Pfizer Agrees to a Record $2.3 Billion Criminal Fine in Fraud Probe

Pfizer’s general counsel said: “We regret certain actions taken in the past, but are proud of the action we’ve taken to strengthen our internal controls.” Source: BBC News

The only thing Big Pharma ‘regrets’ is getting caught.

Illegally promoting drugs for conditions that had not been approved by regulators is common practice in the pharmaceutical industry.

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Pfizer Inc. drugs, from right, the pain pill Lyrica, antibiotic Zyvox, and schizophrenia treatment Geodon are arranged for a photo at C.O. Bigelow Pharmacy in New York on Sep. 2, 2009. Photographer: JB Reed/Bloomberg

Sept. 2 (Bloomberg) — Pfizer Inc. agreed to a $1.2 billion criminal fine, the largest in U.S. history, and a felony plea by a subsidiary to close an investigation into what government lawyers described as fraudulent marketing of drugs.

The fine, over sales practices for a painkiller since pulled from the market, makes up the biggest single share of a record $2.3 billion settlement, announced today, between the U.S. Justice Department and New York-based Pfizer. The deal includes $1 billion in civil penalties, the largest non-criminal fraud case against a drugmaker, the department said.

Pfizer, the world’s largest drugmaker, entered into a five- year integrity agreement with the Health and Human Services Department as well. The government pays for medicines through several health programs and joined the investigation after private whistleblowers filed lawsuits in three states. The criminal case revolved around allegations that the painkiller Bextra and three other medicines were promoted for uses other than those approved by the Food and Drug Administration.

“When a drug is marketed or promoted for non- authorized, so-called off-label uses, any use not approved by the FDA — as was the case here — public health may be at risk,” Associate Attorney General Tom Perrelli said at a news conference in Washington.

The four-year investigation uncovered a range of practices, including kickback payments to doctors in the sale of nine other drugs, among them the impotence drug Viagra and cholesterol pill Lipitor, officials said.

‘Final Closure’ for Pfizer

The agreement resolves all “material pending matters” with the Justice Department, Pfizer’s general counsel, Amy W. Schulman, said in a statement.

“This gives us a very important opportunity to put final closure on the universe of material open items involving our U.S.-based operations,” she said.

Pfizer, which had $48.3 billion in revenue last year, reported in January that it took a fourth-quarter charge of $2.3 billion to cover the preliminary agreement. The company said today it would have no additional charges from the case.

The company will post a $33 million charge in this year’s third quarter for a settlement with 42 states over promotion of the schizophrenia drug Geodon, one of the four medicines that U.S. officials said were illegally promoted. Besides Bextra, the others are the antibiotic Zyvox and seizure medication Lyrica.

Pfizer fell 10 cents to $16.28 on the New York Stock Exchange. The shares have declined 8.1 percent this year

Pharmacia Upjohn, acquired by Pfizer in 2003, will plead guilty to one count of felony misbranding of a pharmaceutical, the Justice Department said. The agreement includes a $100 million payment, known as a forfeiture, beyond the fine.

Money to Agencies

Doctors can prescribe medicines for off-label conditions — uses not approved by U.S. regulators. Drugmakers aren’t allowed to promote medicines for those purposes.

Proceeds from the settlement will go to U.S. government health agencies. Those include Medicare, the program for the elderly and disabled, and the military’s Tricare health plan. Money will also go to Medicaid, the joint U.S.-state program for the poor. The states’ share of the settlement is $331 million.

Bextra is part of a class of drugs called Cox-2 inhibitors. Pfizer acquired Bextra, approved in 2001, through its purchase of Pharmacia Upjohn. The settlement concerns only marketing practices and not safety of the drug.

Pfizer said it denies all of the civil allegations in the lawsuit with the exception of “certain improper actions” in promoting Zyvox.

The civil payments consist of $503 million involving Bextra, $301 million for Geodon, $98 million for Zyvox, and $50 million for the seizure and pain drug Lyrica. It also includes $48 million to settle an investigation over payments to doctors.

Repeat Violations

Acting U.S. Attorney for the District of Massachusetts Mike Loucks said at the Washington news conference that Pfizer’s previous violations figured in the “severe” monetary penalty and corporate integrity agreement.

The settlement was the fourth with Pfizer or a subsidiary since 2002. The previous three agreements settled criminal or civil charges involving distribution and marketing or Lipitor, Neurontin and Genotropin and resulted in combined payments of $513 million, he said.

To prevent recurrence, the corporate integrity agreement calls for Pfizer to notify doctors about the settlement and establish a mechanism for physicians to report questionable conduct by any company representative. The company must also post information on payments it makes to doctors, including honoraria, travel and lodging, the Justice Department said.

Civil War Law

Sharon Woods, director of the Pentagon Defense Criminal Investigative Service, said the agency has been participating in the case since 2004 in response to several False Claims Act lawsuits the U.S. government joined.

“We were a very key player,” said Woods, whose agency is the military’s FBI. Tricare will receive about $33 million from the settlement that represented Pentagon payments to companies for processing claims of military dependents, she said.

The False Claims Act, dating to the Civil War, lets people file fraud claims on behalf of the government. Six whistleblowers will share $102 million of the settlement.

Pfizer previously agreed to pay 33 states and the District of Columbia $60 million to resolve claims the company improperly marketed Bextra and another drug for unapproved uses.

The lead case is Collins v. Pfizer Inc., 04-11780, U.S. District Court, District of Massachusetts (Boston).

To contact the reporters responsible for this story: Shannon Pettypiece at spettypiece@bloomberg.net; Cary O’Reilly in Washington at caryoreilly@bloomberg.net

Last Updated: September 2, 2009 16:53 EDT
By Cary O’Reilly and Tony Capaccio

Source: Bloomberg

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