GlaxoSmithKline has reached a civil settlement with the US Department of Justice, the US Attorney's Office for the District of Massachusetts, and the Office of the Inspector General of the US Department of Health and Human Services to resolve the federal government's "Average Wholesale Price" investigation concerning Zofran and Kytril, drugs used to treat nausea associated with chemotherapy.

The company has agreed to pay the government a civil settlement of $149 million plus certain interest. The total amount of the settlement is covered by GSK's existing legal reserve. The federal government contended that AWP was artificially inflated, which in turn increased Medicare and Medicaid reimbursement rates for the drugs, a GSK release stated.

However, numerous government reports and other evidence showed that the government was well aware that by using AWP as its reimbursement benchmark, it was paying doctors more than the doctors paid for the medicines. For public policy reasons, the government maintained those reimbursement levels for many years.

Notwithstanding this, GSK decided to settle the case, without admitting any wrongdoing, to put this historical matter behind it. The settlement covers the time period of 1994 to 2002 for Zofran and 1994 to 2000 for Kytril. SmithKlineBeecham divested Kytril in December 2000, just before its merger with Glaxo Wellcome.

Most of the settlement relates to Medicare payments for Zofran and Kytril injectibles, but a portion of the settlement fund has been allocated to Medicaid and to the states that choose to participate in the settlement to reimburse their Medicaid programs for payments they made for these products.

In addition to the $149 million payment, the settlement also includes an interest payment of approximately $1.8 million to cover the time during which the parties worked out details of the agreement. GSK fully cooperated with the government over the course of this investigation. The company understands that the federal government's investigation of it concerning AWP issues is now completed and closed, the release added.