Pfizer Reaches Record Settlement with Feds; Yes, That Is $2.3 Billion with a ‘B’

September 2, 2009

By Douglas B. Farquhar

Pharmaceutical manufacturer Pfizer has agreed to the largest drug marketing settlement yet – $2.3 billion (yes, that is “billion” with a “b”) to resolve claims originally brought by six whistleblowers that the firm illegally marketed four drugs – according to a U.S. Department of Justice announcement.  While the practices underlying the claims have become fairly standard grist for the government penalty mill, the penalties and fines in these cases are anything but standard: the $1.2 billion criminal fine against Pfizer subsidiary Pharmacia & Upjohn, Inc. is claimed by people who should know (the U.S. Department of Justice) to be the largest fine ever levied against a U.S. company, and the six whistleblowers will receive a total of $102 million (one of the whistleblowers will receive more than $51.5 million).
First, on the criminal side, Pharmacia agreed to plead guilty to a felony violation of Federal Food, Drug, and Cosmetic Act for misbranding Bextra (valdecoxib), an anti-inflammatory drug, that the company will agree was marketed for uses that FDA specifically declined to approve due to safety considerations.  In addition to the fine of $1.195 billion the company has agreed to pay, the company will forfeit $105 million as part of the criminal settlement.  This settlement is so large that the forfeiture would have made headlines standing on its own, but is merely an afterthought given the size of the fine and the civil settlement.
Second, on the civil side, Pfizer has agreed to pay $1 billion in civil settlements of cases which were brought under the federal False Claims Act (“FCA”) by whistleblowers (called “qui tam relators” under the Act) who seek recovery of reimbursements under federal programs, including Medicare, Medicaid, and health benefits provided  to military personnel, federal employees, and their families.  About $330 million of that amount will go to state governments to reimburse them for Medicaid reimbursements.  The FCA set up a system to reward the whistleblowers if they initiate successful claims that the government investigates.
According to government documents publicizing the settlement:

  • Bextra was marketed for acute pain and surgical pain, although only approved for certain types of arthritis and menstrual cramps, and for higher dosages than approved.

  • Geodon (ziprasidone) was marketed for depression, mood disorder, dementia, and other indications when approved only for schizophrenics and acute episodes experienced by patients suffering from bipolar disorder.

  • Zyvox (linezolid) was promoted for infections caused by MRSA (methicilllin-resistant Staphylococcus aureus) while only approved by FDA for other types of infections and certain types of pneumonia.

  • Lyrica (pregabalin) was promoted for chronic pain, neouropathic pain, perioperative pain, and migraines, when it was approved only for fibromyalgia and certain other conditions.

Generally, a company signing a settlement agreement under these circumstances does not admit liability for the acts alleged by the whistleblowers or the federal government.  But the marketing acts that allegedly resulted in the false claims for federal reimbursement included the following:

  • The marketing team positioned Bextra for uses other than the approved uses, created and tested sales materials promoting those uses.

  • The sales force marketed Bextra for unapproved uses, including drafting and distributing physician standing orders and hospital pain “pathways” that called for unapproved uses of Bextra.

  • Pfizer and Pharmacia used “so-called” Advisory Boards, consultant meetings, and other forms of remuneration to promote Bextra for unapproved uses (Advisory Boards have been a particularly frequent target for federal government investigations).

  • The sales force created sham requests from physicians for off-label information (the requests are supposed to originate from physicians without prompting from sales representatives).

  • Distribution of drug samples for unapproved uses.

  • Sponsoring supposedly independent CME (continuing medical education programs) that were not independent.

  • Initiating, funding, and occasionally drafting articles for medical publications about unapproved uses of Bextra.

Allegations relating to kickbacks also covered several other drugs for which Pfizer has now bought peace with federal and state governments in the civil settlement. 

Pfizer was also required to sign a five-year Corporate Integrity Agreement (“CIA”) with the Office of Inspector General of the United States Department of Health and Human Services.  The Pfizer CIA is available here.  CIAs are discussed generally here.

The Relators, at least some of whom were Pfizer employees, provide further evidence that marketing pharmaceuticals is a tricky business.  In the old days, one needed to worry about competitors, and possibly FDA.  These days, even one's own employees may be the source of liability to a company, particularly when the incentives to sue are as big as in a case like this.  $51 million means one doesn't have to tote a sales rep's bag ever again.   

The settlement documents are available here.