Glaxo's 'Massive' Fines Just Cost of Doing Business By Marek Fuchs 07/03/12 - 08:31 AM EDT Add Comment
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NEW YORK (TheStreet) -- What's $3 billion: a ruinous amount or simply a few bucks between friends, the mere cost of doing business? More on GSK
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That's the operative question when Glaxo(GSK_), or any other company -- think Johnson & Johnson(JNJ_), Merck(MRK_), Pfizer(PFE_) -- is fined for malpractices.
In what The New York Times(NYT_) termed "the largest settlement involving a pharmaceutical company" (all those others have had to pay settlements in the last couple of years too, though this edges the previous fines out) Glaxo pleaded guilty to promoting a number of drugs, including antidepressants, for unapproved uses and failing to report safety data.
As a trader, here's what you need to know: How much of a fix will this put Glaxo in, and will it impact the way drug companies do business? But the only way to answer this central question is to put Glaxo's fine into perspective.
Too many media outlets don't even attempt it.
NBC News, for example, ran a segment calling the fine "massive," but offering no sense of proportion. This makes the $3 billion (a lot to you and me) sounds onerous.
The New York Times gave you the perspective you need: "Despite the large amount," The Times wrote, "$3 billion represents only a portion of what Glaxo made on the drugs. Avandia, for example, racked up $10.4 billion in sales, Paxil brought in $11.6 billion, and Wellbutrin sales were $5.9 billion during the years covered by the settlement." Put like that, it is clear: the fine will be rationalized as the cost of doing business and change little.
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