Pfizer pays a record $2.3 billion to settle criminal charges

Pfizer Inc. (PFE) claimed yet another record Wednesday. This honor, dubious at best, came about when the pharmaceutical giant agreed to pay a record $2.3 billion to settle civil and criminal charges over marketing of its recalled Bextra arthritis drug and three other medicines. Kathleen Sebelius, Secretary of Department of Health and Human Services called this a "historic settlement," which "will return nearly $1 billion to Medicare, Medicaid, and other government insurance programs." Meanwhile, Mike Loucks, acting U.S. Attorney for the District of Massachusetts crowed "The size and seriousness of this resolution [...] reflect the seriousness and scope of Pfizer's crimes."

What exactly has Pfizer done that has officials basking in their success? Well, once again it has been charged with promoting off-label uses for its drugs and for "certain payments to healthcare professionals." In other words, representatives of the company were promoting the drugs for conditions that they haven't been approved for and giving doctors kickbacks to encourage them to prescribe the meds.

This is the largest such settlement in the U.S. for claims of off-label drug promotion, topping the $1.42 billion Eli Lilly (LLY) agreed to pay earlier this year for off-label sales of its Zyprexa schizophrenia drug. Moreover, the $1.3 billion criminal penalty related only to Bextra is "the largest criminal fine ever imposed in the United States for any matter," according to the U.S. Department of Justice.

The settlement also involves pain management pill Lyrica, the schizophrenia treatment Geodon and the anit-infection drug Zyvox, as well as nine other medicines. Although huge, the agreement isn't exactly a surprise: in January, Pfizer said that it had reached an agreement "in principle" to the settlement and took a $2.3 billion charge during the fourth quarter of 2008. Even so, this didn't stop several in the media from calling the agreement "Pfizer's legal day of reckoning."

An example of what specifically Pfizer has been accused of and what it had done wrong can be seen in the case against Mary Holloway, one of its regional managers, who pleaded guilty to one count of distributing a misbranded drug. She and her sale staff of about 100 sold "Bextra for precisely the uses that the FDA refused to approve." As Holloway's case shows, while doctors can prescribe medicines for off-label conditions and uses that are not approved by the FDA, the drugmakers themselves aren't allowed to promote such uses.

Unrelated to these charges, Bextra was withdrawn from the market in 2005 over safety concerns connecting it with a rare skin condition.

Under the agreement with the DOJ, New York-based Pfizer's subsidiary Pharmacia & Upjohn Company, Inc., which it acquired in 2003, will plead guilty to one criminal count of violating the U.S. Food, Drug, and Cosmetic Act related to its past promotion of Bextra.

The $1.0 billion in civil payments for infractions that Pfizer "expressly denies" except in the case of certain improper actions related to the promotion of Zyvox -- break to approximately $503 million related to Bextra, $301 million for Geodon, $98 million for Zyvox, and $50 million for Lyrica. It also includes a civil payment of approximately $48 million to resolve allegations of kickbacks to healthcare professionals involving nine other Pfizer medicines.

In addition, the company has reached agreements in several states to settle state civil consumer protection allegations related to its past promotional practices concerning Geodon. These settlements, which total $33 million, will go on the books in the third-quarter of 2009.

And like most offenders, now Pfizer will have to undergo "therapy" and be on notice with the law. It has entered into a Corporate Integrity Agreement (CIA) with the officials, which institutes certain new measures and requires Pfizer to continue maintenance of a corporate compliance program for a period of five years.

According to Amy W. Schulman, senior vice president and general counsel of Pfizer, the company is relieved to have this matter resolved, as it can now enhance its focus on what it does best as a pharmaceutical company: "discovering, developing and delivering innovative medicines." Shulman added, however, that "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls and pioneer new procedures."

Pfizer goes on to describe the voluntary procedures it has taken over and above the agreement, but this may not help its image as the company is no stranger to such allegations. In 2004, Warner-Lambert (which Pfizer acquired in 2000) paid a $430 million fine for promoting Neurontin off-label as a painkiller. 1,200 cases are still pending in the matter.
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