into without any degree of duress or compulsion.

16. This Agreement is governed by the laws of the United States. The Parties agree that the exclusive jurisdiction and venue for any dispute arising between and among the Parties under this Agreement shall be the United States District Court for the District of Massachusetts, except that disputes arising under the CIA shall be resolved exclusively under the dispute resolution provisions in the CIA.

17. For purposes of construction, this Agreement shall be deemed to have been drafted by all Parties to this Agreement and shall not, therefore, be construed against any party for that reason in any dispute.

18. This Agreement constitutes the complete agreement between the Parties with respect to the issues covered by the Agreement. This Agreement may not be amended except by written consent of all the Parties.

19. The individuals signing this Agreement on behalf of GSK represent and warrant that they are

Appendix B 54a

authorized by GSK to execute this Agreement. The United States’ signatories represent that they are signing this agreement in their official capacities and they are authorized to execute this Agreement.

20. This Agreement may be executed in counter-parts, each of which constitutes an original and all of which shall constitute one and the same Agreement.

21. This Agreement is binding on GSK’s successors, transferees, heirs and assigns.

22. All parties consent to the disclosure of this Agreement, and information about this Agreement, to the public after the Effective Date.

23. This Agreement is effective on the date of signature of the last signatory to the Agreement (Effective Date of this Agreement). Facsimiles or electronic versions of signatures shall constitute acceptable, binding signatures for purposes of this Agreement.

UNITED STATES OF AMERICA

CARMEN M. ORTIZ United States Attorney

By: /s/ Susan G. Winkler SUSAN G. WINKLER SHANNON T. KELLEY BRIAN PEREZ-DAPLE Assistant United States Attorneys District of Massachusetts

Dated: 7/2/2012

Appendix B 55a

STUARTS F. ELERY Acting Assistant Attorney General

By: /s/ Natalie A. Priddy JOYCE R. BRANDA JAMIE ANN YAVELBERG CHARLES J. BIRO NATALIE A. PRIDDY Attorneys Commercial Litigation Branch, Civil Division United States Department of Justice

Dated: 7/2/2012 By: _____________________

JILL FURMAN MARK L. JOSEPHS TIMOTHY T. FINLEY Attorneys Consumer Protection Branch, Civil Division United States Department of Justice

Dated:

STUARTS F ELERY Acting Assistant Attorney General

By: /s/ Natalie A. Priddy JOYCE R. BRANDA JAMIE ANN YAVELBERG CHARLES J. BIRO NATALIE A. PRIDDY Attorneys Commercial Litigation Branch, Civil Divison United States Department of Justice

Dated: 7/2/2012

Appendix B 56a

By: /s/_Jill Furman__________ JILL FURMAN MARK L. JOSEPHS TIMOTHY T. FINLEY Attorneys Consumer Protection Branch, Civil Division United States Department of Justice

Dated: 7/2/2012

By: /s/ Gregory E. Demske GREGORY E. DEMSKE Chief Counsel to the Inspector General Office of Inspector General U.S. Department of Health and Human Services

Dated: 6/22/12

By: /s/ Paul J. Hutter PAUL J. HUTTER General Counsel TRICARE Management Activity United States Department of Defense

Dated: 6/26/12

By: /s/ Shirley R. Patterson SHIRLEY R. PATTERSON Assistant Director for Federal Employee Insurance Operations United States Office of Personnel Management

Dated: 6/22/12

Appendix B 57a

By: /s/ J. David Cope by [Illegible] J. DAVID COPE Debarring Official Office of the Assistant Inspector General for Legal Affairs United States Office of Personnel Management Dated: 6/26/12

GLAXOSMITHKLINE LLC

By: /s/ Elpidio Villarreal Dated: 6/28/12

ELPIDIO VILLARREAL Senior Vice President, Global Litigation GlaxoSmithKline LLC

By: /s/ Nina M. Gussack Dated: 6/28/12

NINA M. GUSSACK SEAN P. FAHEY PEPPER HAMILTON LLP 3000 Two Logan Square 18th & Arch Streets Philadelphia, PA 19103-2799 (215) 981-4000 Counsel to GlaxoSmithKline LLC

By: /s/ Mathew O’Conner Dated: 6/28/12

GEOFFREY HOBART MATHEW O’CONNER COVINGTON & BURLING LLP 1201 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2401 (202) 662-6000 Counsel to GlaxoSmithKline LLC

Appendix C 58a

JUSTICE NEWS Department of Justice Office of Public Affairs

FOR IMMEDIATE RELEASE Monday, July 2, 2012

GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and

Failure to Report Safety Data

Largest Health Care Fraud Settlement in U.S. History

Global health care giant GlaxoSmithKline LLC (GSK) agreed to plead guilty and to pay $3 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices, the Justice Department announced today. The resolution is the largest health care fraud settlement in U.S. history and the largest payment ever by a drug company.

GSK agreed to plead guilty to a three-count criminal information, including two counts of introducing misbranded drugs, Paxil and Wellbutrin, into inter-state commerce and one count of failing to report safety data about the drug Avandia to the Food and Drug Administration (FDA). Under the terms of the plea agreement, GSK will pay a total of $1 billion, including a criminal fine of $956,814,400 and forfeiture in the amount of $43,185,600. The criminal plea agreement also includes certain non-monetary compliance commitments and certifications by GSK’s U.S. president and board of directors. GSK’s guilty plea and sentence is not final until accepted by the U.S. District Court.

Appendix C 59a

GSK will also pay $2 billion to resolve its civil liabilities with the federal government under the False Claims Act, as well as the states. The civil settlement resolves claims relating to Paxil, Wellbutrin and Avandia, as well as additional drugs, and also resolves pricing fraud allegations.

“Today’s multi-billion dollar settlement is unprece-dented in both size and scope. It underscores the Administration’s firm commitment to protecting the American people and holding accountable those who commit health care fraud,” said James M. Cole, Deputy Attorney General. “At every level, we are determined to stop practices that jeopardize patients’ health, harm taxpayers, and violate the public trust – and this historic action is a clear warning to any company that chooses to break the law.”

“Today’s historic settlement is a major milestone in our efforts to stamp out health care fraud,” said Bill Corr, Deputy Secretary of the Department of Health and Human Services (HHS). “For a long time, our health care system had been a target for cheaters who thought they could make an easy profit at the expense of public safety, taxpayers, and the millions of Americans who depend on programs like Medicare and Medicaid. But thanks to strong enforcement actions like those we have announced today, that equation is rapidly changing.”

This resolution marks the culmination of an exten-sive investigation by special agents from HHS-OIG, FDA and FBI, along with law enforcement partners across the federal government. Moving forward, GSK will be subject to stringent requirements under its corporate integrity agreement with HHS-OIG; this agreement is designed to increase accountability and

Appendix C 60a

transparency and prevent future fraud and abuse. Effective law enforcement partnerships and fraud prevention are hallmarks of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which fosters government collaboration to fight fraud.

Criminal Plea Agreement

Under the provisions of the Food, Drug and Cos-metic Act, a company in its application to the FDA must specify each intended use of a drug. After the FDA approves the product as safe and effective for a specified use, a company’s promotional activities must be limited to the intended uses that FDA approved. In fact, promotion by the manufacturer for other uses – known as “off-label uses” – renders the product “misbranded.”

Paxil: In the criminal information, the government alleges that, from April 1998 to August 2003, GSK unlawfully promoted Paxil for treating depression in patients under age 18, even though the FDA has never approved it for pediatric use. The United States alleges that, among other things, GSK participated in preparing, publishing and distributing a misleading medical journal article that misreported that a clinical trial of Paxil demonstrated efficacy in the treatment of depression in patients under age 18, when the study failed to demonstrate efficacy. At the same time, the United States alleges, GSK did not make available data from two other studies in which Paxil also failed to demonstrate efficacy in treating depression in patients under 18. The United States further alleges that GSK sponsored dinner programs, lunch pro-grams, spa programs and similar activities to promote the use of Paxil in children and adolescents. GSK paid

Appendix C 61a

a speaker to talk to an audience of doctors and paid for the meal or spa treatment for the doctors who attended. Since 2004, Paxil, like other antidepres-sants, included on its label a “black box warning” stating that antidepressants may increase the risk of suicidal thinking and behavior in short-term studies in patients under age 18. GSK agreed to plead guilty to misbranding Paxil in that its labeling was false and misleading regarding the use of Paxil for patients under 18.

Wellbutrin: The United States also alleges that, from January 1999 to December 2003, GSK promoted Wellbutrin, approved at that time only for Major Depressive Disorder, for weight loss, the treatment of sexual dysfunction, substance addictions and Attention Deficit Hyperactivity Disorder, among other off-label uses. The United States contends that GSK paid millions of dollars to doctors to speak at and attend meetings, sometimes at lavish resorts, at which the off-label uses of Wellbutrin were routinely pro-moted and also used sales representatives, sham advisory boards, and supposedly independent Con-tinuing Medical Education (CME) programs to pro-mote Wllbutrin for these unapproved uses. GSK has agreed to plead guilty to misbranding Wellbutrin in that its labeling did not bear adequate directions for these off-label uses. For the Paxil and Wellbutrin misbranding offenses, GSK has agreed to pay a criminal fine and forfeiture of $757,387,200.

Avandia: The United States alleges that, between 2001 and 2007, GSK failed to include certain safety data about Avandia, a diabetes drug, in reports to the FDA that are meant to allow the FDA to determine if a drug continues to be safe for its approved indications

Appendix C 62a

and to spot drug safety trends. The missing infor-mation included data regarding certain post-marketing studies, as well as data regarding two stud-ies undertaken in response to European regulators’ concerns about the cardiovascular safety of Avandia. Since 2007, the FDA has added two black box warn-ings to the Avandia label to alert physicians about the potential increased risk of (1) congestive heart failure, and (2) myocardial infarction (heart attack). GSK has agreed to plead guilty to failing to report data to the FDA and has agreed to pay a criminal fine in the amount of $242,612,800 for its unlawful conduct con-cerning Avandia.

“This case demonstrates our continuing commit-ment to ensuring that the messages provided by drug manufacturers to physicians and patients are true and accurate and that decisions as to what drugs are prescribed to sick patients are based on best medical judgments, not false and misleading claims or improper financial inducements,” said Carmen Ortiz, U.S. Attorney for the District of Massachusetts.

“Patients rely on their physicians to prescribe the drugs they need,” said John Walsh, U.S. Attorney for Colorado. “The pharmaceutical industries’ drive for profits can distort the information provided to physicians concerning drugs. This case will help to ensure that your physician will make prescribing decisions based on good science and not on misinformation, money or favors provided by the pharmaceutical industry.”

Civil Settlement Agreement

As part of this global resolution, GSK has agreed to resolve its civil liability for the following alleged

Appendix C 63a

conduct: (1) promoting the drugs Paxil, Wellbutrin, Advair, Lamictal and Zofran for off-label, non-covered uses and paying kickbacks to physicians to prescribe those drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex; (2) making false and misleading statements concerning the safety of Avandia; and (3) reporting false best prices and underpaying rebates owed under the Medicaid Drug Rebate Program.

Off-Label Promotion and Kickbacks: The civil settlement resolves claims set forth in a complaint filed by the United States alleging that, in addition to promoting the drugs Paxil and Wellbutrin for unapproved, non-covered uses, GSK also promoted its asthma drug, Advair, for first-line therapy for mild asthma patients even though it was not approvedor medically appropriate under these circumstances. GSK also promoted Advair for chronic obstructive pulmonary disease with misleading claims as to the relevant treatment guidelines. The civil settlement also resolves allegations that GSK promoted Lamictal, an anti-epileptic medication, for off-label, non-covered psychiatric uses, neuropathic pain and pain manage-ment. It further resolves allegations that GSK promoted certain forms of Zofran, approved only for post-operative nausea, for the treatment of morning sickness in pregnant women. It also includes allegations that GSK paid kickbacks to health care professionals to induce them to promote and prescribe these drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex. The United States alleges that this conduct caused false claims to be submitted to federal health care programs.

GSK has agreed to pay $1.043 billion relating to false claims arising from this alleged conduct. The

Appendix C 64a

federal share of this settlement is $832 million and the state share is $210 million.

This off-label civil settlement resolves four lawsuits pending in federal court in the District of Massachu-setts under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery.

Avandia: In its civil settlement agreement, the United States alleges that GSK promoted Avandia to physicians and other health care providers with false and misleading representations about Avandia’s safety profile, causing false claims to be submitted to federal health care programs. Specifically, the United States alleges that GSK stated that Avandia had a positive cholesterol profile despite having no well-controlled studies to support that message. The United States also alleges that the company sponsored programs suggesting cardiovascular benefits from Avandia therapy despite warnings on the FDA-approved label regarding cardiovascular risks. GSK has agreed to pay $657 million relating to false claims arising from misrepresentations about Avandia. The federal share of this settlement is $508 million and the state share is $149 million.

Price Reporting: GSK is also resolving allegations that, between 1994 and 2003, GSK and its corporate predecessors reported false drug prices, which re-sulted in GSK’s underpaying rebates owed under the Medicaid Drug Rebate Program. By law, GSK was required to report the lowest, or “best” price that it charged its customers and to pay quarterly rebates to the states based on those reported prices. When drugs are sold to purchasers in contingent arrangements

Appendix C 65a

known as “bundles,” the discounts offered for the bundled drugs must be reallocated across all products in the bundle proportionate to the dollar value of the units sold. The United States alleges that GSK had bundled sales arrangements that included steep discounts known as “nominal” pricing and yet failed to take such contingent arrangements into account when calculating and reporting its best prices to the Department of Health and Human Services. Had it done so, the effective prices on certain drugs would have been different, and, in some instances, triggered a new, lower best price than what GSK reported. As a result, GSK underpaid rebates due to Medicaid and overcharged certain Public Health Service entities for its drugs, the United States contends. GSK has agreed to pay $300 million to resolve these allegations, including $160,972,069 to the federal government, $118,792,931 to the states, and $20,235,000 to certain Public Health Service entities who paid inflated prices for the drugs at issue.

Except to the extent that GSK has agreed to plead guilty to the three-count criminal information, the claims settled by these agreements are allegations only, and there has been no determination of liability.

“This landmark settlement demonstrates the De-partment’s commitment to protecting the American public against illegal conduct and fraud by pharma-ceutical companies,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Depart-ment’s Civil Division. “Doctors need truthful, fair, balanced information when deciding whether the benefits of a drug outweigh its safety risks. By the same token, the FDA needs all necessary safety-related information to identify safety trends and to

Appendix C 66a

determine whether a drug is safe and effective. Unlawful promotion of drugs for unapproved uses and failing to report adverse drug experiences to the FDA can tip the balance of those important decisions, and the Justice Department will not tolerate attempts by those who seek to corrupt our health care system in this way.”

Non-monetary Provisions and Corporate Integrity Agreement

In addition to the criminal and civil resolutions, GSK has executed a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services, Office of Inspector General (HHS-OIG). The plea agreement and CIA include novel provisions that require that GSK implement and/or maintain major changes to the way it does business, including changing the way its sales force is compensated to remove compensation based on sales goals for territories, one of the driving forces behind much of the conduct at issue in this matter. Under the CIA, GSK is required to change its executive compensation program to permit the company to recoup annual bonuses and long-term incentives from covered executives if they, or their subordinates, engage in significant misconduct. GSK may recoup monies from executives who are current employees and those who have left the company. Among other things, the CIA also requires GSK to implement and maintain transparency in its research practices and publication policies and to follow specified policies in its contracts with various health care payors.

“Our five-year integrity agreement with GlaxoSmithKline requires individual accountability of its board and executives,” said Daniel R. Levinson,

Appendix C 67a

Inspector General of the U.S. Department of Health and Human Services. “For example, company executives may have to forfeit annual bonuses if they or their subordinates engage in significant misconduct, and sales agents are now being paid based on quality of service rather than sales targets.”

“The FDA Office of Criminal Investigations will aggressively pursue pharmaceutical companies that choose to put profits before the public’s health,” said Deborah M. Autor, Esq., Deputy Commissioner for Global Regulatory Operations and Policy, U.S. Food and Drug Administration. “We will continue to work with the Justice Department and our law enforcement counterparts to target companies that disregard the protections of the drug approval process by promoting drugs for uses when they have not been proven to be safe and effective for those uses, and that fail to report required drug safety information to the FDA.”

“The record settlement obtained by the multi-agency investigative team shows not only the importance of working with our partners, but also the importance of the public providing their knowledge of suspect schemes to the government,” said Kevin Perkins, Acting Executive Assistant Director of the FBI’s Criminal, Cyber, Response and Services Branch. “Together, we will continue to bring to justice those engaged in illegal schemes that threaten the safety of prescription drugs and other critical elements of our nation’s healthcare system.”

“Federal employees deserve health care providers and suppliers, including drug manufacturers, that meet the highest standards of ethical and professional behavior,” said Patrick E. McFarland, Inspector General of the U.S. Office of Personnel Management.

Appendix C 68a

“Today’s settlement reminds the pharmaceutical industry that they must observe those standards and reflects the commitment of Federal law enforcement organizations to pursue improper and illegal conduct that places health care consumers at risk.”

“Today’s announcement illustrates the efforts of VA OIG and its law enforcement partners in ensuring the integrity of the medical care provided our nation’s veterans by the Department of Veterans Affairs,” said George J. Opfer, Inspector General of the Department of Veterans Affairs. “The monetary recoveries realized by VA in this settlement will directly benefit VA healthcare programs that provide for veterans’ continued care.”

“This settlement sends a clear message that taking advantage of federal health care programs has substantial consequences for those who try,” said Rafael A. Medina, Special Agent in Charge of the Northeast Area Office of Inspector General for the U.S. Postal Service. “The U.S. Postal Service pays more than one billion dollars a year in workers’ compensation benefits and our office is committed to pursuing those individuals or entities whose fraudulent acts continue to unfairly add to that cost.”

A Multilateral Effort

The criminal case is being prosecuted by the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Consumer Protection Branch. The civil settlement was reached by the U.S. Attorney’s Office for the District of Massachusetts, the U.S. Attorney’s Office for the District of Colorado and the Civil Division’s Commercial Litigation Branch. Assis-tance was provided by the HHS Office of Counsel to

Appendix C 69a

the Inspector General, Office of the General Counsel-CMS Division and FDA’s Office of Chief Counsel as well as the National Association of Medicaid Fraud Control Units.

This matter was investigated by agents from the HHS-OIG; the FDA’s Office of Criminal Investiga-tions; the Defense Criminal Investigative Service of the Department of Defense; the Office of the Inspector General for the Office of Personnel Management; the Department of Veterans Affairs; the Department of Labor; TRICARE Program Integrity; the Office of Inspector General for the U.S. Postal Service and the FBI.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Kathleen Sebelius, Secretary of HHS. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. Over the last three years, the department has recovered a total of more than $10.2 billion in settlements, judgments, fines, restitution, and forfeiture in health care fraud matters pursued under the False Claims Act and the Food, Drug and Cosmetic Act.

Court documents related to today’s settlement can be viewed online at www.justice.gov/opa/gsk-docs.html.

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