Pharmaceutical giant GlaxoSmithKline (NYSE:GSK) on Monday said it will record a $3.4 billion charge against fourth-quarter earnings related to legal problems tied to its blockbuster diabetes drug Avandia.
Glaxo faces thousands of lawsuits by former Avandia users and is currently under investigation in the U.S. by federal and state prosecutors for allegedly failing to report potentially damaging side effects of the drug.
A number of those suits were settled last year.
But in a statement Monday, the company said the number of new product liability cases involving Avandia “is substantial and (Glaxo) has now completed its assessment of these additional cases and an estimate of likely future claims.”
Glaxo’s top lawyer, PD Villarreal, said in the statement: “We recognize that this is a significant charge, but we believe the approach we are taking to resolve long-standing legal matters is in the company’s best interests. We have closed out a number of major cases over the last year and we remain determined to do all we can to reduce our litigation risk.”
Avandia was approved in 1998 to treat type 2 diabetes by helping control blood sugar levels and topped at sales of about $3 billion in 2006. Sales have plummeted in recent years as concerns have been raised that Avandia can contribute to heart attacks.
The risk first came to the public’s attention in 2007 when the New England Journal of Medicine published a report suggesting that users of Avandia had a 43% increased risk of a heart attack.
Glaxo is accused of failing to adequately research the drug or warn users about the potentially risks.