Pfizer Inc agreed to pay a record $2.3 billion to settle claims that it inappropriately advertised 13 medicines and plead guilty to a US criminal charge connected to the promotion of its now-withdrawn Bextra pain treatment.
After being deemed a repeat offender in pitching pharmaceuticals to patients and doctors for unapproved uses, the US authorities slapped the world’s largest drugmaker with massive fines.
Pfizer pleaded guilty to an earlier felony charge of inappropriate sales methods in 2004, and its actions have been subject to US scrutiny since then.
“If another one of these charges crops up, it would raise questions whether Jeff Kindler is keeping everyone at Pfizer on a tight enough leash,” stated Miller Tabak analyst Les Funtleyder, referring to Pfizer’s CEO.
Kindler was Pfizer’s general counsel from 2002 to 2006, when he became CEO. When asked if he negotiated the 2004 settlement and if he advised any precautions at the time to prevent the kind of recurrent improprieties exposed on Wednesday, Pfizer declined to respond.
The company announced in January that it had taken a $2.3 billion charge late last year to resolve charges involving Bextra and other pharmaceuticals, but provided no further specifics.
“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 acting US attorney for the District of Massachusetts Mike Loucks.
The settlement includes a $1.3 billion criminal penalty for selling Bextra, which was taken off the market in 2005 due to safety concerns. Pfizer acquired Bextra when it purchased Pharmacia Corp. in 2003.
According to the US Department of Justice, Pfizer’s marketing staff marketed Bextra for acute pain, surgical pain, and other unapproved applications, while its salesforce promoted the medicine directly to doctors for those unapproved uses and dosages.
According to the authorities, the company and Pharmacia employed advisory boards, consultant meetings, and costly resort vacations to inappropriately advertise Bextra to doctors and make false claims about the drug’s safety and efficacy.
In addition, the settlement includes $1 billion in civil payments relating to so-called “off-label” medicine sales, which refers to usage not approved by the US Food and Drug Administration, as well as payments to healthcare professionals. Except for admitting to illegal advertising of the medication Zyvox, Pfizer contested all of the civil charges.
“We regret certain actions taken in the past, but are proud of the action we’ve taken to strengthen our internal controls,” said Pfizer’s general counsel Amy Schulman.
Cracking down on healthcare fraud is a top goal for the Justice Department, authorities said, and comes as President Barack Obama tries to push through changes of the $2.5 trillion healthcare system to rein in spiraling costs.
Morningstar analyst Damien Conover believes the settlement and guilty plea will not have a significant impact on Pfizer’s ability to market medications. “However, it could send the wrong message at a time when you’re making some pretty critical negotiations with the U.S. government on healthcare reform.”
Sandra Jordan, a former federal prosecutor and law professor at North Carolina’s Charlotte School of Law, stated, “Pfizer can survive this and pay the money. If it had fought the government at trial and lost, and a judge imposed a criminal sentence, it could have resulted in a corporate death penalty. That would have put Pfizer out of business.”
The settlement is the largest for improper prescription drug marketing to date, surpassing the $1.42 billion Eli Lilly and Co agreed to pay earlier this year for off-label sales of its Zyprexa schizophrenia drug.
Pfizer said it will pay $503 million to settle Bextra-related practices, $301 million for its schizophrenia treatment Geodon, $98 million for Zyvox, and around $50 million for its blockbuster Lyrica, which is used to treat nerve pain and seizures.
In addition to the $2.3 billion fine, Pfizer stated that it will incur further expenses of up to $33 million to address state civil consumer fraud allegations linked to Geodon advertising.
The majority of the alleged wrongdoing occurred in or before 2005, the company said. However, some were as recent as 2007, while Pfizer was still on probation for unlawful Neurontin promotion.
Pfizer did not say whether any executives had been penalized in connection with the latest offenses.
Six whistleblowers, including John Kopchinski, a former sales representative who exposed Pfizer’s Bextra marketing methods, triggering federal investigations, will get more than $102 million under the False Claims Act. Kopchinski’s stake was estimated to be worth more than $51.5 million.
Pfizer pleaded guilty to criminal charges of illegally selling epilepsy medicine Neurontin for migraine headaches, pain, and bipolar illness in 2004 and agreed to pay $430 million to the federal and state governments. Pfizer acquired Neurontin when it purchased Warner Lambert Corp. in 2000.
Pfizer’s marketing activities have been under regulatory scrutiny for the past five years as a result of an earlier deal.
Pfizer will be required to follow a five-year compliance program under the new agreement. Pfizer will be required to post information about payments to doctors, such as travel, on its website, as well as establish a system for doctors to report questionable conduct by Pfizer’s representatives.
On the New York Stock Exchange, Pfizer shares fell 10 cents, or 0.6 percent, to $16.28.