According to an article dated October 20, 2006, plaintiff's putative class action alleged that defendant Glaxo Smithkline PLC (GSK) and its chief executive violated Securities Exchange Act §10(b) and Rule 10b-5 by making false and misleading statements as to GSK's drug Paxil, damaging GSK investors. The court dismissed plaintiff's complaint, with prejudice, for failure to state a claim. In dismissing, as time-barred, claims that GSK withheld information over alleged difficulties experienced by patients discontinuing their use of Paxil, the court noted that plaintiff was on notice of any claim based on the discontinuation claims more than two years before bringing suit. It also ruled that plaintiff failed to allege the scienter element of securities fraud. Further, plaintiff failed to plead economic loss as to claims that GSK misrepresented the safety and efficacy of Paxil's use in children and also failed to plead loss causation on other claims, including a claim that GSK violated the False Claims Act by overcharging Medicare and Medicaid for its products.
The original complaint charges GlaxoSmithKline and certain of its officers and directors with violations of the Securities Exchange Act of 1934. GlaxoSmithKline along with its subsidiaries constitute a global healthcare group engaged in the creation, discovery, development, manufacture and marketing of pharmaceutical and consumer health-related products. Specifically, the complaint alleges that during the Class Period, the prices of GlaxoSmithKline’s stock and ADRs were artificially inflated by defendants concealing deficiencies with the Company’s selective serotonin reuptake inhibitor (“SSRI”) drug, Paxil, in treating adolescent depression. On August 5, 2004, The Wall Street Journal published an article that reported that a new analysis by the FDA had confirmed the link between SSRIs (including Paxil) and suicidal tendencies in young people. The prices of GlaxoSmithKline’s stock and ADRs, which were inflated during the Class Period, declined as the falsity of defendants’ statements came to light.
A similar class action was filed in the U.S. District Court for the Eastern District of Pennsylvania, and has been transferred and consolidated with the the lead action in the Southern District of New York.