Pfizer to pay $2.3 Billion for fraudulent marketing, US Justice Dept reveals

Global pharmaceutical behemoth Pfizer (which is in the process of acquiring fellow US drug major Wyeth in a $68 billion deal), and its subsidiary Pharmacia & Upjohn (acquired in 2003), have agreed to pay $2.3 billion, the largest health care fraud settlement in the history of the US Department of Justice, to resolve criminal and civil liability arising from the illegal promotion of certain pharmaceutical products, the Department announced on September 2.

Pharmacia & Upjohn has agreed to plead guilty to a felony violation of the Food, Drug and Cosmetic Act for misbranding Bextra (valdecoxib), with the intent to defraud or mislead. Bextra is an anti-inflammatory drug that Pfizer pulled from the market in 2005. Under the provisions of the Food, Drug and Cosmetic Act, a company must specify the intended uses of a product in its New Drug Application to the FDA. Once approved, the drug may not be marketed or promoted for "off-label" uses, ie, any use not specified in an application and approved by the FDA. Pfizer promoted the sale of Bextra for several uses and dosages that the agency specifically declined to approve due to safety concerns, the DoJ stated. The company will pay a criminal fine of $1.195 billion, the largest criminal fine ever imposed in the USA for any matter. Pharmacia & Upjohn will also forfeit $105 million, for a total criminal resolution of $1.3 billion.

In addition, Pfizer has agreed to pay $1 billion to resolve allegations under the civil False Claims Act that the company illegally promoted four drugs - Bextra; Geodon (ziprasidone HCI), an anti-psychotic drug; Zyvox (linezolid), an antibiotic; and Lyrica (pregabalin, an anti-epileptic drug - and caused false claims to be submitted to government health care programs for uses that were not medically accepted indications and therefore not covered by those programs. The civil settlement also resolves allegations that Pfizer paid kickbacks to health care providers to induce them to prescribe these, as well as other, drugs. The federal share of the civil settlement is $668,514,830 and the state Medicaid share is $331,485,170.

"Today's landmark settlement is an example of the Department of Justice's ongoing and intensive efforts to protect the American public and recover funds for the federal treasury and the public from those who seek to earn a profit through fraud. It shows one of the many ways in which federal government, in partnership with its state and local allies, can help the American people at a time when budgets are tight and health care costs are increasing," said Associate Attorney General Tom Perrelli. "This settlement is a testament to the type of broad, coordinated effort among federal agencies and with our state and local partners that is at the core of the Department of Justice's approach to law enforcement."

"This historic settlement will return nearly $1 billion to Medicare, Medicaid and other government insurance programs, securing their future for the Americans who depend on these programs," said Kathleen Sebelius, Secretary of the Department of Health and Human Services. "The Department of Health and Human Services will continue to seek opportunities to work with its government partners to prosecute fraud wherever we can find it. But we will also look for new ways to prevent fraud before it happens. Health care is too important to let a single dollar go to waste," she added.

"Illegal conduct and fraud by pharmaceutical companies puts the public health at risk, corrupts medical decisions by health care providers, and costs the government billions of dollars," said Tony West, Assistant Attorney General for the Civil Division. "This civil settlement and plea agreement by Pfizer represent yet another example of what penalties will be faced when a pharmaceutical company puts profits ahead of patient welfare."

"The size and seriousness of this resolution, including the huge criminal fine of $1.3 billion, reflect the seriousness and scope of Pfizer's crimes," said Mike Loucks, acting US Attorney for the District of Massachusetts. "Pfizer violated the law over an extensive time period. Furthermore, at the very same time Pfizer was in our office negotiating and resolving the allegations of criminal conduct by its then newly acquired subsidiary, Warner-Lambert, Pfizer was itself in its other operations violating those very same laws. Today's enormous fine demonstrates that such blatant and continued disregard of the law will not be tolerated,' he stressed.

Whistleblower law suits filed under the qui tam provisions of the False Claims Act that are pending in the District of Massachusetts, the Eastern District of Pennsylvania and the Eastern District of Kentucky triggered this investigation. As a part of this resolution, six whistleblowers will receive payments totaling more than $102 million from the federal share of the civil recovery, said the DoJ.

Pfizer previously disclosed a related $2.3 billion charge to its fourth-quarter and full-year 2008 earnings in connection with the DoJ agreement in principle on January 26, 2009. No additional charge to the company's earnings will be recorded in connection with this settlement. Pfizer expressly denies all of these civil allegations, with the exception that it acknowledges certain improper actions related to the promotion of Zyvox.