Legal Troubles for GlaxoSmithKline and Johnson & Johnson | Market Check-Up, 11/4/13 | Summary and Q&A

TL;DR

Johnson & Johnson will pay $2.2 billion in one of the largest healthcare fraud settlements in US history, Glaxo likely won't face charges for bribery allegations in China, and Merck has positive news with a more effective HPV vaccine and promising Phase 2 results for a Hepatitis C combo drug.

Key Insights

• 🌥️ The healthcare fraud settlement with Johnson & Johnson is significant, but not uncommon for large pharmaceutical companies.
• 🈂️ Glaxo's avoidance of bribery charges in China prevents restrictions on drug pricing and potential penalties.
• 🎅 Merck's positive developments with their HPV vaccine and Hepatitis C combo drug provide potential growth opportunities in their pipeline.

Transcript

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Questions & Answers

Q: What charges did Johnson & Johnson face in the healthcare fraud settlement?

Johnson & Johnson faced charges related to marketing drugs off-label and giving kickbacks to doctors. They will pay $2.2 billion as part of the settlement.

Q: How common are healthcare fraud settlements of this magnitude?

Healthcare fraud settlements of this magnitude are not uncommon. Pfizer paid $2.3 billion in 2010, and Glaxo settled for $3 billion in 2012 for similar charges. However, this settlement should not significantly impact Johnson & Johnson's financials or investor confidence.

Q: Why is Glaxo likely off the hook for bribery allegations in China?

Glaxo claims they had no knowledge of the alleged bribery scheme, which was attributed to local situations. If true, this is good news for the company and its investors as it prevents unwanted attention and large fines from the Chinese government.

Q: What positive developments did Merck have?

Merck's new HPV vaccine is more effective than their previously approved vaccine and provides protection against additional strains. They also had promising Phase 2 results for a Hepatitis C combo drug with cure rates ranging from 90-100%.

Summary & Key Takeaways

• Johnson & Johnson will pay $2.2 billion as part of a healthcare fraud settlement for charges including the marketing of drugs off-label and kickbacks to doctors.

• Glaxo likely won't face charges for a bribery scheme in China, providing relief for investors and preventing restrictions on drug pricing.

• Merck has positive news with a more effective HPV vaccine and promising Phase 2 results for a Hepatitis C combo drug.