GlaxoSmithKline has agreed to settle a US lawsuit by paying out $40 million to reimburse health insurers that paid for children and adolescents who received the company’s antidepressant Paxil/Seroxat.

News of the settlement was revealed by Baum, Hedlund, Aristei & Goldman, a law firm representing the plaintiffs. Although Paxil (paroxetine) was never approved for use by children, doctors could prescribe it 'off label' and there are severe restrictions on promotion and marketing for such use.

However the law firm had claimed GSK promoted Paxil as being "remarkably safe and effective" for depressed children. Senior partner Michael Baum argues that the UK drugs major acted improperly especially as GSK’s own paediatric clinical trials showed Paxil was no more effective than sugar pills” and in fact caused adolescents “to experience increased suicidality”. Mr Baum added that “litigation like this helps remove the incentive for drug companies to take advantage of the off-label marketing loophole”.

Under the terms of the settlement, GSK will reimburse insurers who covered a Paxil prescription for use by a minor between 1998 and 2004. Insurers can claim a refund of 40% of their actual costs of the drug prescribed to children and adolescents diagnosed with a major depressive disorder, or 15% of the cost if the diagnosis was not included.

Last year, GSK agreed to pay $64 million to parents in another class-action settlement. In both of these cases, the firm denies liability and has settled to avoid the costs and uncertainties of ongoing litigation.