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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK __________________________________________ ) In re: GlaxoSmithKline plc Securities ) Civil Action No. 05 CIV. 3751 (LAP) Litigation ) ) DEMAND FOR JURY TRIAL __________________________________________) CONSOLIDATED SECOND AMENDED COMPLAINT
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Page 1: 1 Consolidated Second Amended Complaint 09/26/2005

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

__________________________________________)

In re: GlaxoSmithKline plc Securities ) Civil Action No. 05 CIV. 3751 (LAP)Litigation )

) DEMAND FOR JURY TRIAL__________________________________________)

CONSOLIDATED SECOND AMENDED COMPLAINT

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JURISDICTION AND VENUE

1. The claims asserted herein arise under §§ 10(b) and 20(a) of the Securities Exchange

Act of 1934 (“1934 Act”) and Rule 10b-5. Jurisdiction is conferred by § 27 of the 1934 Act, and 28

U.S.C. §1331. Venue is proper here pursuant to § 27 of the 1934 Act. GlaxoSmithKline plc and

SmithKline Beecham Corporation doing business as GlaxoSmithKline plc (collectively “GSK”) is

headquartered in London, England, but conducts business in this District. GSK’s ADRs trade on the

New York Stock Exchange headquartered in this District.

THE PARTIES

2. Lead Plaintiff Joseph J. Masters (“Plaintiff”) acquired publicly traded securities of

GSK during the Class Period and was damaged thereby.

3. Defendant GlaxoSmithKline plc is a public company. GlaxoSmithKline plc’s ADRs

trade in an efficient market on the NYSE under the symbol “GSK.” GlaxoSmithKline plc’s ordinary

shares trade in an efficient market on the London Stock Exchange. Defendant SmithKline Beecham

Corporation is a Delaware corporation, which is a wholly-owned subsidiary of GlaxoSmithKline plc.

GlaxoSmithKline plc was created in December 2000 when Glaxo Wellcome merged with

SmithKline Beecham. Both GlaxoSmithKline plc and SmithKline Beecham, as well as all of their

predecessors, subsidiaries and successors, are referred to herein collectively as “GSK.”

4. Defendant Jean-Pierre Garnier (“Garnier”) was CEO and Chairman of GSK

throughout the Class Period. By reason of his position, Garnier had access to material inside

information about GSK and was able to control directly or indirectly the acts of GSK and the

contents of the representations disseminated during the Class Period by or in the name of GSK.

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5. The defendants are liable, jointly and severally, as direct participants in the scheme

and wrongs complained of herein. Defendants had a duty promptly to disseminate accurate and

truthful information with respect to GSK’s products, operations, financial condition and future

business prospects or to cause and direct that such information be disseminated so that the market

prices of GSK’s stock and ADRs would be based on truthful and accurate information.

SUMMARY OF THE ACTION

6. From the time it was formed, GSK has relied upon various deceptive practices to

artificially inflate its stock price. Concerning its patents for various medications, GSK would file

baseless patent applications to prevent competition to its products from generic drug manufactures.

GSK would tout to the investing public that the drug patents for its largest selling medications, Paxil

and Augmentin, would expire years in the future, when in reality GSK knew, or should have known,

that its patent protection for both Paxil and Augmentin had either already expired, or would expire

shortly. These two drugs accounted for billions of dollars in sales for GSK during the class period.

By falsely touting that the patents for these two drugs would expire years in the future, GSK mislead

the investing public into believing that the future sales and profits from these two drugs would

remain high. GSK knew that without patent protection, generic manufactures would undercut GSK’s

monopoly prices, which would directly lead to plunging sales for GSK. This is exactly what

happened. In addition, GSK’s illegal practice of patent manipulation violated U.S. anti-trust laws.

So far GSK has paid out over $160 million to settle antitrust class actions for its illegal practice of

patent manipulation involving Paxil and $29 million to settle antitrust class actions involving

Augmentin. This is not the only liability GSK faces for its practice of patent manipulation of Paxil

and Augmentin. GSK is currently being sued for by the City of New York for medicare fraud, and

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by various insurance companies for anti-trust violations springing from this practice of patent

manipulation. GSK’s public false and misleading statements concerning the patent protection for

both Paxil and Augmentin have damaged investors, who would not have paid the high prices for

GSK that they did if they had know patent protection had or would shortly expire.

7. Not only did GSK illegally file baseless patents for its Paxil medication, it also hid

from the public and government regulators the fact that Paxil was causing serious and sometimes

deadly health problems to consumers. GSK touted Paxil to doctors as a medication that was safe and

effective for children, when it knew from its own drug testing program that Paxil was less effective

than a placebo, while it also was twice as likely as a placebo to cause suicide. These problems, when

disclosed to the public, lead to decreased sale for Paxil. Some countries forbid doctors from

prescribing Paxil to children, while here in the U.S. Paxil was required to warn that children who

use Paxil are at increased risk of suicide. GSK also hid from consumers and government regulators

the fact that Paxil was causing withdrawal problems, even in healthy test subjects. Sales of Paxil

plunged as medical professionals and the public became aware that GSK’s statements that Paxil was

safe and non-habit forming were false and misleading. Not only have sales been negatively impacted

by the disclosure of these problems, but class action products liability suits have been filed which

have resulted in billions of dollars in potential liability. GSK shares have suffered as a result.

8. Finally, GSK has also violated the Federal False Claims Act numerous times, which

has artificially raised reported profits. The latest violation was shown on September 20, 2005, when

it was announced that GSK had paid out $150 million to settle claims that GSK engaged in a scheme

to inflate the price of its drugs Zofran and Kytril for the Medicare and Medicaid programs.

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CLASS ACTION ALLEGATIONS

9. This is a class action on behalf of those who purchased or otherwise acquired GSK

common stock and ADRs during the period from December 27, 2000 through August 5, 2004,

inclusive (the “Class Period”), excluding defendants, directors and officers of the Company and their

families and affiliates (the “Class”). Class members are so numerous that joinder of them is

impracticable. At all relevant times, the markets for GSK ADRs and common stock were efficient.

10. Common questions of law and fact predominate and include whether defendants

(i) violated the 1934 Act; (ii) omitted and/or misrepresented material facts; (iii) knew or recklessly

disregarded that their statements were false; and (iv) artificially inflated GSK’s stock and ADR

prices and the extent of and appropriate measure of damages.

11. Plaintiff’s claims are typical of those of the Class. Prosecution of individual actions

would create a risk of inconsistent adjudications. Plaintiff will adequately protect the interests of

the Class. A class action is superior to other available methods for the fair and efficient adjudication

of this controversy.

BACKGROUND

12. Concerning its patent protection, SmithKline Beecham disclosed in its Form-20F for

the year ending December 31, 1999 that [t]he patent situation on potassium clavulanate (Augmentin

and Timentin) is complex. Although patents on the compound expired in some markets in 1995, the

relevant U.S. patents will not expire until 2002 and patent extensions in France and Italy also provide

protection beyond 2000.” Concerning Paxil, this Form-20F also disclosed that “[t]he patent for the

marketed form of Seroxat/Paxil expires during or after 2006.”

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13. On January 17, 2000, the Boards of Glaxo Wellcome (NYSE: GLX) and SmithKline

Beecham (NYSE: SBH) announced that they have unanimously agreed the terms of a proposed

merger of equals to form Glaxo SmithKline.

14. March 1, 2000, SmithKline Beecham announced that it had obtained a new US patent

on its broad-spectrum antibiotic, Augmentin. This patent was completely baseless and filed only to

illegally prohibit generic drug manufactures from selling generic forms of Augmentin.

15. The terms of the merger were released in the PR Newswire on July 5, 2000. Under

the terms of the merger, Glaxo Wellcome Shareholders and SmithKline Beecham shareholders

would receive, respectively: for each Glaxo Wellcome share 1 GlaxoSmithKline share and for each

SmithKline Beecham share 0.4552 GlaxoSmithKline shares. Holders of Glaxo Wellcome ADRs

and holders of SmithKline Beecham ADRs would receive, respectively: for each Glaxo Wellcome

ADS 1 GlaxoSmithKline ADS for each SmithKline Beecham ADS 1.138 GlaxoSmithKline ADSs.

Based on the number of shares outstanding as at the 31st December 1999, upon the merger becoming

effective, 3,640,804,312 GSK shares would be issued to Glaxo Wellcome shareholders and

2,556,309,411 GlaxoSmithKline shares would be issued to SmithKline Beecham shareholders,

representing approximately 58.75 percent and 41.25 percent respectively of the issued ordinary share

capital of GSK.

16. On July 26, 2000, in an article by the Financial Time, defendant Garnier is quoted as

identifying Paxil/Seroxat and Augmentin as “stars of the show” as these two drugs each brought in

over a billion dollars in revenue. Defendant Garnier also stated he was confident that newly granted

patents on Augmentin, would keep competition at bay until 2013.

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17. On December 27, 2000, the start of the Class Period, the merger between Glaxo

Wellcome and SmithKline Beecham was completed. Trading in the shares of GSK commenced on

the London Stock Exchange and trading also commenced on GSK American Depositary Receipts

(ADRs) on the New York Stock Exchange.

18. The FDA approves drugs for human use if they are safe and effective as determined

through scientifically conducted clinical studies. Throughout the Class Period, GSK manufactured

and sold paroxetine under the name Paxil in the United States and under the name Seroxat in Great

Britain (hereinafter, “Paxil”). Paxil is a selective serotonin re-uptake inhibitor (SSRI) approved

for treating depression, panic, obsessive compulsive disorder, post traumatic stress disorder, social

anxiety disorder, premenstrual dysphoric disorder general anxiety disorder in adults. It was not

approved for any condition or illness in children and adolescents. However, physicians are allowed

to prescribe FDA-approved drugs for conditions or diseases for which FDA approval has not been

obtained when, through the exercise of independent professional judgment, the physician determines

that the drug in question is an appropriate treatment for an individual patient. This practice is referred

to as "off-label" use, and prescribing paroxetine for children and adolescents is an off-label use.

19. Approximately 2.1 million prescriptions for paroxetine were written for children

and adolescents in the United States during 2002. Nearly 900,000 of these prescriptions were for

youngsters whose primary diagnosis was a mood disorder, the most common of which is

depression. It is estimated that one-third of such prescriptions are written by non-psychiatrists,

many by family practitioners and pediatricians. Prescriptions for paroxetine to treat mood

disorders in children and adolescents translated into US sales for GSK of approximately

$55 million in 2002, and much more world-wide.

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20. GSK has misrepresented information concerning the safety and efficacy of

paroxetine for treating MDD in children and adolescents. GSK has allowed positive information

about pediatric use of paroxetine to be disclosed publically, but has withheld and concealed

negative information concerning the safety and effectiveness of the drug as a treatment for

pediatric MDD.

21. GSK selectively released only data from favorable studies regarding Paxil and

concealed data from unfavorable studies, using its employees, paid consultants, and unwitting

researchers as conduits to disseminate the misleading information from these studies to the public

and investors, as follows:

22. From May 30, 1998 through June 4, 1998, Drs. M.B. Keller, N.D. Ryan and B.

Birmaher, et al., presented a poster at the American Psychiatric Association (“APA”) Annual

Meeting in Toronto, Canada, entitled “Efficacy of [Paxil] in adolescent depression.” This poster

found Paxil efficacious in children and adolescents.

23. In 1998, Drs. K.D. Wagner, B. Birmaher and G. Carlson et al. presented a poster at

the New Clinical Drug Evaluation Unit (“NCDEU”) Annual Meeting in Boca Raton, Florida, entitled

“Safety of [Paxil] and imipramine in the treatment of adolescent depression.” This poster found

Paxil efficacious in children and adolescents.

24. In October 1998, Drs. R. Berard and N. Ryan presented a poster at the European

College of Neuropsychopharmacology Annual Meeting in Paris, France, entitled “Adolescent

depression: Efficacy of [Paxil].” This poster found Paxil efficacious in children and adolescents.

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25. In August, 1999, Dr. C. Gagiano presented a poster at the World Congress of

Psychiatry Meeting Hamburg, Germany, entitled “[Paxil] in adolescent depression.” This poster

found Paxil efficacious in children and adolescents.

26. In December, 1999, Drs. G.J. Emslie, K.D. Wagner and M.A. Riddle, et al. presented

a poster at the American College of Neuropsychopharmacology (“ACNP”) Annual Meeting in

Acapulco, Mexico, entitled “Efficacy and safety of [Paxil] in the treatment of children and

adolescents with OCD [obsessive compulsive disorder].” This poster found Paxil efficacious in

children and adolescents.

27. In December, 1999, Dr. Karen Wagner, one of the authors listed on the published

article concerning GSK’s study to assess the safety and efficacy of Paxil in treating children and

adolescents, Study 329, spoke at a meeting of GSK Neuroscience consultants, at which she discussed

Study 329. She was quoted by an internal GSK newsletter as having said: “We can say that [Paxil]

has both efficacy and safety data for treating depression in adolescents.”

28. From May 13 - 18, 2000, Drs. B. Birmaher, J.P. McCafferty and K.M. Bellew, et al.,

presented a poster at the APA Annual Meeting in Chicago, Illinois, entitled “Comorbid ADHD and

disruptive behavior disorders as predictors of response in adolescents treated for major depression.”

This poster found Paxil efficacious in children and adolescents.

29. From May 30, 2000 through June 2, 2000, Drs. K.D. Wagner, G.J. Emslie and B.

Birmaher, et al., presented a poster at the NCDEU in Boca Raton, Florida, entitled “Safety of [Paxil]

in the treatment of children and adolescents with OCD.” This poster found Paxil efficacious in

children and adolescents.

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30. The above statements each remained alive and uncorrected in the market at the

beginning of the Class Period.

CLASS PERIOD STATEMENTS AND EVENTS

GSK’S PUBLIC STATEMENTS CONCERNING PAXIL’S USE ON CHILDREN

31. On February 21, 2001, GSK announced preliminary results for the year ended

December 31, 2000. GSK reported Paxil sales of £1.55 billion, an increase of 17% from the year

before.

32. From May 5 - 10, 2001, Drs. D.A. Geller, J. Biederman and D.J. Carpenter, et al.,

presented a poster at the APA Annual Meeting in New Orleans, Louisiana, entitled “Comorbid

psychiatric illness and response to treatment in pediatric OCD.” This poster found Paxil efficacious

in children and adolescents.

33. From May 28 - 31, 2001, Drs. D.A. Geller, J. Biederman and K.D. Wagner, et al.,

presented a poster at the NCDEU Annual Meeting in Phoenix, Arizona, entitled “Comorbid

psychiatric illness and response to treatment, relapse rates and behavioral adverse event incidence

in pediatric OCD.” This poster found Paxil efficacious in children and adolescents.

34. Defendants commissioned Drs. M.B. Keller, N.D. Ryan and M. Strober, et al., to

write an article about one of GSK’s allegedly successful Paxil studies, Study 329. It was published

in an article in the Journal of the American Academy of Child and Adolescent Psychiatry, entitled

“Efficacy of [Paxil] in the treatment of adolescent major depression: A randomized, controlled trial.”

J Am Acad Child Adolesc. Psychiatry, 2001 Jul;40 (7):762-72. This article concluded that: “[Paxil]

is generally well tolerated and effective for major depression in adolescents.”

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35. In November, 2001, GSK issued a Medical Information Letter regarding the use of

Paxil to treat major depressive disorder (“MDD”) in children and adolescents, which reported studies

with positive efficacy results. GSK also enclosed a published article regarding its favorable study

with the Medical Information Letter.

36. On May 19 - 23, 2002, Drs. D. Gallagher, C. Gardiner and D.J. Carpenter presented

a poster at the APA Annual Meeting in Philadelphia, Pennsylvania, entitled “Interim Results: Long-

term safety of [Paxil] in pediatric patients.” This poster found Paxil efficacious in children and

adolescents.

37. In June, 2002, Drs. D.A. Geller, K.D. Wagner and G.J. Emslie, et al., presented a

poster at the NCDEU Annual Meeting in Boca Raton, Florida, entitled “Efficacy of [Paxil] in

pediatric OCD: Results of a multicenter study.” This poster found Paxil efficacious in children and

adolescents.

38. In June, 2002, Drs. K.D. Wagner, E. Wetherhold and D.J. Carpenter, et al., presented

a poster at the NCDEU Annual Meeting in Boca Raton, Florida, entitled “Safety and tolerability of

[Paxil] in children and adolescents: Pooled results from four multicenter, placebo-controlled trials.”

This poster found Paxil efficacious in children and adolescents.

39. From October 22 - 27, 2002, Drs. D.A. Geller, K.D. Wagner, and G.J.Emslie, et al.,

presented a poster at the American Academy of Children in Adolescent Psychiatry Annual Meeting

in San Francisco, California, entitled “Efficacy of [Paxil] in pediatric OCD: Results of a multicenter

study.” At that same meeting, Drs. K.D. Wagner, M.B. Stein and R. Berard, et al, presented a poster

entitled “Efficacy of [Paxil] in childhood and adolescent social anxiety disorder.” Also at that

meeting, Drs. K.D. Wagner, E. Wetherhold and D.J. Carpenter et al, submitted an abstract entitled

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“Safety and tolerability of [Paxil] in children and adolescents: Pooled results from five multicenter,

placebo-controlled trials.” These posters and abstract found Paxil efficacious in children and

adolescents.

40. In December, 2002, K.D. Wagner, E. Wetherhold and D.J. Carpenter , et al.,

published an article in the Journal of Child and Adolescent Psychopharmacology, entitled “Safety

and tolerability of [Paxil] in children and adolescents: Pooled results from four multicenter, placebo-

controlled trials.” This article found Paxil efficacious in children and adolescents.

41. In December, 2002, Drs. D.A. Geller, K.D. Wagner, and G.J.Emslie published an

article in the Journal of Child and Adolescent Psychopharmacology, entitled “Efficacy and safety

of [Paxil] in pediatric OCD: Results of a double-blind, placebo-controlled trial.” This article found

Paxil efficacious in children and adolescents.

42. On December 8 - 12, 2002, Drs. K.D. Wagner, M.B. Stein and R. Berard, et al.,

presented a poster and the ACNP Annual Meeting in San Juan, Puerto Rico, entitled “Efficacy of

[Paxil] in childhood and adolescent social anxiety disorder.” This poster found Paxil efficacious in

children and adolescents.

43. In January, 2003, Drs. A. Braconnier, R. Le Coent and D. Cohen published an article

in the Journal of the American Academy of Child and Adolescent Psychiatry, entitled “[Paxil] versus

clomipramine in adolescents with severe major depression: A double-blind, randomized, multicenter

trial.” This article found Paxil efficacious in children and adolescents

44. On May 17 - 22, 2003, Drs. K.D. Wagner, E. Wetherhold and M. Gee, et al.,

presented a poster at the APA Annual Meeting in San Francisco, California, entitled “Remission of

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pediatric social anxiety disorder with [Paxil].” This poster found Paxil efficacious in children and

adolescents.

45. On May 17 - 22, 2003, Drs. R. Berard, K.D. Wagner, and D.J. Carpenter, et al.,

presented a poster at the APA Annual Meeting in San Francisco, California, entitled “SSRI therapy

of pediatric patients with social anxiety disorder or OCD.” This poster found Paxil efficacious in

children and adolescents.

46. In May, 2003, Drs. K.D. Wagner, E. Wetherhold and M. Gee, et al., presented a

poster at the NCDEU in Boca Raton, Florida, entitled “Remission of pediatric social anxiety disorder

with [Paxil].” This poster found Paxil efficacious in children and adolescents.

47. The various statements in the preceding paragraphs were all sponsored by and/or

known to GSK, which was instrumental in publicizing them. They were each misleading for failing

to disclose other negative studies known to GSK.

48. On June 2, 2004, the Attorney General for the State of New York sued GSK based

upon GSK’s suppression of adverse studies relevant to Paxil use to treat children and adolescents.

In response to this announcement, GSK stock dropped from $42.77 on June 1 to $41.39.

49. On August 5, 2004, The Wall Street Journal published an article which reported that

a new analysis by the FDA had confirmed the link between SSRIs and suicidal tendencies in young

people.

50. On August 26, 2004 New York Attorney General Eliot Spitzer and GSK announced

a settlement in which GSK agreed to release previously unpublished data about the safety and

effectiveness of the antidepressant drug Paxil. As part of the settlement, GSK’s drug tests for Paxil

were published on GSK’s website. Also, GSK agreed to pay $2.5 million.

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51. On December 9, 2004, the ABC News’ program “Primetime Live” did a story on

Paxil concerning its effects on children and its causing withdrawal symptoms. As part of the story

ABC published internal documents from GSK that were previously unavailable. These documents

are still publicly viewable at http://abcnews.go.com/Health/story?id=311956&page=1 As a result

of these disclosures GSK’s price declined on December 10 from $45.08 to $44.82.

52. Ono of the documents is a GSK memo dated August 16, 2001 to its sales force in

2001 touting the drug's “remarkable efficacy and safety in the treatment of adolescent depression”

and that the drug was a "truly a remarkable product that continues to demonstrate efficacy." This

memo was sent to its sale force even though internal studies by GSK had concluded that Paxil had

little or no effect in treating depression in children and adolescents. And as far back as 1997, the

company was aware of studies reporting suicide-related behaviors in young patients taking the drug.

53. The story also noted that, according to the 1997 review, one study found that 25

percent of patients taking Paxil in one experienced discontinuation symptoms (vs. 5.9 percent for

patients taking a placebo). In a study of patients with major depression, 42 percent of the patients

taking Paxil experienced one discontinuation symptom. However, an internal 1998 “business plan

guide” for sales reps instructed them to “minimize concerns surrounding discontinuation symptoms.”

Sales reps were also told to explain to doctors that the “discontinuation incident rate is two in 1,000

patients.” This rate is markedly different from the results of the studies in the safety review published

nine months earlier.

54. In a company-sponsored education program for sales representatives, “withdrawal

syndrome” was clearly defined as “a class effect that can occur when an SSRI is stopped abruptly.

Symptoms may include asthenia, flu-like symptoms, fatigue, dizziness, nausea, and sleep

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disturbances (insomnia, vivid dreams or nightmares).” However, the next direction recommended

reps avoid using the term: “instead of ‘withdrawal syndrome,’ which implies addictive properties,

try to refer to this phenomenon as ‘discontinuation symptoms.’” One vivid reminder of the

importance of Paxil to GSK is found on a May 1997 sales memo. Sales reps are reminded, “Let's

face it in the end. [sic] The only thing the anxious and agitated patient will be saying is: ‘Where's

my Paxil!!!!!!’” The comment is illustrated by a cartoon of a screaming woman.

55. As if to underscore the importance of Paxil to GlaxoSmithKline, another company

sales document graphically explained why discontinuation is an issue. The answer: $1 billion, the

total sales of Paxil and Seroxat (a related SSRI) as of September 1997. This statement is illustrated

by a large, black money bag.

56. In a June 5, 1997 memo, a public relations firm working for GSK, Ruder-Finn drafted

a letter on the topic of discontinuation symptoms that was apparently intended for publication by a

company spokesperson or possibly a physician. The memo explained that “complete duplication will

look fishy if we decide to submit both. Are there other references we could draw on for the various

drugs? At the very least, we can't have the references appear in the same order.” The draft letter

listed three physicians as the intended senders, including Dr. Bruce Pollock of the University of

Pittsburgh.

57. A letter by Pollock appeared in the October 1998 issue of the Journal of Clinical

Psychiatry. Although Pollock's letter was not the same as what the PR company drafted, it made

nearly every point in the draft — almost in the same sequence. The company's 1998 business plan

guide for sales reps cited Pollock's letter as “an effective tool for addressing discontinuation.”

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GSK'S MISREPRESENTATIONS IN ITS MEDICAL INFORMATION LETTERS:

NOVEMBER 2001 THROUGH JANUARY 2003

58. GSK also provides information concerning off-label uses of its drugs to physicians

through its Medical Information Letters, but only when the physician makes an unsolicited

request for the information. As of November 2001, GSK had completed and approved the final

clinical reports on studies 329, 377 and 701, and the extension phase of study 329. GSK issued

Medical Information Letters in November 2001 and January 2003, both of which misrepresented the

information concerning the safety and efficacy of paroxetine for treating MDD in children and

adolescents as GSK knew it at the time. GSK enclosed the published article concerning study

329 with some of the Medical Information Letters.

59. Neither of these Medical Information Letters reported the four efficacy outcomes

from study 329 that were not statistically significant. Nor did the Medical Information Letters

refer to the fact that study 329 had an extension phase in which the rate of relapse did not differ

between the paroxetine and placebo groups. While all of the efficacy outcomes from study 377

placebo were not statistically significant, the Medical Information Letters failed to communicate

GSK's own conclusion that there was no clinical significance, as well as no statistical significance,

in the outcomes from study 377. Nor did these Medical Information Letters include

any reference to study 701 in which placebo outperformed paroxetine. Each of these Medical

Information Letters, however, reported open label (non-placebo-controlled) studies with positive

efficacy results.

60. GSK reported emotional lability data from its MDD paroxetine studies in only one

of the two Medical Information Letters it sent to physicians during this period. Even when GSK

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reported the emotional lability information in one Letter, which was exclusively from study 329,

it did so only for the paroxetine group. Without the comparative data from the placebo group,

these data on possibly suicide-related thinking and acts lost much of their meaningfulness.

61. The Medical Information Letter that reported emotional lability data from study 329

also provided information on other categories of adverse events observed during study 716. This

Letter, however, did not inform physicians that in study 716 emotional lability was experienced by

6.8 percent of the participants (children and adolescents) with a primary diagnosis of MDD and in

12.5 percent of the adolescents with MDD. Extension study 329 was not mentioned in any of the

Medical Information Letters, although in this study emotional lability was observed in 7.7 percent

of the paroxetine group versus 3.0 percent in the placebo group.

62. GSK’s representations in its Medical Information Letters concerning its safety and

effectiveness on children and adolescents were false and misleading because GSK failed to disclose

that the results of its own drug studies showed that Paxil was less effective than placebos and that

Paxil use doubled the risk of self-harm. Because of its numerous drug studies involving Paxil, GSK

knew that Paxil was not effective in treating adolescents and children. More important that simply

showing that Paxil was ineffective, these drug studies showed that Paxil was actually harmful to

adolescents and children. When the results of these studies became known, Paxil was banned as a

treatment in many countries. Additionally, the FDA, while it did not ban Paxil, gave it a “blackbox

warning” that it could increase suicides in children. These measures greatly decreased the sale of

Paxil worldwide.

PAXIL DRUG STUDIES

63. GSK conducted three randomized, placebo-controlled, double-blind clinical

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studies to assess the safety and efficacy of paroxetine in treating children and adolescents

diagnosed with MDD. These studies are referred to by GSK as studies 329, 377 and 701.

64. GSK management approved the final clinical reports for studies 329 and 377 in

1998 and for study 701 on July 31,2001. GSK has represented that studies 329, 377 and 701 were

“well designed and appropriate to investigate whether paroxetine was efficacious in children and

adolescents with MDD.” The FDA has also referred to them as “well-controlled trials.”

65. GSK conducted two additional studies that were extensions of studies 329 and 701.

The extension of study 329 (final clinical report approved by GSK on October 31,2001), which

included only youngsters with MDD, was not randomized. It was designed to evaluate relapse rate

and longer-term safety, not efficacy. Study 716 (final clinical report approved by GSK on September

16, 2002), was not randomized, placebo-controlled or blind (all participants received paroxetine

during the extension) and included participants from completed studies of pediatric patients with

MDD (study 701) or OCD. It examined the longer-term safety of paroxetine.

66. These studies were published on GSK’s website in 2004 as part of its settlement with

New York Attorney General Eliot Spitzer’s lawsuit alleging that GSK hid data showing Paxil was

harmful to children.

67. GSK's studies did not demonstrate that paroxetine is efficacious in treating

children and adolescents with MDD. Two of the three GSK placebo-controlled studies (377 and

701) failed to show that paroxetine was more effective than placebo or that there was any evidence

of efficacy for treating MDD in children and adolescents. Study 377 found that "[n]o clinically or

statistically significant differences were detected between paroxetine and placebo in either of the

[two] primary efficacy variables," or on any of the secondary measures. In study 701, placebo

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actually outperformed paroxetine on the primary efficacy measure and there were no statistically

significant differences between paroxetine and placebo on any of the secondary measures.

68. Another placebo-controlled trial, study 329, presented a mixed picture of paroxetine.'s

efficacy in treating MDD in a pediatric population. Before study 329 began, GSK specified seven

measures of efficacy, two of which it identified as "primary" endpoints and five as "secondary"

endpoints. The efficacy of paroxetine was not measured as superior to placebo at a level of statistical

significance on either of the primary measures. It was measured as superior to placebo on three of

the five secondary ones, as well as on an endpoint that was added to the analysis.

69. Worse, GSK's studies showed the possibility of a link between paroxetine and an

increased risk of suicidal thoughts and acts in adolescents. Combined, studies 329, 377, and 701

showed that certain possibly suicide-related behaviors were approximately two times more likely

in the paroxetine group than the placebo group. The extension phase of study 329 and study 716

provided support for the presence of such a risk in youngsters taking paroxetine.

70. In the five studies (329, 377,701, 329-extension and 716), GSK coded suicidal

thinking and acts, as well as mood swings, crying and similar behaviors, as "emotional lability." In

study 329, emotional lability was recorded for 6.5 percent of the participants on paroxetine (for five

of six of these youngsters, the events were classified as "serious") and only 1.1 percent in the placebo

group (also "serious"). In study 377, emotional lability occurred in 4.4 percent of the paroxetine

group, while it occurred in 3.2 percent in the placebo group. In study 701, emotional lability

occurred in 3.6 percent of the paroxetine group participants who remained in the study for the

tapering-off or follow-up periods, while it occurred in 1.4 percent of the same group of participants

who took placebo.

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71. In the 329 extension study, emotional lability was found in 7.7 percent of the

youth on paroxetine (four individuals) and 3.0 percent of the placebo group. The reported

incident for three of the four paroxetine youngsters was intentional overdose, and the youth from

the placebo group was reported as suicidal and homicidal. The adverse events for these four

participants were categorized as serious.

72. In study 716, which had no placebo group, emotional lability occurred in 6.8

percent of the participants (children and adolescents) with a primary diagnosis of MDD and in

12.5 percent of the adolescents with MDD.

GSK'S PRESENTATION OF POSITIVE INFORMATION AND ITS

MISREPRESENTATION AND SUPPRESSION OF NEGATIVE INFORMATION.

73. Because its studies failed to demonstrate efficacy for paroxetine in treating MDD in

children and adolescents and suggested a possible increased risk of suicidal thinking and acts for

these youth, GSK sought to limit physicians' access to only the most favorable aspects of the

data from these studies. To accomplish this, GSK embarked on a campaign both to suppress and

conceal negative information concerning the drug and to misrepresent the data it did reveal

concerning the drug's efficacy and safety.

74. An internal GSK document from 1998 concluded that, in light of the mixed

efficacy outcomes from study 329 and the entirely negative results of study 377, GSK's "target"

was "[t]o effectively manage the dissemination of these data in order to minimize any potential

negative commercial impact.” As part of its campaign to "manage the dissemination of these data,"

the document recommended that GSK prepare and cause the publication of a full article on the only

study with some favorable conclusions, study 329.

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75. Thereafter, and in accordance with the recommended plan, an article that described

and analyzed the results of study 329, referred to above as “Efficacy of [Paxil] in the Treatment of

Adolescent Major Depression: a Randomized, Controlled Trial” was published J Am Acad Child

Adolesc. Psychiatry, 2001 Jul;40 (7):762-72. The authors of this article included two GSK

employees who authored GSK's final clinical report for study 329.

76. Although it allowed the data from study 329 to be published, GSK concealed and

suppressed studies 377 and 701, which failed to show that paroxetine was more effective than

placebo in treating MDD in children and adolescents. While information from study 377 was

presented at a medical convention in 1999, neither study 377 nor study 701 had ever been published,

and they remained unavailable to physicians until recently, same as the results of the extension phase

of study 329 and study 716. (Interim results from study 716 were presented at a medical conference

in 2002).

77. The data in studies 377 and 701, as well as the data from the extension phase of

study 329 and study 716, are material to the risk-benefit balance and, therefore, to a physician's

decision whether to prescribe paroxetine for a child or adolescent with MDD. This is especially

true in light of the publication of the positive results study 329.

78. GSK has repeatedly misrepresented the safety and efficacy outcomes from its studies

of paroxetine as a treatment for MDD in a pediatric population to its employees who promote

paroxetine to physicians. These sales representatives are the GSK personnel who

routinely have personal contact with the physicians who decide whether to write prescriptions for

paroxetine.

79. On a cover memo that transmitted the published article concerning study 329 to

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"All Sales Representatives Selling Paxil," Zachary Hawkins, GSK Paxil Product Management,

stated, "Paxil demonstrates REMARKABLE Efficacy and Safety in the treatment of

adolescent depression." (Type face as in original). Study 329 did not demonstrate remarkable

efficacy and safety in treating adolescent depression. Although the memo contained the boiler-plate

language, "FYI Article will be stamped: This article is for pharmaceutical consultants' Information

only. Do not use it with, or distribute it to physicians," it is clear that this was the intent. The sole

reason GSK had to provide this information to sales representatives was to falsely characterize

study 329 in their communications with physicians. Indeed, it appears that these sales

representatives had paroxetine "targets" for psychiatrists who treat only children and adolescents,

because GSK informed its sales force that these targets would be eliminated in 2003.

80. In December 1999, Dr. Karen Wagner, one of the authors listed on the published

article concerning study 329, spoke at a meeting of GSK Neuroscience consultants, at which she

discussed study 329. She was quoted by an internal GSK newsletter as having said, "We can say

that paroxetine has both efficacy and safety data for treating depression in adolescents." Although

study 377 had also been completed when this newsletter was distributed, its negative results were

not mentioned.

THE TRUTH CONCERNING PAXIL AND CHILDREN BEGINS TO EMERGE

81. In 2002, as part of its application for FDA approval of paroxetine to treat OCD in

children and adolescents, GSK submitted the final clinical reports for studies 329, 377 and 701,

which assessed the safety and efficacy of paroxetine in the treatment of MDD in pediatric

patients. GSK subsequently provided these materials to the drug-regulatory agencies of other

countries. The studies raised issues for all the drug-regulatory agencies regarding the efficacy

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and safety of pediatric use of paroxetine for treating MDD.

82. In documents submitted in response to safety and risk-benefit issues raised by various

drug-regulatory agencies, including the FDA, the UK's Medicines and Healthcare products

Regulatory Agency ("MHRA ") and the European Agency for the Evaluation of Medicinal Products

("EMEA "), GSK admitted that studies 329, 377 and 701 "all failed to separate paroxetine from

placebo overall and so do not provide strong evidence of efficacy in this indication."

83. On June 10,2003, the MHRA stated that its analyses of GSK's studies suggested

the risk of self-harm and potential suicidal behavior of youngsters with MDD was between 1.5

and 3.2 times greater for the paroxetine group than for placebo. The MHRA reported that its

Committee on Safety of Medicines advised that paroxetine "should not be used in children and

adolescents under the age of 18 years to treat depressive illness." The agency also added a

contraindication for this use on the paroxetine labeling in the UK, which substantially

curtailed its use as a treatment for pediatric MDD.

84. The Irish Medicines Board followed suit in December 2003.

85. In response to the MHRA's June 10, 2003 warning, GSK admitted in a letter to

physicians in the UK that the "clinical trials in children and adolescents under 18 years of age

failed to demonstrate efficacy in Major Depressive Disorder and that there was a doubling of the

rate of reporting of adverse events in the paroxetine group compared with placebo, including ...

emotional lability." In a press release GSK issued in the UK, the company admitted that, in its

studies of youngsters with depression, it had observed "a difference between [paroxetine] and

placebo in terms of suicidal thinking or attempts, particularly in adolescents."

86. In a submission GSK made to the EMEA and subsequently sent to the FDA on

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November 17, 2003, GSK admitted that the risk-benefit balance for treating pediatric MDD

patients using paroxetine was unfavorable. Citing the overall lack of statistical significance in the

efficacy outcomes from studies 329, 377 and 701 and the possibly increased risk of suicidal

thinking and acts for these youth, especially for older adolescents, GSK stated, "it must be

concluded that the benefit-risk balance is in [favor] of not treating children and adolescents

[diagnosed with MDD] with paroxetine." GSK also stated in this submission, "in view of a safety

signal concerning a possible increase in suicidal behavior, particularly in adolescents with

MDD, the use of paroxetine in children and adolescents with MDD cannot be recommended."

87. On June 19,2003, the FDA issued a Talk Paper, which stated that it was reviewing

the data from studies of paroxetine use in children and adolescents with MDD to assess possible

increased risk of suicidal thinking and attempts in this population. Noting the absence of

evidence of efficacy, the FDA also stated that although the review of the safety data was not

complete, "FDA is recommending that Paxil not be used in children and adolescents for the

treatment of MDD." In a second Talk Paper in October 2003, the FDA did not retract its finding

that "three well-controlled" clinical trials of paroxetine did not establish its efficacy in treating

MDD in the pediatric population, but it noted the scientific fact that the lack of evidence of

efficacy in any particular study is not "definitive" evidence that the drug is not effective. It also

stated that the possibility of a link between paroxetine and an increased risk of suicidal thoughts and

acts was under agency review and advised that paroxetine and other drugs in its class (Selective

Serotonin Reuptake Inhibitors or "SSRls") be used with caution. The FDA strengthened its advice

to use SSRIS with caution in a third FDA Talk Paper issued March 22, 2004.

88. On July 15, 2003, after discussions with Health Canada, the Canadian regulatory

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agency, GSK issued a public advisory "alerting patients, their parents or guardians, and

healthcare professionals that until further information is available Paxil should not be given to

pediatric patients (children and adolescents under 18 years of age), due to concerns of a possible

increased risk of suicidal thinking, suicidal attempts or self-harm. Paxil must not be used in

pediatric patients with major depressive disorder, due to the additional fact that studies have

failed to show that Paxil was effective in this patient population."

89. On April 22, 2004, the Committee for Proprietary Medicinal Products of the

EMEA announced that, following its review of scientific data, it was recommending to the

European Commission that paroxetine not be prescribed for pediatric patients.

90. Despite its 2003 admissions to regulatory agencies and to the public in the UK and

Canada, and despite the agencies' negative assessment of efficacy and articulated safety concerns

about the use of paroxetine by children and adolescents with MDD, GSK continues to

misrepresent and conceal information in an ongoing effort to encourage physicians to prescribe

paroxetine to these youngsters.

91. For example, GSK revised its Medical Information Letter three times after the

FDA's first Talk Paper in June 2003. While these Letters included all of the data from study 329,

none cited the existence of the extension phase of this study, which showed no difference in

relapse rate between paroxetine and placebo. One of these three 2003 Medical Information

Letters did not report any additional information concerning emotional lability beyond what was

reported in the earlier Medical Jnforn1ation Letters that pre-dated any of the Talk Papers. None of

the Letters reported the particularly negative emotional lability data from study 329-extension and

study 716, although they cited other non-randomized studies that had no placebo control,

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Moreover, all of these communiques to physicians referenced the FDA Talk Papers, but one

failed to acknowledge the absence of evidence of efficacy from the clinical studies, which the

FDA's first Talk Paper had noted.

92. GSK also issued a fourth Medical Information Letter explicitly responding to the

FDA's first Talk Paper, which omitted any reference to the agency's finding of no evidence of

paroxetine's efficacy in treating MDD in a pediatric population. This Medical Information Letter

was specifically focused on the use of paroxetine to treat children and adolescents with MDD,

and stated: "GlaxoSmithKline stands firmly behind Paxil as a safe and effective medication that

continues to help millions of patients suffering from mood and anxiety disorders. We will

continue to work with the FDA on the safety evaluation." In the context of this document, the

quoted statement appeared to announce GSK's position concerning paroxetine as a treatment for

MDD in a pediatric population, suggesting it is safe and effective for this use.

93. GSK further controlled physicians' access to negative information about

paroxetine as a treatment for MDD in children and adolescents by controlling the information

provided to its own personnel. While GSK attached the FDA's June 19,2003 Talk Paper to a

July 15, 2003 internal company newsletter, it instructed the sales representatives that the copy of

the Talk Paper was "for your information only, and it [sic] not to be used with your customers." This

2003 newsletter also informed the sales personnel, who communicate directly with physicians, that

study 329, as described in the published article, was able to establish efficacy despite a high

placebo-response rate. At most, study 329 presents a mixed picture on efficacy.

94. Although, in response to the British and Canadian regulatory actions, GSK

distributed letters to the physicians in those countries informing them that clinical studies had

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failed to demonstrate the efficacy of paroxetine in MDD in the pediatric population and that there

was a doubling of the rate of reporting of adverse events, including emotional lability, it did not

provide American physicians with this same information. Instead, it sent the Medical

Information Letters, with their omissions of material information, to only those physicians who

specifically requested information concerning paroxetine use as a treatment for MDD in children

and adolescents.

95. GSK took affirmative steps to conceal negative information about the use of

paroxetine to treat MDD in children and adolescents from the American public. Unlike GSK's

June 10, 2003 press release in Britain, which disclosed that GSK had "seen a difference between

[paroxetine] and placebo in terms of suicidal thinking or attempts [in its MDD studies]

particularly in adolescents," GSK's June 19,2003 American press release noted only that "there

is no evidence that Paxil is associated with an increased risk of suicidal thinking or acts in adults"

and that "not a single person [who participated in the pediatric paroxetine trials] committed

suicide." The American press release provided no safety or efficacy information material to

treatment decisions for pediatric patients with MDD.

96. Virtually all physicians have access to the results of study 329 through the

published article. GSK's failure to disclose to these physicians the findings of studies 377, 701, and

the safety outcomes of studies 329-extension phase and 716, created the false impression

that, based on the scientific evidence in GSK's control, there is no question about paroxetine's

safety and efficacy in treating MDD in children and adolescents and, therefore, the risk-benefit

balance is well settled and generally favorable for this off-label use. This impression was

reinforced by GSK's mischaracterization of much of the information it did disclose, its further

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concealment and suppression of negative information, and its paroxetine-related targeting of

psychiatrists who treat only pediatric patients.

FRIVOLOUS PATENT LITIGATION

97. In addition to making false and misleading statements and failing to disclose known

negative effects of Paxil obtained during its drug trials on children and adolescents, throughout the

Class Period, GSK filed a number of frivolous lawsuits to prevent other drug makers from marketing

less expensive, generic versions of Paxil and Augmentin.

98. Prior to the beginning of the Class Period, both Paxil and Augmentin had been GSK

best selling drugs.

99. GSK represented throughout the Class Period that its patent on Paxil would expire

in 2006. This representation was made in GSK’s Form 20-F for the years ending December 31,

1999, 2000, and 2001.

100. The false and misleading information that GSK’s patent for its best selling drug,

Paxil, patent would expire in 2006 was widely distributed. As announced in the February 19, 2001

edition of the Financial News, in an article entitled “Pharmaceutical Company to Soothe Investors'

Fears” noted that “GSK already has a strong franchise in treating depression, thanks to

Paxil/Seroxat. Paxil, which is similar to Prozac, is the group's biggest-selling drug, but it faces the

loss of its patent protection from 2006.”

101. On February 21, 2001 GSK released its Preliminary Announcement of Results for the

year ended 31st December 2000. GSK said in part that “Strong growth from key therapy areas: CNS

growth driven by Seroxat/ Paxil. In GSK's largest sales category, CNS, excellent growth of 16 per

cent to #3,279 million was driven by an outstanding performance from Seroxat/Paxil, which

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increased by 17 per cent to[1,550 million English pounds]. During 2000, Paxil became the market

leader in the US SSRI (selective serotonin reuptake inhibitor) market in new retail prescriptions.

Paxil [benefitted] throughout the world from its new indication for Social Anxiety Disorder. GSK's

strategy of broadening the label for new indications continued with filings for Generalised Anxiety

Disorder and Post Traumatic Stress Disorder, and the expected launches during 2001 will contribute

to further growth of Paxil in the USA. In Europe, where Seroxat continues to be the number one

antidepressant, its sales grew by 11 per cent to #334 million, while in the RoW [rest of the world]

growth was 29 per cent to #159 million. Paxil was launched in Japan at the end of 2000 and is off

to a strong start. In the growing anti-depressant market, DTC campaigns [focusing] on social anxiety

disorder helped Paxil to grow by 18 per cent.

102. Concerning its patents, GSK stated that it was engaged in litigation in the USA and

Europe regarding infringement of the Group's patents related to Paxil/Seroxat. . . . GSK has become

aware of [authorizations] issued by regulatory authorities in Europe for paroxetine hydrochloride

anhydrate, a variant of paroxetine hydrochloride hemihydrate, the active ingredient in Seroxat/Paxil,

following the expiration of the data exclusivity period in European markets. GSK believes that

marketing of a paroxetine hydrochloride anhydrate product by third parties in European countries

would infringe its patents and expects to vigorously litigate its position should a third party launch

such a product.

103. On April 12, 2001, GSK published its Form 20-F for the year ending on December

31, 2000. In this Form-20 GSK stated that its patent for Seroxat/ Paxil paroxetine expired

“During or after 2006"

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104. Concerning its intellectual property litigation, GSK made the following

announcements. In July 1998 the Group filed an action against TorPharm, Apotex nc and Apotex

Corp in the US District Court for the Northern District of Illinois charging infringement of the

Group's patent for paroxetine hydrochloride hemihydrate ( Paxil/ Seroxat). TorPharm, through its

US agent, Apotex Corp, filed an Abbreviated New Drug Application (ANDA) with the US Food and

Drug Administration (FDA) seeking approval to introduce a generic form of Paxil into the US

market prior to expiration in 2006 of the Group's patent. TorPharm asserted in the ANDA that its

compound does not infringe the Group's patent, and in February 2000 challenged the validity of that

patent. The parties are still engaged in the discovery process; no trial date has been set.

105. In 1999 the Group filed an action against Geneva Pharmaceuticals and in 2000 against

Zenith Goldline in the US District Court for the Eastern District of Pennsylvania charging

infringement of the Group's patents for paroxetine hydrochloride hemihydrate ( Paxil/ Seroxat).

Geneva and Zenith Goldline filed ANDAs for paroxetine hydrochloride asserting that their

compounds do not infringe the Group's patents or that the patents are invalid. In addition the Group

has filed new actions against TorPharm in the Eastern District of Pennsylvania based upon new

patents issued in 1999 and 2000 covering paroxetine. The new patents were also included in the

actions against Geneva and Zenith Goldline. Proceedings in those actions have been deferred

pending a decision on GlaxoSmithKline's motion to consolidate all Pennsylvania litigation.

106. In March 2000 GlaxoSmithKline filed an action against Pentech in the US District

Court for the Northern District of Illinois for infringement of the Group's patents for paroxetine

hydrochloride. Pentech filed an ANDA for a capsule version of Paxil, asserting that its compound

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and presentation do not infringe the Group's patents or that the patents are invalid. This matter is

still in discovery.

107. In October 2000 GlaxoSmithKline filed an action against Synthon in the US District

Court for the Middle District of North Carolina for infringement of the Group's patents for

paroxetine hydrochloride and paroxetine mesylate. Synthon filed a 505(b)(2) application (a 'paper

NDA') with the US FDA using a different salt form of paroxetine than that used in the marketed

form of Paxil. This matter is still in its early stages.

108. In January 2001 GlaxoSmithKline filed an action against Alphapharm in the US

District Court for the Eastern District of Pennsylvania for infringement of the Group's patents for

paroxetine hydrochloride. Alphapharm filed an ANDA for paroxetine hydrochloride asserting that

its product would not infringe the Group's patents or that the patents are invalid. This matter is still

in its early stages.

109. GSK also made the following false and mislead statement: “With respect to all the

pending litigation in the USA relating to Paxil, the Group believes that its patents are valid and that

the third party compounds do infringe the Group's patents, and it intends to vigorously litigate its

position.”

110. On December 30, 2002 GSK announced that the United States District Court for the

Eastern District of Pennsylvania had ruled on summary judgement motions filed by TorPharm

Pharmaceuticals (a wholly owned subsidiary of Apotex) in litigation over Paxil. The court ruled in

GSK's favor on one patent, in Apotex's favour on a second patent, holding the patent

invalid; and split the decision on the remaining two patents, holding some claims in the patents

invalid but denying Apotex's motions on other claims. GSK also announced that it believed there

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were significant hurdles preventing the launch of a generic Paxil product, and reconfirmed its

published earnings guidance for 2002 and 2003.

111. These representations were false and misleading because, unknown to its investors,

GSK did not have legitimate patent protection until 2006. Instead GSK’s representations of patent

protection were based upon the illegal practice of “evergreening” its paroxetine hydrochloride

monopoly by obtaining a dozen patents over the last decade, which if unchallenged would have

extended that monopoly until 2019 -- 27 years after the expiration of the original patent. These

patents were frivolous, non-novel and redundant, concerning chemical properties of the molecule

that have nothing to do with its effectiveness. The sole purpose of these patent filings and suits was

not to protect any conceivable novel scientific discovery, but only to support GSK’s illegal efforts

to protect their monopoly profits as long as possible. GSK has unlawfully exploited hypertechnical

patent arguments repeatedly to activate the automatic stay provisions for generic drugs under the

Hatch-Waxman Act.

GENERIC MANUFACTURES

112. Apotex, Inc. (“Apotex”) is a corporation organized under the laws of the

Dominion of Canada, with its principal place of business located at 150 Signet Drive, Weston,

Ontario, Canada, M9L 1T9. Apotex, Inc. also does business as Torpharm. Apotex is engaged in

the business of manufacturing and marketing pharmaceuticals, and applied to the United States

Food and Drug Administration (“FDA”) for permission to market a generic bioequivalent to

Paxil. On September 8, 2003, Apotex brought the first generic paroxetine hydrochloride product

to the market, in four dosage strengths.

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113. Zenith Goldline Pharmaceuticals, Inc. (“Zenith”) is a corporation organized under

the laws of the State of Florida, and maintains an office at 4400 Biscayne Boulevard, Miami,

Florida, 33137. Zenith is engaged in the business of manufacturing and marketing

pharmaceuticals, and has applied to the FDA for permission to market a generic bioequivalent to

Paxil.

114. Pentech Pharmaceuticals, Inc. (“Pentech”) is a corporation organized under the

laws of the State of Illinois, and maintains an office at 1100 Lake Cook Road, Suite 257, Buffalo

Grove, Illinois, 60089. Pentech is engaged in the business of manufacturing and marketing

pharmaceuticals, and has applied to the FDA for permission to market a generic bioequivalent to

Paxil.

115. Geneva Pharmaceuticals, Inc. (“Geneva”) is a corporation organized under the

laws of the State of Colorado, and maintains an office at 2655 W. Midway Blvd., Broomfield,

Colorado, 80038-0446. Geneva is engaged in the business of manufacturing and marketing

pharmaceuticals, and has applied to the FDA for permission to market a generic bioequivalent to

Paxil.

116. Alphapharm PTY, Ltd. (“Alphapharm”) is a limited liability company

incorporated under the laws of Australia and having its principal place of business at 12-14

Queen Street, Glebe, New South Wales, 2037 Australia. Alphapharm is engaged in the business

of manufacturing and marketing pharmaceuticals, and has applied to the FDA for permission to

market a generic bioequivalent to Paxil. On March 8, 2004, Alphapharm obtained approval of its

generic bioequivalent product, in four dosage strengths.

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THE FEDERAL SCHEME FOR APPROVAL OF PIONEER DRUGS

117. Under the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq.,

approval by the FDA is required before a company may begin selling a new drug. Pre-market

approval for a new drug, often referred to as a “pioneer” or “branded” drug, must be sought by

filing a New Drug Application (“NDA”) with the FDA demonstrating that the drug is safe and

effective for its intended use. New drugs that are approved for sale in the United States by the

FDA are typically (but not necessarily) covered by patents, which provide the patent owner with

the exclusive right to sell that new or pioneer drug in the United States for the duration of the

patents involved, plus any extension of the original patent period (the “FDA Exclusivity Period”)

granted pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, 98

Stat. 1585, 21 U.S.C. § 355 (the “Hatch-Waxman Act” or the “Act”).

118. In addition to information on safety and efficacy, NDA applicants must submit to

the FDA a list of all patents that claim the drug for which FDA approval is being sought, or that

claim a method of using the drug, and with respect to which a claim of patent infringement could

reasonably be asserted against an unlicensed manufacturer or seller of the drug.

119. Once the NDA is approved, the FDA must list any patents referenced as part of

the NDA application process in a publication known as the “Approved Drug Products With

Therapeutic Equivalence Evaluations.” 21 U.S.C. § 355(b)(1). This publication is commonly

called the “Orange Book..”

120. Pursuant to 21 U.S.C. § 355©)(2), if, after its NDA is approved, the pioneer drug

manufacturer obtains a new patent that claims the drug or methods of its use, the company must

supplement its NDA by submitting information on the new patent within 30 days of issuance.

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The FDA then lists the new patent in a supplement to the Orange Book. The FDA is required to

accept as true the patent information it obtains from patent holders and to withhold its approval

of a subsequent drug application whenever the patent holder presents a litigated dispute (baseless

or not) regarding the validity or infringement of the patent. If an unscrupulous patent holder

provides false information to the FDA or files frivolous patent infringement actions to delay the

onset of generic competition, the FDA is powerless to stop it.

121. Once the FDA approves the new drug as safe and effective, it may be used in the

United States only under the direction and care of a physician who writes a prescription,

specifying the drug by name, which must be dispensed by a licensed pharmacist. The pharmacist

must, in turn, fill the prescription with the drug brand specified by the physician, unless an AB-

rated generic version of that pioneer drug which has been approved by the FDA is available.

ABBREVIATED NEW DRUG APPLICATIONS FOR GENERIC DRUGS

122. Congress enacted the Hatch-Waxman Act in 1984 to establish an abbreviated

process to expedite and facilitate the development and approval of more affordable generic drugs,

while still allowing new drug innovators to obtain an economic return on their investments and

discoveries. To effectuate this purpose, the Hatch-Waxman Act permits a generic drug

manufacturer to file an “abbreviated” new drug application (“ANDA”), which incorporates by

reference the safety and effectiveness data developed and previously submitted by the company

that manufactured the original, “pioneer” drug. The Act also provides an economic incentive to

the generic companies to be the first to file an ANDA for a particular generic drug: a 180-day

statutory period of market exclusivity, during which time the manufacturer has the right to

market its drug free from other generic competition.

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123. Information that must be included in the ANDA includes the generic company’s

position vis-à-vis the patent that the pioneer manufacturer claims applies to the drug. The

ANDA filer must make one of four certifications. Only the so-called “Paragraph IV

Certification” is relevant here. Paragraph IV requires the ANDA filer to certify that the patent

for the pioneer drug is invalid or will not be infringed by the proposed generic company’s

product. 21 U.S.C. § 355(j)(2)(A)(vii)(IV).

124. If the ANDA contains a Paragraph IV Certification, the ANDA applicant must

provide notice to the owner of each patent that is referred to in the certification, and to the holder

of the approved NDA to which the ANDA refers. See 21 U.S.C. § 355(j)(2)(B)(I). The notice

must include a detailed statement of the factual and legal basis for the ANDA applicant’s

assertion that the patent is not valid or will not be infringed by the generic product. See id.; 21

C.F.R. § 314.95.

125. The branded drug patent owner, upon receiving a Paragraph IV Certification from

an ANDA applicant, has 45 days to initiate a patent infringement suit against the applicant. See

21 U.S.C. § 355(j)(5)(B)(iii). If no action is initiated within 45 days, the process for FDA

approval of the generic product is not delayed by patent issues. However, if a patent

infringement suit is brought within the 45-day window, FDA approval of the ANDA is

automatically postponed until the earliest of the expiration of all listed patents, the expiration of

30 months from the patent holder’s receipt of notice of the Paragraph IV Certification, or a final

judicial determination of non-infringement of all patents, whichever comes first.

126. The FDA has stated that it does not evaluate the merits of the listed patent claim,

but merely acts in a ministerial role, initiating the stay provision automatically if a patent suit is

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filed. Thus branded drug patent holders need only file a patent infringement lawsuit within 45

days of receipt of a Paragraph IV Certification in order to automatically block an ANDA

applicant’s generic drug from entering the market for up to 30 months.

GENERIC DRUGS

127. Generic drugs are drugs which the FDA has found to have the same active

chemical composition and provide the same therapeutic effects as the pioneer, brand-name drugs.

Where a generic drug is completely equivalent to a pioneer or brand-name drug, the FDA assigns

the generic drug an “AB” rating. Generic drugs are normally priced substantially lower than the

brand-name drugs to which they are bioequivalent. In July 1998, the Congressional Budget

Office (“CBO”) released a study titled “How Increased Competition from Generic Drugs Has

Affected Prices and Returns In The Pharmaceutical Industry” (the “CBO Study”). The CBO

Study concluded that generic drugs save consumers and third-party payors between $8 billion

and $10 billion per year. The study involved 21 brand-name prescription drugs that first

experienced generic competition between 1991 and 1993. It determined that the generic versions

cost initially an average of 25% less than the original brand-name drugs at retail prices, and that

as the number of generic manufacturers increases, the average prescription price of the generic

alternative falls. The CBO Study showed that when one to ten firms are manufacturing and

distributing generic forms of a particular drug, the generic retail price of that drug averages about

60% of the brand-name price. When more than 10 manufacturers have entered the market, the

average generic prescription price falls to just 34 percent of the brand-name price. With 20

manufacturers, the generic price was only 20 percent of the brand-name price. Since generic

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prices tend to fall as the number of producers rises, generic manufacturers are most profitable

when they are one of the first to enter a market.

128. The Federal Trade Commission (“FTC”) estimates that average drug prices

decline some 20% within approximately two years of generic entry. As additional manufacturers

bring generic versions of the drug to market, the price continues to drop. See Federal Trade

Commission, Generic Drug Entry Prior to Patent Expiration: An FTC Study, July 2002.

129. The CBO Study also concluded that a brand-name drug loses a significant portion

of its market share to generic competitors soon after the introduction of generic competition,

even if the brand-name manufacturer lowers prices to meet competition. The study estimated that

generic drugs capture at least 44% of the brand-name drug’s market share in just the first year of

sale.

THE AUGMENTIN PATENT LITIGATION

130. March 1, 2000, SmithKline Beecham announced that it had obtained a new US

patent on its broad-spectrum antibiotic, Augmentin. This patent was completely baseless and

filed only to illegally prohibit generic drug manufactures from selling generic forms of

Augmentin.

131. Augmentin is the brand name for the combination of an antibiotic of the penicillin

class, amoxicillin, with the substance clavulanic acid. Clavulanic acid, in its salt form, acts to

potentiate the effects of antibiotics of this class by inactivating an enzyme produced as a

defensive mechanism by the bacteria that the antibiotic is designed to destroy.

132. On July 26, 2000, in an article by the Financial Times, defendant Garnier is

quoted as identifying Paxil/Seroxat and Augmentin as “stars of the show” as these two drugs

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each brought in over a billion dollars in revenue. Defendant Garnier also stated he was confident

that newly granted patents on Augmentin, would keep competition at bay until 2013.

133. On February 2, 2002, United States District Court for the Eastern District of

Virginia, Norfolk Division ruled in Geneva Pharms. v. Glaxosmithkline PLC, 189 F. Supp. 2d

377 (E.D. VA, 2002) that GSK lost certain patent protections for Augmentin.

134. In the face of it patent lose for Augmentin, GSK went on a public relations

offensive. Defendant Garnier appeared on CNBC and the following exchange occurred:

CARL: Speaking of blockbusters, you have two very important drugs, Augmentin (ph), the big

antibiotic, Paxil (ph), the antidepressant. You said that you can get mid teens growth this year if

you can defend those patents here in the U.S. Can you?

GARNIER: Yes. We are very confident we can defend our patents.

CARL: What makes you so confident? Because it has, the courts have not always been going

your way lately.

GARNIER: Of course, but in the case of Augmentin (ph), for instance, those were patents that

were issued by the PTO. Generic companies tried to challenge those patents. They asked for a

second reading at the PTO. The PTO confirmed that those patent[s] were genuine, they were rock

solid. And we feel that the courts eventually will recognize the letter of the law and give us the

added protection for Augmentin. Paxil is a more complex story, but we're still under the 30

months stay and therefore we can confidently predict that there will be no Paxil generics in the

U.S. for a while.

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135. GSK knew or should have known that its Augmentin patent was not protected

after 2000. The original patent application for Augmentin was filed on April 17, 1975, by GSK’s

predecessor in interest, SmithKline Beecham. In 1979 Jerome Goldberg, an examiner at the PTO,

issued a final restriction leading to the Augmentin patent. Goldberg stated that “Applicants

[GSK] are . . . required to elect an invention of a single disclosed composition containing

clavulanic acid and one penicillin or cephalosporin antibiotic for examination on the

merits.”

136. Despite this admonition from examiner Goldberg, GSK pursued parallel patent

applications for similar Augmentin-like compounds with the PTO. One of these, which GSK

had hoped would give them patent protection for Augmentin beyond the 17 years granted by the

original patent, was the “’380 patent.”

137. In an opinion issued on February 25, 2002, the District Court of the Eastern

District of Virginia reviewed the ‘380 patent in the context of a challenge to that patent filed by

Teva Pharmaceuticals, a generic drug manufacturer attempting to market a generic equivalent to

Augmentin. The court found that the ‘380 patent was invalid as a matter of law on the ground of

obvious-type double patenting. The court noted that in order to receive patent protection, a

newly claimed invention must be novel and distinct from all previously claimed patented

inventions the holder owns.

138. On March 13, 2002, GSK announced that it had partially lost its court battle over

Augmentin. Why it waited so long to announce this loss was not explained. Additionally, to

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minimize the loss to its stock, GSK announced that it would soon appeal this decision. This

announcement caused GSK’s stock to drop from $48.81 on March 13 to $48.27 on March 14,

and drop again to $47.62 on March 15.

139. On May 23, 2003 GSK announced the complete loss of Augmentin patent

protection via the PR Newswire. GSK also stated that it continued to believe that its patents

covering Augmentin were valid. The Company stated that it was appealing both this ruling and

previous rulings from the same court on Augmentin patents expiring in 2017 and 2018. The

press release also revised earnings due to the impact of generic competition for Augmentin. It

also stated that “[e]arnings forecasts continue to assume GSK successfully defends its intellectual

property surrounding Paxil in the US.”

140. This announcement caused GSK to lose almost 9 billion English pounds or 8.7%

of its value. The U.S. price fell from $41.47 to $38.03. Merrill Lynch downgraded its

recommendation on the stock to “neutral” on the news.

141. On November 23, 2003, the United States Court of Appeals for the Federal

Circuit issued its ruling on the Augmentin patents in Geneva Pharms., Inc. v. GlaxoSmithKline

PLC, 349 F.3d 1373 (Fed. Cir. 2003). The Court upheld the lower count’s ruling that GSK did

not have patent protection for Augmentin.

142. This clear abuse of the patent system, in contravention of express directives from

the USPTO was designed to extend GSK’s monopoly on the sale of Augmentin. GSK’s

statements concerning when its Augmentin patent would expire were false and misleading for the

reasons contained in the court’s rulings. An antitrust lawsuit was filed in the Eastern District of

Virginia on behalf of consumers and third-party payors such as self-insured unions and HMOs:

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Ryan House v. GlaxoSmithKline plc, Docket No. 2:02cv442. On July 28, 2004, the court

certified this class and preliminarily approved the settlement. On January 10, 2005, the court

gave final approval for the settlement for the class which includes purchasers from January 4,

2000 to April 30, 2004. The settlement provides for $29 million, of which 55% is to be paid to

consumers and 45% is to be paid to third-party payors.

GSK’S PAROXETINE HEMIHYDRATE PATENTS

The Original Expired Patent for Paroxetine Hydrochloride

143. On February 8, 1977, Ferrosan, a British company, obtained Patent No. 4,000,196

(“the ‘196 patent”), on a set of compounds including the drug paroxetine hydrochloride.

Paroxetine is a selective serotonin reuptake inhibitor (“SSRI”). The patent abstract states, “[t]he

invention relates to new 3-substituted 1-alkyl-4-phenylpiperidines, being useful as antidepressant

and anti-Parkinson agents, and to their production.”

144. Ferrosan’s molecule was an “anhydrate” (i.e., free of water) form of the molecule.

145. In 1980, Ferrosan licensed its paroxetine patent to GSK, which began

manufacturing and testing the drug in 1981.

146. The ‘196 patent expired in 1992.

GSK’s Paroxetine Hemihydrate Patent

147. In March 1985, a chemist in GSK’s laboratory discovered that he had produced a

different form of paroxetine, called “hemihydrate” distinguished from Ferrosan’s “anhydrous”

form in that the hemihydrous form contains a water molecule.

148. Paxil® consists of the hemihydrous form of paroxetine, while several proposed

generics contain anhydrous forms. As FDA tentative approval of anhydrous generic forms of

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Paxil® illustrates, the therapeutic effects are the same. GSK began testing the hemihydrous form

in clinical trials, but only for its effectiveness as an antidepressant, not with regard to any

therapeutic difference between hemihydrous and anhydrous forms, which has never been

claimed.

149. On or about January 26, 1988, the United States Patent and Trademark Office

(“PTO”) issued U.S. Patent No. 4,721,723, titled “Anti-Depressant Crystalline Paroxetine

Hydrochloride Hemihydrate (“the ‘723 hemihydrate patent”). GSK currently owns the ‘723

hemihydrate patent.

150. The ‘723 patent claims crystalline paroxetine hydrochloride hemihydrate as a

newly invented synthetic compound.

151. GSK submitted an NDA to the FDA, which the FDA subsequently designated

NDA No. 20-031, for a drug containing, as its active ingredient, paroxetine hydrochloride

hemihydrate. On December 29, 1992, the FDA approved GSK’s NDA for the drug, which GSK

markets as Paxil®.

152. As of December 29, 1992, the FDA listed in the Orange Book the ‘723

hemihydrate patent in connection with approved NDA No. 20-031, despite the fact that the

original ‘196 patent had already expired. Moreover, at that time, GSK had no pending

applications for any additional patents purporting to claim the drug that is the subject of NDA

No. 20-031.

153. As of December 29, 1992, GSK began to enjoy a five-year statutory monopoly in

the market for paroxetine hydrochloride hemihydrate by reason of the FDA’s determination that

the approved NDA No. 20-031 purportedly contained a new, previously-unapproved active

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ingredient. During that five-year period, the Act and applicable regulations barred the FDA from

approving any ANDA that referenced NDA No. 20-031. Therefore, the earliest date that the

FDA could have ended GSK’s paroxetine hydrochloride monopoly by approving an ANDA that

referenced NDA No. 20-031 was December 29, 1997. 21 U.S.C. § 355(j)(5)(D)(ii).

154. In May, 1995, more than two years after the FDA approved NDA No. 20-031,

GSK began filing patent applications with the U.S. Patent and Trademark Office (“PTO”) for

purportedly new anhydrous versions of paroxetine hydrochloride, even though the same form of

the drug was in the original ‘196 patent, which expired in 1992. Such patents did not begin to

issue until 1999.

155. On March 31, 1998, Apotex submitted an ANDA to the FDA, which the FDA

subsequently designated ANDA No. 75-356, for a paroxetine hydrochloride anhydrate drug, not

the hemihydrous form claimed by GSK’s ‘723 patent, which GSK referenced in NDA No. 20-

031.

156. Apotex filed ANDA No. 75-356 with substantial and statutorily required studies

to demonstrate that Apotex’s paroxetine anhydrate drug was therapeutically equivalent to the

approved NDA No. 20-031 paroxetine hydrochloride hemihydrate drug.

157. Apotex followed the Hatch-Waxman Act by addressing the only patent listed at

the time for NDA No. 20-031 – the ‘723 hemihydrate patent – with a Paragraph IV Certification,

stating that the manufacture, sale or use of Apotex’s proposed paroxetine hydrochloride

anhydrate drug would not infringe that patent. 21 U.S.C. § 355(j)(2)(A)(vii)(IV). Apotex’s

submission to the FDA contained all the information required by the FDA’s regulations.

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158. Apotex was the first applicant to file an ANDA that referenced GSK’s NDA for

Paxil® and contained a Paragraph IV Certification. This entitled Apotex to market exclusivity

on generic paroxetine hydrochloride for 180 days after either Apotex began commercial

marketing of its paroxetine hydrochloride anhydrate drug, a court ruled that Apotex’s proposed

paroxetine hydrochloride anhydrate drug would not infringe the patent subject to Paragraph IV

Certification, or that such patent was invalid or unenforceable. See 21 U.S.C. § 355(j)(5)(B)(iv).

159. Apotex further followed the Act by notifying GSK of the filing of the ANDA and

of the reasons why the manufacture, sale or use of its proposed paroxetine hydrochloride

anhydrate product did not infringe GSK’s ‘723 hemihydrate patent. See 21 U.S.C. §

355(j)(2)(B)(I).

160. Apotex’s Paragraph IV Certification on the ‘723 hemihydrate patent conferred

standing on GSK -- pursuant to the Hatch-Waxman Act -- to file an infringement action within

45 days after receiving notice of Apotex’s Paragraph IV Certification. See 21 U.S.C. §

355(j)(5)(B)(iii); 35 U.S.C. § 271(e)(2).

161. On June 26, 1998, GSK sued Apotex in the United States District Court for the

Northern District of Illinois for alleged infringement of the ‘723 hemihydrate patent, pursuant to

21 U.S.C. § 355(j)(5)(B)(iii) and 35 U.S.C. § 271(e)(2) (the “First Illinois Action”)

162. When it filed the First Illinois Action, GSK knew that such suit was baseless,

because Apotex was proposing the manufacture, sale or use of its paroxetine hydrochloride

anhydrate product, a product which, by definition, would not infringe on GSK’s ‘723

hemihydrate patent, the only patent that was listed in the Orange Book in connection with Paxil®

and NDA No. 20-031.

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163. The courts subsequently found that the First Illinois Action was baseless. On

March 3, 2003, the District Court for the Northern District of Illinois ruled that Apotex’s generic

product did not infringe the ‘723 patent, and dismissed GSK’s suit with prejudice. See

SmithKline Beecham Corp. v. Apotex Corp., 247 F. Supp. 2d 1011 (N.D. Ill. 2003) (Posner, J.)

(sitting by designation pursuant to 28 U.S.C. § 291(b)). Judge Posner characterized GSK’s

allegation of infringement as “hypertechnical,” inviting “a form of extortion,” and seeking “a 14-

year extension of the patent term without authorization in the patent statute.” Id. at 1049, 1045

&1047.

164. As reported in the April 4, 2002 edition of The Independent, on April 3, 2002,

GSK “hit its lowest level since it was created from the merger of Glaxo Wellcome and

SmithKline Beecham. The stock dropped 26p to 1,617p on concerns that an early generic version

of its leading antidepressant, Paxil, may steal market share from the pharmaceutical giant.

Traders were unsettled by news that a private Dutch generics firm called Synthon has filed an

application with the US Food and Drug Administration for a variant of Paxil, on which Glaxo is

said to have weak patent protection. Some argue that if the Dutch company manages to get its

drug to the market by 2004 it could hit [GSK]'s earnings for that year by as much as 9 per cent.”

165. As reported in the July 13, 2002 (Saturday) edition of the Financial Times,

(London,England) “[GSK] suffered another blow on Friday after the High Court partly

overturned the patent on its blockbuster antidepressant Paxil. BASF, the German chemicals

group, won the right to produce generic copies of the drug after the High Court ruled that parts of

GSK's patent covering paroxetine hydrochloride, were invalid. When trading resumed on

Monday, July 15, 2002 GSK shares sank to $36.65 from $38.15 the day before.

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166. On July 23, 2002, GSK announced that it had lost a patent case for in United

States for Paxil. GSK’s share price dropped to $32.86 from $34.02 on the news.

167. As noted in the July 25, 2002 edition in the Investors Chronicle, in an article

entitled “Time Runs out for GSK” the Company “faces substantial revenue erosion as patents on

its leading drugs near their expiration dates. Shares in [](GSK) had another dismal week despite

a decent set of second-quarter results. Clearly, investors are more preoccupied with the

company's future - in particular its ability to cope with its patent expiry problems - than its

historical performance.[] [B]ehind the good headline numbers, problems lurk. GSK has lost

around 35 per cent of its value since the start of the year when it emerged that some of these - its

best-performing drugs - would be at the mercy of cheaper generic copies.

168. On October 23, 2002, GSK announced its earnings for the quarter. The results

were surprising because GSK noted that it had reserved 145 million pounds for legal costs.

During the conference call discussing the results, defendant Garnier stated in response to a

question concerning earnings that concerning growth that: “We basically have a guidance of at

least 10% once again, we cover for everything except for a surprise with paxil that's unlikely at

this stage of the game for next year.”

169. Because of the reserve for legal costs, GSK shared dropped 6% from $41.34 to

$39.27. On October 24, 2002 GSK shares again fell, this time to $38.00. As summarized in its

headline, The Times (London) on October 24, 2002 reported that “GSK surprises City with

Pounds 145m legal hit[.]” The decline would have been worse but for the announcement a 4

billion pound stock buy-back plan that was also announced the same day.

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170. On December 30, 2002 GSK announced an Update on Paxil Patent Litigation via

PR Newswire. GSK announced that a federal judge for the United States District Court for the

Eastern District of Pennsylvania (Philadelphia) has ruled on summary judgment motions in

GSK's favor on one patent, denying the motions for invalidity and non-infringement; in Apotex's

favor on a second patent, holding the patent invalid; and split the decision on the remaining two

patents, holding some claims in the patents invalid but denying Apotex's motions on other

claims. GSK also announced that it “continues to believe there are significant hurdles that

prevent launch of a generic Paxil( R) product. Accordingly, GSK's published earnings guidance

for 2002 and 2003 remains as previously stated. GSK's anti-depressant, Paxil( R) was launched

in the US in early 1993, with patent expiry in 2006.” Share prices increased upon GSK

reconfirming its earning guidance and its portrayal of this decision as a partial victory. As

reported in The Independent (London)’s December 31, 2002, edition under a headline entitled

“Glaxo Boosted by US Patent Ruling on Anti-depressant Drug” GSK “raised hopes it could head

off potential rivals to one of its top-selling drugs yesterday and reassured investors by repeating

its earnings guidance. In the article, Steve Plag, pharmaceuticals analyst at Credit Suisse First

Boston, said: “This is clearly very good news as it means the second patent case now goes to

trial in one of the slowest courts in the US, which should mean no resolution to the Paxil case

until the end of 2003 at the earliest.”

171. On February 5, 2003, the patent trial concerning Paxil between GSK and

ApotexA started in Chicago (US). In the case, GSK claimed that patents for its best-selling anti-

depressant Paxil (paroxetine) have been infringed by a rival treatment developed by Apotex.

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172. On February 14, 2003 GSK announced that it had purchased 2 billion English

pounds of its own stock as part of the stock purchase plan announced on October 24, 2002.

173. On March 4, 2003 the court ruled that Apotex had not infringed patents on GSK’s

best-selling product Paxil. In response to the verdict, GSK’s shares slid from $35.27 to $34.15 or

3%. As reported by The Time (London) on March 5, 2003 “The loss of Paxil revenue is likely

to come down to the bottom line but the bad news is fully in the price. Market forecasts are

assuming the worst, so the stock should recover from here." This view was repeated by Nigel

Barnes, pharmaceuticals analyst at Merrill Lynch, who said: “The worst is probably over at these

sorts of levels. GSK trades at a considerable discount to the international sector and there's

considerable yield support.”

174. On May 23, 2003 GSK announced via the PR Newswire that a federal judge in the

United States Federal District Court for the Eastern District of Virginia had ruled in favor of

Geneva Pharmaceuticals, Teva Pharmaceuticals and Ranbaxy, declaring that three of GSK's U.S.

patents for its antibiotic Augmentin are invalid. GSK also stated that continues to believe its

patents covering Augmentin are valid. The Company stated that it was appealing both this ruling

and previous rulings from the same court on Augmentin patents expiring in 2017 and 2018. The

press release also revised earnings due to the impact of generic competition for Augmentin. It

also stated that “[e]arnings forecasts continue to assume GSK successfully defends its intellectual

property surrounding Paxil in the US.”

175. This announcement caused GSK to lose almost 9 billion English pounds or 8.7%

of its value. The U.S. price fell from $41.47 to $38.03. Merrill Lynch downgraded its

recommendation on the stock to “neutral” on the news.

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176. On July 1, 2003, GSK announced today that it is requesting the U.S. Food and

Drug Administration (FDA) to remove three patents related to Paxil from the register of

pharmaceutical patents maintained by the FDA and known as the “Orange Book.” This was an

admission that the patents should not have been issued in the first place.

177. On July 31, 2003 Apotex received FDA clearance to market a generic version of

GSK top-selling antidepressant Paxil. GSK share prices slipped on the news from $39.22 to

$38.31 and on August 1 declined to $37.40.

178. On November 23, 2003, the United States Court of Appeals for the Federal

Circuit issued its ruling on the Augmentin patents in Geneva Pharms., Inc. v. GlaxoSmithKline

PLC, 349 F.3d 1373 (Fed. Cir. 2003). The Court upheld the lower count’s ruling that GSK did

not have patent protection for Augmentin.

179. On February 12, 2004 GSK announced that sales of Paxil were off 40% due to

generic competition. Shares fell from $45.15 to $43.39 on the news even though GSK

announced that profits were up 14% for 2003. Prices fell to $42.52 the next day as the news was

digested by the market.

180. On April 23, 2004, the U.S. Court of Appeals for the Federal Circuit affirmed

Judge Posner, albeit on different grounds. The Court held that because GSK’s clinical testing of

the hemihydrous form of the drug in 1985 constituted a “public use” pursuant to 35 U.S.C. §

102(b), the patent claim was invalid. See SmithKline Beecham Corp. v. Apotex Corp., 2004 WL

868425 (Fed. Cir. April 23, 2004).

181. GSK knew or should have known that its Paxil patent was not valid for the

following reasons:

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182. In addition to being baseless, the First Illinois Action was intended to thwart

potential generic competitors. The mere filing of the Illinois Action triggered a statutory 30-

month statutory stay – until December, 2000 – on FDA approval of Apotex’s ANDA No. 75-356,

unless the court earlier granted a judgment of non-infringement or invalidity. 21 U.S.C. §

355(j)(5)(B)(iii).

183. In further response to Apotex’s ANDA filing, GSK submitted to the FDA for

listing in the Orange Book two newly issued patents for purportedly new anhydrous forms of

paroxetine hydrochloride.

184. Specifically, on or about February 16, 1999, the PTO issued U.S. Patent No.

5,872,132, titled “Form of Paroxetine Hydrochloride Anhydrate” (“the ‘132 Form C patent”).

GSK currently owns the ‘132 Form C patent.

185. The ‘132 Form C patent claims a particular, allegedly new, crystalline form of

paroxetine hydrochloride anhydrate designated in the patent as Form C.

186. Additionally, on or about May 4, 1999, the PTO issued U.S. Patent No. 5,900,423,

titled “Form of Paroxetine Hydrochloride Anhydrate” (“the ‘423 Form A patent”). GSK currently

owns the ‘423 Form A patent.

187. The ‘423 Form A patent claims a second allegedly new anhydrous crystalline

form of paroxetine hydrochloride.

188. Although neither the ‘132 Form C patent nor the ‘423 Form A patent claim the

paroxetine hydrochloride hemihydrate drug for which GSK submitted NDA No. 20-031 and

which the FDA approved in 1992, GSK submitted the ‘132 Form C patent and the ‘423 Form A

patent to the FDA for listing in the Orange Book in 1999. Based on GSK’s false representation

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that the ‘132 Form C patent and the ‘423 Form A patent related to NDA No. 20-013, the FDA in

fact listed the two patents in the Orange Book despite the fact that Paxil® contains the

hemihydrous form of the molecule. See 21 U.S.C. § 355(b)(1); 21 C.F.R. § 314.53(b).

189. Moreover, when it submitted to the FDA the ‘132 Form C patent and the ‘423

Form A patent, GSK knew that it was making false representations to the FDA, since Apotex,

and not GSK, had performed (and submitted with its ANDA) the clinical trial work necessary to

enable the FDA to approve a paroxetine hydrochloride anhydrate drug for marketing to the

American public. Indeed, when it wrongfully submitted the patents to the FDA, GSK had never

before sought FDA approval to market any anhydrous form of paroxetine hydrochloride and

therefore could not market an anhydrous form.

190. After the FDA listed the two 1999 patents with NDA No. 20-031 in the Orange

Book, Apotex was forced to supplement its ANDA with Paragraph IV Certifications as to the

‘132 Form C patent and the ‘423 Form A patent. In addition, pursuant to the Act, Apotex sent

the requisite notices of such certifications to GSK.

191. Thereafter, with the knowledge that its listing in the Orange Book was improper,

on August 9, 1999, GSK filed a new patent infringement action against Apotex in the United

States District Court for the Eastern District of Pennsylvania, asserting infringement of the ‘423

Form A patent (“the First Pennsylvania Action”).

192. The First Pennsylvania Action was objectively baseless, and was solely intended

to keep generic paroxetine hydrochloride off the market. It did just that, as the filing of the

litigation extended GSK’s monopoly another 30 months pursuant to the Act.

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193. In response to these events, on February 3, 2000, Apotex sought administrative

relief by filing a Citizen Petition (the “Petition”) with the FDA. In the Petition, Apotex noted

that “if an NDA holder is permitted, as GSK did here, to list for an indefinite and extended future

period any new patents that issue,” generic manufacturers such as Apotex face “exposure to

multiple lawsuits, serial stays of FDA approval, loss of generic exclusivity periods and virtually

no guarantee of market entry even if the original ‘pioneer’ patent has expired.”

194. On or about June 27, 2000, the PTO issued to GSK U.S. Patent No. 6,080,759

(“the ‘759 Patent”) for an invention titled Paroxetine “Hydrochloride Form A.”

195. The ‘759 Patent claims, inter alia, a paroxetine hydrochloride anhydrate Form A

made according to a certain process.

196. GSK submitted the ‘759 Patent for listing in the Orange Book in connection with

NDA No. 20-031.

197. On or about September 5, 2000, the PTO issued to GSK U.S. Patent No.

6,113,944 (“the ‘944 Patent”), for an invention titled “Paroxetine Tablets and Process to Prepare

Them.”

198. The ‘944 Patent claims, inter alia, a pharmaceutical composition in tablet form

containing paroxetine hydrochloride, produced on a commercial scale by a defined process.

199. GSK submitted the ‘944 Patent for listing in the Orange Book in connection with

NDA No. 20-031.

200. Apotex complied with the Act and filed an additional Paragraph IV Certification,

claiming that the ‘759 Patent was invalid, unenforceable and would not be infringed by Apotex’s

proposed generic bioequivalent. Pursuant to the Act, Apotex also notified GSK of its position

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that, inter alia, “the ‘759 patent was not properly listed with the [FDA] because GSK filed patent

information with the FDA prior to approval of NDA No. 20-031, because GSK did not apply for

or procure issuance of the ‘759 patent until long after approval of the NDA, because the ‘759

Patent does not claim the drug for which GSK obtained FDA approval, and because information

on process patents may not be submitted to [the] FDA.”

201. Similarly, with respect to the ‘944 Patent, Apotex complied with the Act and filed

and served a Paragraph IV Certification. In that certification, Apotex pointed out that GSK

procured the patent by making fraudulent misrepresentations to and concealing material facts

from the PTO. Apotex claimed that the ‘944 Patent was invalid and would not be infringed by

Apotex’s proposed generic product. Further, Apotex noted that the ‘944 Patent was improperly

submitted to the FDA for listing in the Orange Book, because “SmithKline filed patent

information with the FDA prior to approval of its NDA No. 20-031; because SmithKline did not

apply for or procure the issuance of the ‘944 patent until long after approval of the NDA; and

because Torpharm’s [Apotex’s] ANDA was filed prior to the ‘944 Patent’s issuance and listing

in the Orange Book.” Lastly, the drug for which GSK sought and received FDA approval on

December 29, 1992 was made using a different formulation process.

202. Upon receiving the foregoing Paragraph IV Certifications, GSK continued its

pattern of filing baseless litigation intended to keep generic paroxetine hydrochloride off the

market. On September 27, 2000, GSK filed yet another patent infringement action against

Apotex, this one concerning the ‘759 patent, in the United States District Court for the Eastern

District of Pennsylvania (the “Second Pennsylvania Action”). Although the Second

Pennsylvania Action was based upon an invalid patent that was improperly caused to be listed by

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the FDA in the Orange Book, GSK filed it to keep its monopoly stranglehold on the paroxetine

hydrochloride market and to prevent their competitors from providing a generic form of the drug

to the public.

203. Similarly, on January 11, 2001, after receiving the Paragraph IV Certification with

respect to the ‘944 Patent, GSK again sued Apotex for patent infringement, again in the Eastern

District of Pennsylvania (the “Third Pennsylvania Action”). As set forth in Apotex’s Paragraph

IV certification, the Third Pennsylvania Action was and is objectively baseless, and its sole

purpose was to prevent FDA consideration of Apotex’s ANDA for an additional 30 months.

204. Apotex amended its answer in this matter to include counterclaims for

monopolization, attempted monopolization and conspiracy to monopolize under Sections 1 and 2

of the Sherman Act. Its claim sets out conduct including “raising and retaining barriers to

competition; initiating and maintaining sham litigation against TorPharm on the ‘723 patent;

unlawfully obtaining patents for inventions that were not otherwise patent able through knowing

and willful fraud on the PTO; the improper listing of patents in the Orange Book that do not

claim the paroxetine hydrochloride hemihydrate drug for which GSK submitted NDA No. 20-

031, and the initiation and maintenance of sham litigation on such patents; attempts to destroy

TorPharm’s 180-day exclusivity period by unlawful schemes to trigger it; attempts to destroy

TorPharm’s 180-day exclusivity period by introducing a paroxetine hydrochloride product

simultaneously with TorPharm; and . . . unlawfully attempting to leverage its monopoly power

for paroxetine hydrochloride to further extend its monopoly once generic competition appears to

become inevitable.”

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205. GSK relied on the same fraudulent filings with the FDA and filing of serial sham

litigations to exclude Zenith from the market. Zenith filed with the FDA ANDA No. 75-691 for

paroxetine hydrochloride tablets and included the appropriate Paragraph IV Certification with

respect to the ‘723 hemihydrate patent, the ‘132 Form C patent, and the ‘423 Form A patent.

206. On February 3, 2000, GSK received a letter from Zenith, dated February 1, 2000,

and sent by certified mail, purporting to be a Notice of Certification under Section 505(j)(2)(B)

of the Act, 21 U.S.C. § 355(j)(2)(B)(I) and (ii). This letter alleges that the product for which

Zenith sought approval is paroxetine hydrochloride. This letter further alleges that the paroxetine

hydrochloride tablets do not infringe on the ‘723 hemihydrate, ‘132, or ‘423 Patents.

207. Specifically, Zenith advised GSK that, with respect to the ‘723 hemihydrate

patent, the paroxetine hydrochloride sought to be marketed by Zenith are not in hemihydrous

form. Regarding the ‘132 patent, Zenith explained how its paroxetine hydrochloride does not

infringe on any of the patent’s two claims. Finally, with respect to the ‘423 patent, Zenith noted

that it has no intention of marketing the product as claimed by the ‘423 patent.

208. Despite its knowledge that the proposed paroxetine hydrochloride did not infringe

on the ‘723 hemihydrate, ‘132 or ‘423 patents, on March 16, 2000, GSK filed patent litigation

against Zenith in the Eastern District of Pennsylvania (the “Fourth Pennsylvania Action”),

claiming infringement of the ‘723 hemihydrate, ‘132, and ‘423 Patents. For the reasons

described above, such litigation was and is objectively baseless, and intended to block Zenith

from selling its generic for at least 30 months.

209. As a result, GSK has and will continue to improperly maintain its monopoly over

the paroxetine hydrochloride market.

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210. Pentech filed with the FDA ANDA No. 75-771 for paroxetine hydrochloride

capsules and included the appropriate Paragraph IV Certification.

211. Pursuant to the Act, on March 24, 2000, Pentech sent to GSK the requisite notice

of its Paragraph IV Certification. 21 U.S.C. § 355(j)(2)(B)(i) and (ii). This notice alleges that the

product for which Pentech sought approval is paroxetine hydrochloride. This letter further

alleges that the paroxetine hydrochloride tablets do not infringe on the ‘723, ‘132 or ‘423 Patents.

212. According to Pentech, while the ‘723 hemihydrate patent’s claims are limited to

paroxetine hydrochloride hemihydrate, Pentech’s paroxetine hydrochloride was anhydrous, and

therefore, could not possibly infringe the ‘723 patent. Pentech also asserted that the ‘723 patent

was invalid and unenforceable due to the legal doctrines of anticipation and obviousness.

Similarly, Pentech asserted that its product did not infringe the ‘423 patent because it is

amorphous and not crystalline. Pentech also asserted that, under the Doctrine of Equivalents, the

‘132 patent was invalid. Finally, Pentech noted that “it appears that [GSK] may have made

material misrepresentations to the U.S. PTO in connection with ... [the] patent applications” for

the ‘423 and ‘132 patents.

213. Despite its knowledge of these facts, on or about May 11, 2000, GSK filed patent

infringement litigation against Pentech in the Northern District of Illinois (the “Second Illinois

Action”) with respect to the ‘723 hemihydrate and ‘132 Patents. For the reasons stated above,

such litigation was baseless, and intended to interfere with prospective generic competition.

214. In April 2003, Pentech settled its litigation with GSK. In exchange for the

dismissal, which was submitted under seal, Pentech negotiated the right to distribute GSK-

manufactured Paxil® in Puerto Rico immediately, and to sell the licensed product throughout the

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United States, but only when Apotex launched its generic product. “The deal represents a new

type of arrangement between brand and generic firms, the effect of which is to reduce the value

of first-to-file exclusivity.” The Pink Sheet, April 21, 2003. GSK thereby reduced the viability

of generic entry by effectively stripping Apotex of the 180-day exclusivity period.

215. Geneva filed with the FDA ANDA No. 75-566 for paroxetine hydrochloride

tablets and included the appropriate Paragraph IV Certification.

216. On May 17, 1999, GSK received a letter from Geneva, dated May 13, 1999, and

sent by certified mail, purporting to be a Notice of Certification under Section 505(j)(2)(B) of the

Act, 21 U.S.C. § 355(j)(2)(B)(i) and (ii). According to this notification, the paroxetine

hydrochloride for which Geneva sought approval does not infringe on the ‘723 hemihydrate,

‘132, or ‘423 Patents. The letter further stated that the claims of the ‘723 hemihydrate and ‘132

patents are invalid and unenforceable.

217. With regard to the ‘723 hemihydrate patent, Geneva pointed out that the products

for which it sought approval contain a different active ingredient, i.e., paroxetine hydrochloride

anhydrate, while “[a]ll claims of the ‘723 patent are limited to crystalline paroxetine

hydrochloride hemihydrate, its compositions, its uses or its manufacture.” In addition, Geneva

asserted that the invention claimed in the ‘723 patent was not a pioneer invention.

218. Regarding the ‘132 patent, Geneva pointed out that the anhydrous paroxetine

hydrochloride in the Geneva product is different from the anhydrous paroxetine hydrochloride

claimed in the ‘132 patent because of vast differences in the melting point claims of the two

products. For these and other reasons, Geneva asserted that “the manufacture, use or sale of the

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Geneva Products will not infringe, or induce or contribute to infringement of, any valid claim of

the ‘132 patent, either literally or under the doctrine of equivalents.”

219. Despite its knowledge of these facts, on or about June 9, 1999, GSK filed patent

infringement litigation against Geneva in the Eastern District of Pennsylvania (the “Fifth

Pennsylvania Action”) with respect to the ‘723 hemihydrate and ‘132 Patents. For the reasons

stated above, such litigation was and is objectively baseless, and brought by GSK for the’

purpose of extending its monopoly of the paroxetine hydrochloride market.

220. On October 5, 2000, Geneva sent to GSK notice of its Paragraph IV Certifications

with respect to the ‘927 and ‘759 patents, which Geneva claimed are invalid and/or

unenforceable. According to Geneva, the ‘927 patent covers paroxetine methanesulfonate, while

the Geneva products comprise paroxetine hydrochloride and do not involve paroxetine

methanesulfonate in any step of the preparation process.

221. As to the ‘759 patent, Geneva’s certification letter asserted that information

material to GSK’s patent was not submitted to the PTO, and that two of the claims of the ‘759

patent were invalid.

222. Despite knowledge of these facts, including its omissions of material facts to the

PTO, on or about November 22, 2000, GSK filed another patent infringement suit against

Geneva in the Eastern District of Pennsylvania with respect to the ‘759 and ‘944 Patents (the

“Sixth Pennsylvania Action”). For the reasons stated above, the Sixth Pennsylvania Action is

and was objectively baseless, and its sole purpose was to impede the introduction of a generic

competitor for another 30 months.

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223. By filing such litigation, GSK has effectively blocked Geneva from selling its

generic for at least 30 months, and, as a result, GSK has and will continue to improperly maintain

its monopoly over the paroxetine hydrochloride market.

224. Alphapharm filed with the FDA ANDA No. 75-716, for paroxetine hydrochloride

tablets and included the appropriate Paragraph IV Certification.

225. Pursuant to the Act, Alphapharm sent notice of the Paragraph IV Certification to

GSK on or about January 11, 2001 in accordance with Section 505(j)(2)(B) of the Act, 21 U.S.C.

§ 355(j)(2)(B)(i) and (ii). As explained in this notice, the ‘723 hemihydrate patent is inapplicable

and cannot be infringed because Alphapharm’s product is paroxetine hydrochloride anhydrate.

The ‘944 patent is invalid because its claims regarding the function of the drug were known prior

to any invention by GSK. According to Alphapharm, its product would not infringe the ‘132

Patent because of differences in melting points and the fact that Alphapharm’s product contains

an ingredient not covered by the ‘132 patent. In addition, Alphapharm claimed that the ‘423

patent is invalid because the form of paroxetine hydrochloride claimed therein was disclosed as

early as May, 1987 (a fact which must have been concealed from the PTO when GSK sought the

patent). Alphapharm pointed out that, in contrast to the ‘927 patent, its product does not contain

paroxetine methane sulfonate. Therefore, the ‘927 patent would not be infringed by

Alphapharm’s product. Finally, Alphapharm noted that its paroxetine hydrochloride product has

materially different ingredients than the drug covered by the ‘759 Patent. Similarly, the synthesis

of the paroxetine hydrochloride anhydrate of Alphapharm is different than, and thus not covered

by, the claims of the ‘759 patent.

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226. Despite the knowledge of these facts, on or about March 1, 2001, GSK filed

patent infringement litigation against Alphapharm in the Eastern District of Pennsylvania (the

“Seventh Pennsylvania Action”) with respect to the ‘723 hemihydrate, ‘132, ‘759 and ‘423

Patents. For the reasons stated above, the Seventh Pennsylvania Action was and is objectively

baseless, and intended to thwart the ability of GSK’s competitors to enter the marketplace with

paroxetine hydrochloride.

227. By filing such litigation, GSK has effectively blocked Alphapharm from selling

its generic for at least 30 months, and, as a result, GSK has and will continue to improperly

maintain its monopoly over the paroxetine hydrochloride market and prevent the public from

reaping the substantial benefits of generic competition.

228. GSK announced on July 1, 2003 that it had asked the FDA to delist the ‘759 and

‘927 patents from the Orange Book. GSK also requested the delisting of Patent No. 6,172,233

(the “233 Patent”). These patents, if they had gone unchallenged, would have extended GSK’s

paroxetine hydrochloride monopoly to 2019.

229. The delisting of the ‘233 patent removed the final 30-month stay on approval of

Apotex’s ANDA. On September 8, 2003, Apotex brought its generic product to market, in four

dosage strengths. Apotex’s product launch reflected its strong belief that any patent infringement

litigation brought against it by Defendants was baseless, because Apotex would be at risk of

substantial liability to Defendants if it were found to have infringed.

230. In a pharmaceutical market riddled with abuse of the patent system, Paxil® is one

of the most egregious examples of a brand-name drugmaker repeatedly abusing the 30-month

stay provision of the Hatch-Waxman Act to perpetuate a patent monopoly long past its rightful

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expiration date. Its monopolistic behavior has prompted several calls for reform. As a result of a

record five separate 30-month stays, the Federal Trade Commission (“FTC”) reports that Paxil®

has been given a total stay of 65 months after the first ANDA filing, during which time it reaped

annual sales of over $1 billion.

231. The FTC issued a report in July 2002 on generic drugs. See Federal Trade

Commission, Generic Drug Entry Prior to Patent Expiration: An FTC Study, July 2002

(available at < http://www.ftc.gov/os/2002/07/genericdrugstudy.pdf>). It listed Paxil® as one of

eight brand-name drugs whose owner listed a patent in the Orange Book after the filing of one or

more ANDAs. It characterized GSK’s late patent listings as “questionable,” singling them out as

being of the type that “raise significant listability issues.” The FTC noted that certain “product-

by-process” patents did not, in fact, contain a novel product, and thus were merely process

patents, which the Hatch-Waxman Act does not allow to be listed in the Orange Book. Thus

patents such as the ‘927 and ‘233 patents, both of which acknowledge that the product paroxetine

hydrochloride was well-known at the time of filing, should never have been listed. The FTC also

impugned Defendants’ redundant Paxil® patent filings. The FTC stated that Paxil® was one of

four products for which “the brand-name company applied for the patents more than one year

after the FDA had approved the drug product covered by the NDA,” suggesting that the patents

cannot cover the approved drug product and be valid, “due to the ‘on sale bar’ of patent law.”

232. On June 18, 2003, the FDA promulgated a final rule clarifying what types of

patents can be listed in the Orange Book, and requiring more detailed patent declarations to

justify their inclusion in the Orange Book.“ The final rule limits to one per ANDA or 505(b)(2)

application the maximum number of statutory 30-month stays of approval to which an innovator

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will be entitled when it submits multiple patents for the same NDA.” Applications for FDA

Approval to Market a New Drug, 68 Fed. Reg. 36676 (2003) (to be codified at 21 C.F.R. Part

314).

233. In November 2000, the US Federal Trade Commission (FTC) staff advised GSK

that they were conducting a non-public investigation to determine whether it was violating

Section 5 of the Federal Trade Commission Act by monopolizing or attempting to monopolize'

the market for paroxetine hydrochloride by preventing generic competition to Paxil and requested

GSK submit certain information in connection with that investigation. In October 2003 the FTC

closed its investigation on the basis of its finding that no further action is warranted.

234. Following public reference to the FTC investigation regarding Paxil, class actions

were filed in the US District Court for the Eastern District of Pennsylvania on behalf of indirect

purchasers, including consumers and third party payers, and direct purchasers. Plaintiffs claimed

that GSK monopolized a market for Paxil by bringing allegedly sham patent litigation and

allegedly abusing the regulatory procedures for the listing of patents in the FDA Orange Book.

235. So far, the Paxil antitrust cases have cost the GSK more than $165 million in class

action settlements, as well as untold millions more paid out in confidential settlements with some

of the largest drug wholesalers who opted out of the class action. A $65 million settlement was

approved by the court in Nichols v. SmithKline Beecham Corp., a suit brought on behalf of

"indirect" purchasers. The court also approved a $100 million settlement in The Stop & Shop

Supermarket Co. v. Smithkline Beecham Corp., a class action brought on behalf of direct

purchasers, such as drug wholesalers. Eight corporations which could have been members of the

direct purchaser class opted out of the case and struck their own settlements with SmithKline.

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Together, the eight companies -- CVS Meridian Inc., Rite Aid Corp., Walgreen Co., Eckerd

Corp., Albertson's Inc., The Kroger Co., Safeway Inc. and Hy-Vee Inc. -- account for slightly

more than one-third of the purchases of Paxil by direct purchasers.

236. GSK’s conduct worked a fraud on the Class in two different ways. First, GSK

misrepresented to the Class when its patents on Paxil were to run out. As shown above, once the

patents expired, GSK would lose market share and profits by reason of direct competition with

generic drugs. If the members of the Class knew that Paxil would face generic competition in

2003, instead of 2006 as proclaimed by GSK, they would not have purchased GSK securities at

the prices they did. As admitted by GSK, generic Paxil has caused Paxil sales to plummet.

237. Second, GSK’s course of conduct in engaged in anti-trust violations has left GSK

open to suit on numerous grounds. In addition to liability for anti-trust violations, GSK is also

being sued for Medicade fraud. Additionally, it is also being sued by health insurance companies

that claim they over paid millions of dollars because GSK illegally kept generic versions of Paxil

off the market.

SUPPRESSION FROM THE MARKET AND FROM PRESCRIBING PHYSICIANS OF

PAXIL’S ADDICTIVE POTENTIAL AND SEVERE WITHDRAWAL EFFECTS.

238. Despite awareness that Paxil had a greater potential for addiction than other drugs

of its class, GSK suppressed this information, which it surely possessed prior to release of the

drug in 1992. Despite studies conducted by GSK throughout the 1990s that demonstrated this

serious addictive potential GSK misconstrued the studies’ results and mislead consumers and

physicians. This disinformation campaign was quite successful and did not begin to crumble

until August 2001 when a class action lawsuit was filed on behalf of consumers who were

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addicted to the drug was filed in California. Shortly after this, the FDA ordered Paxil to change

its labeling to reflect Paxil’s addictive potential. Paxil’s share price began to decline at this point

in 2001 and has never recovered.

239. Paxil is a member of a class of drugs known as the selective serotonin reuptake

inhibitors “SSRIs.” Other members of this class include drugs such as Prozac and Zoloft, both of

which were marketed before Paxil.

240. GSK knew from pre-marketing studies that not only was Paxil more selective in

inhibiting serotonin reuptake, “stronger” in laymen’s terms, but that its half-life was much

shorter than other SSRIs. It is a well-known principle in pharmacology that drugs that affect the

central nervous system become more addictive as their half-life decreases. A simple statement of

this principle is that the “peak” of the “high” is reached more quickly and the “low” of the low is

also reached more quickly.

241. An excellent example that is known outside the medical community, in law

enforcement circles for example, that the addictive potential of the drug cocaine is affected by

this principle. The most addictive mechanism of delivery of cocaine is intravenous injection,

followed by inhalation of the “base” form i.e. “freebase” or “crack”, followed by nasal inhalation.

The reason that each of these mechanisms is more addictive than the next, in the context of the

same drug, is that the rapidity in which the drug enters and leaves the brain. That is why the

intravenous, or directly into the bloodstream route is most addictive. This spectrum of addictive

properties is approximated within the SSRI class of antidepressants, with Paxil having the

shortest half-life and the greatest potential for addiction.

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242. In the case of SSRIs, Paxil’s half-life is about 24 hours, while Prozac’s, for

example, is several days.

243. Despite knowledge within GSK of this common pharmacologic principle, the

company, in its promotional literature, advertised the following: “Paxil belongs to a class of

medications called SSRIs, which have not been shown to be associated with addiction.”

244. Since December 29, 1992, Paxil's labeling has been legally deficient. Paxil's

addictive qualities, its tendency to induce dependency, and its dangerous traits in causing

withdrawal symptoms when the patient reduces and/or abruptly terminates dosage were all facts

known to SKB during this period, but never included in Paxil's label. As a result, virtually all

U.S. physicians were ignorant of this danger.

245. Between December 29, 1992 and the present, scientific literature published by

medical researchers throughout the world documented Paxil's dangerous nature as herein

described. Some of the key articles, among many others, include:

246. In 1993 Stoker and Eric reported paroxetine withdrawal at the American

Psychiatric Association's annual meeting in San Francisco, May 22-27, 1993. The authors

conducted 2 week tapering regimes for 186 patients in 6 to 12 week double-blinded comparative

studies. Paroxetine patients fared badly. Low dose and high dose groups were both studied.

Paxil's low dose group actually fared worse than the high dose group, suffering a 42%

withdrawal rate, as opposed to 38% in the high dose group. Both occurred notwithstanding the

fact that a tapering regime was initiated during reduction of dosage. An imipramine patient group

was also studied. The imipramine group had a lower incidence of withdrawal than either

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paroxetine group. This report occurred 5 months after Paxil entered the U.S. market. Plaintiff

alleges SKB did nothing in response to this information.

247. In 1993, the Committee on Safety of Medicines ("CSM"), Great Britain's

counterpart to the FDA, reported 78 cases of withdrawal after discontinuation of paroxetine,

reporting that "such reactions have been reported more often with paroxetine than with other

SSRI's." ("Current Problems in Pharmacovigilance" (1993; 19:1). SKB refused to react to this

warning.

248. In 1994, Barr and colleagues reported 50% of paroxetine patients suffered

withdrawal syndrome despite the fact that the suffering patients tapered dosage over a 7-10 day

period; (Am J Psychiatry 151:2, February, 1994).

249. In 1994, Keuthen and colleagues reported Paxil withdrawal, indicating that

paroxetine “has been reported to cause such reactions more often than other SSRI's.” The

percentage of Paxil patients with obsessive compulsive disorder ("OCD") adverse affects was

38.5%, and such reactions appeared notwithstanding a tapering down dosage. Patients affected

reported dizziness, ranging from "mild to severe." (J Clin Psychopharmacol 1994; 14:206-7).

250. I n 1995, Oehrberg and colleagues reported that 34.5% of paroxetine patients

reported adverse events on discontinuation, most commonly dizziness -- compared to only 13.5%

of placebo patients. (British Journal of Psychiatry 1995; 167: 374-379.) SKB did not respond to

this report.

251. In 1996, Coupland and colleagues reported that withdrawal occurred on SSRI

reduction of dosage "despite slowly tapered withdrawal." The authors warned that SSRI

withdrawal occurs more frequently with short-half-life SSRI's such as paroxetine and fluvoxamine

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than with Zoloft or Prozac. Paxil patients suffered tremendous withdrawal reactions in these studies.

Of Paxil's 50 patients suffering withdrawal, 16% suffered dizziness, 12% suffered paresthesia, 12%

suffered lethargy, 6% suffered nausea, 2% dysphoria, 4% anxiety, 4% vivid dreams, 4% insomnia,

16% movement related adverse symptoms, and 20% suffered more than one adverse event. (J Clin

Psychopharmacol 1996 Oct;16(5):356-62.).

252. In 1996, Coupland and colleagues reported that withdrawal occurred on SSRI

reduction of dosage "despite slowly tapered withdrawal." The authors warned that SSRI withdrawal

occurs more frequently with short-half-life SSRI's such as paroxetine and fluvoxamine than with

Zoloft or Prozac. Paxil patients suffered tremendous withdrawal reactions in these studies. Of Paxil's

50 patients suffering withdrawal, 16% suffered dizziness, 12% suffered paresthesia, 12% suffered

lethargy, 6% suffered nausea, 2% dysphoria, 4% anxiety, 4% vivid dreams, 4% insomnia, 16%

movement related adverse symptoms, and 20% suffered more than one adverse event. (J Clin

Psychopharmacol 1996 Oct;16(5):356-62.).

253. In 1996, Price and colleagues reported on the British data base of adverse effects on

withdrawal for SSRI medications. By far, paroxetine was the largest inducer of withdrawal. The

most prevalent reactions cited were dizziness, paraesthesia, tremor, anxiety, nausea, and palpitation.

The authors stated that while the overall safety profiles of the SSRI's were similar, "withdrawal

reactions with paroxetine constitute a greater (5.1%) proportion of reports than with the other SSRI's

(0.06% to 0.09%). (Br J Clin Pharmacol 1996 Dlec;42(6):757-63.) SKB failed to act on this report.

254. In February, 1996, Australia's "Adverse Drug Reactions Advisory Committee"

("ADRAC") published results of a study showing that Paxil had the highest rate of SSRI

withdrawal adverse events in that country. Even though Zoloft outsells Paxil in Australia, the latter

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had more than three (3) times the number of adverse complaints as Zoloft. Complaints on Paxil

exceeded Prozac by a rate of greater than 4 to 1. In 1998, Dr. Roger Lane's article, Withdrawal

symptoms after discontinuation of selective serotonin reuptake inhibitors (SSRIs), was published in

the Journal of Serotonin Research (1996, 3, 75-83). After listing the physical symptoms caused by

withdrawal, Dr. Lane observed that of all the SSRIs, paroxetine caused severe withdrawal

symptoms the most often.

255. In 1997, Dr. Haddad reported that the highest incidence of discontinuation

reactions among the SSRI's was paroxetine. (J Clin Psychiatry 1997; 58Suppl7:17-1; discussion

220.) SKB refused to act on this report.

256. In 1997, Lejoyeux and colleagues provided extensive review of the literature on

antidepressant discontinuation, concluding that "they ... (withdrawal symptoms) ... are much

more common with the shorter acting SSRI such as paroxetine, than with the longer acting agent

fluoxetine. Because the symptoms of antidepressant discontinuation include changes in mood, affect,

appetite, and sleep, they are sometimes mistaken for sign of a relapse into depression." (J Clin

Psychiatry 1997;58Suppl7:11-5.) SKB did nothing in response to this article.

257. In 1997, Mackay and colleagues reported on British experience with SSRI's,

reporting on a study done by the Drug Safety Research Unit, Bursledon Hall, Southhampton. A

patient population of 13,741 was screened. It was concluded "Withdrawal symptoms were

significantly more frequent with paroxetine than the other three SSRI's." The report indicated

"agitation, anxiety, tremor, dizziness, loss of balance nausea, vomiting, paraesthesia, and

restlessness are all associated with withdrawal." (Pharmacoepidemiology & Drug Safety,

1997;6:No.4. 235-46.). In late 1997, SKB falsified the results of this study. In an internal document,

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SKB's corporate leadership fabricated the results of this British study and told SKB sales

representatives in the United States that the British study showed that all of the SSRI's were the same as

to withdrawal. This false message was sent to the sales representatives for the express purpose of

conveying this misrepresentation to all physicians in the United States.

258. In 1997, Stahl and seven (7) colleagues documented Paxil's leading withdrawal status

in the world. The authors investigated and reported upon the World Health Organization ("WHO")

database. From the year of introduction for each of the SSRI's, all case reports for Paxil, Prozac, and

Zoloft were retrieved. Sales figures were also retrieved. Paxil's rate of withdrawal reactions were

higher than Prozac and Zoloft for each of the 16 countries surveyed, and also for those countries for

which a detailed analysis was conducted (U.S., U.K., and Australia). (Eur J Clin Pharmacol

1997;53(34):163-9.) SKB showed no sensitivity to this report, taking no action.

259. In 1997, Young and Currie of Newcastle reported on their survey indicating that a

sizeable minority of physicians were aware of the existence of antidepressant withdrawal reactions.

This included psychiatrists, 28% of whom expressed no awareness that antidepressant medications

could induce discontinuation reactions. The conclusion of the authors was that "education about

discontinuation reactions ... is needed for both psychiatrists and family practice physicians." (J Clin

Psychiatry 1997;58 Suppl &:28-30.) SKB disregarded this study by insisting that all physicians

understand "discontinuation" and that no further labeling on Paxil withdrawal was needed.

260. In 1998 Dr. Thompson of Southhampton reported on withdrawal reactions in

antidepressant medications, citing paroxetine, fluoxetine, and sertraline. He discussed

emerging complications in this medical area and their relevance. (J Clin Psychiatry 1998

Oct;59(10):541-8.)

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261. In 2000, Belloeuf and colleagues reported paroxetine withdrawal syndrome on

their patient population. (Ann Med Interne (Paris) 2000 Apr;151 SupplA:A52-3.)

262. In 2000, Dr. Haddad sounded the alarm on professional unawareness of the

serious withdrawal problem, stating that there is widespread "misdiagnosis of antidepressant

discontinuation symptoms" and that "increased professional awareness of discontinuation

symptoms is necessary to prevent misdiagnosis and inappropriate treatment." (Acta Psychiatri

Scand 2000 Dec; 102(6):466-7; discussion 467-8.) SKB likewise refused to heed this report,

continuing to withhold needed labeling changes regarding Paxil withdrawal.

263. In 2000, Hindmarch and colleagues concluded, with respect to a study involving

four SSRIs, that cognitive and psychomotor performance was adversely affected after treatment was

interrupted over 4-7 days. Particularly cited was paroxetine, in which it was stated abrupt

discontinuation of treatment with paroxetine leads to deterioration in various aspects of health and

functioning. The authors made clear their opinion that Paxil was the worst of all, stating that these

effects "are not evident in patients receiving (Prozac), (Zoloft), and (Celexa), suggesting they are not

an SSRI class phenomenon." (Int Clin Psychopharmacol 2000 Nov;15(6):305-18.) SKB refused to act

on this report.

264. On September 6, 2001, the GSK shares dropped from $45.14 to $44.10 on the

news that a class action lawsuit alleging Paxil caused withdraw symptoms was filed.

265. In December of 2001, the FDA ordered GSK to begin warning consumers that

they might have trouble discontinuing Paxil. The company then rewrote the label to note

that the drug sometimes causes “discontinuation effects.” GSK continued to argue that Paxil

is not addictive, taking the position that to be addictive it must cause withdrawal symptoms

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that produce “drug-seeking behavior.” This is in marked contrast to the definition of

addiction in Merriam Webster which is linked from the National Institute of Health’s

website:

Main Entry: adAdicAtionPronunciation: - dik-sh nFunction: noun: compulsive physiological need for and use of a habit-forming substance (as heroin, nicotine, or alcohol)characterized by tolerance and by well-defined physiologicalsymptoms upon withdrawal ; broadly : persistent compulsiveuse of a substance known by the user to be physically,psychologically, or socially harmful -- compareHABITUATION, SUBSTANCE ABUSE (emphasis added)

266. In fact the Paxil prescribing information on GSK’s website

[http://us.gsk.com/products/assets/us_paxil.com] as of 08/09/05 continues to mislead

physicians and consumers. It states:

DRUG ABUSE AND DEPENDENCE

Controlled Substance Class: PAXIL is not a controlled substance. Physical and Psychologic Dependence: PAXIL has not beensystematically studied in animals or humans for its potential for abuse,tolerance or physical dependence. While the clinical trials did notreveal any tendency for any drug-seeking behavior, these observationswere not systematic and it is not possible to predict on the basis of thislimited experience the extent to which a CNS-active drug will bemisused, diverted, and/or abused once marketed. Consequently,patients should be evaluated carefully for history of drug abuse, andsuch patients should be observed closely for signs of misuse or abuseof PAXIL (e.g., development of tolerance, incrementations of dose,drug-seeking behavior).

267. In the 1990s, physicians had three choices amongst the SSRIs for the treatment

of major depressive disorder “MDD”: Paxil, Prozac, and Zoloft. Given that Paxil was not

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only the newest entrant to the market, but also the one of the three that had the highest

potential for addiction, it was an unattractive choice for the treatment of MDD. GSK

recognized this, and began to seek approval for the use of the drug in other, less serious

indications. The company secured permission to market Paxil for the treatment of panic

disorder and obsessive-compulsive disorder. In 1996, sales of the drug had climbed 54% to

$291 million.

268. GSK continued to seek new markets for its drug, looking for ever less

medically serious conditions to treat with Paxil. To that end, in 1999 GSK was granted

approval to market Paxil for the treatment of the previously rare “social anxiety disorder.”

GSK hired a PR firm, Cohn & Wolfe, who “developed a plan to educate reporters,

consumers, and, in some cases, physicians, in an effort to encourage diagnosis and

treatment.” [Emphasis added PR News Journal. Quoted in New York Times, October 16,

2002.]

269. As part of this marketing effort, the “Social Anxiety Disorder Coalition” was

established by the pharmaceutical industry, with an 800 number for potential customers to

call. The coalition also promoted the story of singer/entertainer Donny Osmond, who

recounted his struggles with social anxiety disorder. As the New York Times stated on

October 16, 2002 “Glaxo Smith Kline has steadily and energetically added to the list of

disorders Paxil can be used to treat, and spent billions of dollars to make sure the buying

public knows where to turn in case anxiety or melancholy sets in.”

270. In an indication of what motivated this search for new uses for Paxil, Barry

Brand, SmithKline’s product director for Paxil, stated the following: “Every marketer’s

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dream is to find an unidentified or unknown market and develop it. That’s what we were

able to do with Paxil.” NYT 10/16/2002, quoting “Advertising Age.” This “unidentified or

unknown market” was exploited with Paxil advertisements that asked “What if you were

allergic to people?” and “Your life is waiting.”

271. In the weeks following the tragedy of September 11, 2001, Glaxo modified

their advertising campaign in an apparent attempt to capitalize on post-9/11 anxiety. One

commercial featured a woman sitting at a kitchen table stating “Your worst fears - the what-

ifs . . I can’t control it. Another stated: I’m always thinking something terrible is going to

happen.” And a third woman “It’s like a tape in my mind. It just goes over and over and

over.”

272. By advertising directly to consumers and portraying Paxil as a drug that can

treat many levels of anxiety or depression with little or no risk, GSK circumnavigated their

toughest audience, or those who were most familiar with the psychiatric literature:

psychiatrists themselves. GSK recognized that awareness of Paxil’s addictive potential was

not well-known amongst primary care doctors, even following the label change of 2001. By

advertising directly to consumers, GSK created a demand for Paxil amongst the general

public, the vast majority of whom would ask their non-psychiatrist primary care physician

about the drug. According to a survey in 2000 by Prevention, 71% of patients who asked for

a drug they had seen advertised left with a prescription.

273. SKB has directly deceived the public on Paxil clinical studies as they pertain

to addiction, dependency, and withdrawal. In the same cartoon style pamphlets noted above,

SKB asks the following question: “Can I become Addicted to Paxil?” SKB then answers

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that question with the following: “Paxil has been studied both in short-term and long-term

use and is not associated with dependence or addiction.” The answer is false and misleading

because it suggests that the studies systematically probed the dependency and addiction

issue, and that Paxil did not have these side effects.

274. Despite the extensive documented history of withdrawal reactions and

dependency/withdrawal syndrome associated with Paxil and an ever increasing number of

Paxil withdrawal complaints, SKB adopted a policy of strategic ambiguity. The policy is a

public relations ploy. The strategy recognizes that certain code words must be placed in the

public arena to make it appear that SKB is confronting Paxil safety issues forthrightly. One

part of that strategy is labeling “withdrawal” as “discontinuation.” In this, SKB attempts to

nullify the negative connotation of “withdrawal” and redefines it with misleading

terminology. This strategy is a fraud on its face. There is no word “discontinuation” in the

medial dictionary. All medical dictionaries properly define “withdrawal” as the operative

word to describe the condition. The American Psychiatric Association, the official authority

on diagnosing such symptoms, likewise specifies “withdrawal” as the proper word.

275. The prices of GSK’s stock and ADRs were inflated during the Class Period.

These prices declined as the falsity of defendants’ statements came to light.

VIOLATION OF THE FALSE CLAIMS ACT

276. Finally, GSK has also violated the Federal False Claims Act numerous times,

which has artificially raised reported profits. The first law suit against GSK for violation of

the Federal False Claims Act was filed on November 16, 2001. On this day, GSK was

trading at $53.96. News of the suits leaked out over the following days, and was publicly

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revealed on December 10, 2001, in an article in the National Law Journal. On December 11,

2001 GSK had sunk to $49.40. The lawsuit alleged that GSK was charging the government

higher prices for drugs than private entities.

277. On April 16, 2003 GSK announced that it would its federal civil False Claims

Act liabilities and pay $87,600,922 to the United States, 49 states, the District of Columbia,

and Public Health Service entities as civil damages for losses suffered by the Medicaid

programs and the Public Health Service entities due to GSK's conduct in repackaged and

privately labeled Paxil, an anti- depressant, and Flonase, a nasal spray for Kaiser at

discounted prices but that it had failed to report these lower prices as "best prices" to the

government. This news cause GSK to fall from $39.1 on April 14 to $37.6 on April 16.

This statement ws mislaeding in that these were not all of GSK’s liabilities under the act.

278. GSK is still paying False Claims Act Claims. On September 20, 2005, it was

reported that GSK would pay $150 million to settle claims it overcharged the government for

two anti-nausea drugs. GSK engaged in a scheme to inflate the price of Zofran and Kytril for

the Medicare and Medicaid programs, which reimburse health care providers based on the

manufacturers' prices, the government said. The drugs, typically administered in doctors'

offices or hospitals, are used mainly to counter nausea brought on by chemotherapy and

radiation. The company charged health care providers less for the drugs, knowing the

providers would get to pocket the difference and would be more likely to prescribe them

again, the Justice Department said.

DEFENDANT’S INSIDER TRADING

279. While Garnier was issuing were issuing the materially false and misleading

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statements alleged throughout this Complaint, he took advantage of his knowledge of the

adverse facts that were not disclosed to the public. The extent of his trades, the timing of his

trades and the nature of his trading habits all establish that he had possession of the material

adverse facts alleged herein. Specifically, Garnier sold more than 200,000 shares of GSK

stock for proceeds of over $9.9 million. Specifically, Garnier sold the following amounts of

GSK shares at artificially inflated prices throughout the Class Period while in possession of

material non-public information that was not disclosed to the investment community at the

time of such transaction:

DATE SHARES PROCEEDS

02/19/04 142,250 $ 6,143,293 12/14/04 79,054 $ 3,774,037

NO SAFE HARBOR

280. The statutory safe harbor provided for forward-looking statements under

certain circumstances does not apply to any of the allegedly false statements pleaded in this

Complaint. Many of the specific statements pleaded herein were not specifically identified

as “forward-looking statements” when made, and many were representations about the

Company’s present status. To the extent there were any forward-looking statements: (a) there

were no meaningful cautionary statements identifying the important then-present factors that

could cause actual results to differ materially from those in the purportedly forward-looking

statements; and (b) the particular speakers of such forward-looking statements knew that the

particular statements were false or misleading, and/or the forward-looking statements were

authorized and/or approved by an executive officer of the Company, who knew that those

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statements were false when made.

281. Any purported warnings contained in the press releases and statements

quoted herein were generic and unparticularized boilerplate statements of risk, and thus

lacked the meaningful cautionary language necessary to insulate any purportedly forward-

looking statements.

COUNT I

Violation of § 10(b) of the 1934 Act Against all Defendants

282. Plaintiff repeats the allegations set forth above.

283. Defendants violated § 10(b) and Rule 10b-5 by:

a. Employing devices, schemes, and artifices to defraud;

b. Making untrue statements of material facts and omitting to state

material facts necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading;

c. Engaging in acts, practices, and a course of business that operated as a

fraud or deceit upon the Class in connection with their purchase or acquisition of GSK stock

and ADRs.

284. Class members were damaged. In reliance on the integrity of the market,

they paid artificially inflated prices for GSK stock and ADRs.

285. The undisclosed adverse information concealed by defendants during the

Class Period is the type of information which, because of SEC regulations, regulations of the

national stock exchanges and customary business practice, is expected by investors and

securities analysts to be disclosed and is known by corporate officials and their legal and

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financial advisors to be the type of information which is expected to be and must be

disclosed.

286. Plaintiff and the Class have suffered damages in that, in reliance on the

integrity of the market, they paid artificially inflated prices for GSK stock and ADRs.

Plaintiff and the Class would not have purchased GSK stock and ADRs at the prices they

paid, or at all, if they had been aware that the market prices had been artificially and falsely

inflated by defendants’ misleading statements.

COUNT II

Violations of Section 20(a) of the 1934 Act Against All Defendants

287. Plaintiff repeats the allegations set forth above.

288. Garnier acted as a controlling person of GSK within the meaning of § 20(a)

of the 1934 Act as alleged herein. By virtue of his high-level position, participation in

and/or awareness of GSK's operations and/or intimate knowledge of its internal financial

condition and business practices, Garnier had the power to influence and control and did

influence and control, directly or indirectly, the decision-making of GSK, including the

content and dissemination of the various statements which plaintiff contends are false and

misleading. GSK controlled Garnier and all of its employees. Garnier was provided with or

had unlimited access to copies of GSK's internal studies, reports, press releases, public

filings and other statements alleged by plaintiff to be misleading prior to and/or shortly after

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

289. In particular, Garnier had direct involvement in or intimate knowledge of

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the day-to-day operations of GSK and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as

alleged herein, and exercised the same.

290. As set forth above, the defendants violated §10(b) of the 1934 Act and Rule

10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their positions

as controlling persons, these defendants are liable pursuant to §20(a) of the 1934 Act.

291. As a direct and proximate result of the wrongful conduct of defendants,

plaintiff and other members of the Class suffered damages in connection with their purchase

of GSK ADRs and common stock during the Class Period.

PRAYER

WHEREFORE, plaintiff prays for judgment as follows: declaring this action to be a

proper class action; awarding damages, including interest; awarding expenses, costs and

attorneys' fees; and such equitable/injunctive or other relief as the Court may deem proper.

JURY DEMAND

Plaintiff demands a trial by jury.

Dated: September 26, 2005STULL, STULL & BRODY

By: s/ Jules Brody (JB-9151)Aaron Brody (AB-5850)Tzivia Brody (TB-7268

6 East 45 Street th

New York, New York 10017(212) 687-7230

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STULL, STULL & BRODYTimothy J. Burke10940 Wilshire Blvd., Suite 2300Los Angeles, California 90024(310) 209-2468

Lead Counsel for Plaintiffs

WEISS & LURIEJoseph H. Weiss (JW-4534)551 Fifth Avenue, Suite 1600New York, New York 10176(212) 682-3025

THE WHITEHEAD LAW FIRMC. Mark Whitehead, III610 Barone StreetNew Orleans, Louisiana 70113(504) 586-8899

Counsel for Plaintiffs


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