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September 3, 2009

Pfizer Pays $2.3 Billion to Settle Marketing CaseBy GARDINER HARRISWASHINGTON The pharmaceutical giant Pfizeragreed to pay $2.3 billion to settle civil andcriminal allegations that it had illegally marketed its painkillerBextra, which has been withdrawn.

It was the largest health care fraud settlement and the largest criminal fine of any kind ever.

Although the investigation began and largely ended during the Bush administration, top Obamaadministration officials held a news conference on Wednesday to celebrate the settlement, thank eachother for resolving it and promise more crackdowns on health fraud.

Its another step in the administrations ongoing effort to prosecute any individual or organization thattries to rip off health care consumers and the federal government, said Kathleen Sebelius, secretary of

health and human services.

Republicans and Democrats on Capitol Hill have accused the Obama administration of failing to crackdown adequately on health care fraud, arguing that huge savings in government health programs couldbe found with better enforcement. The settlement had been expected. Pfizer, which is acquiring a rival,Wyeth, reported in January that it had taken a $2.3 billion charge to resolve claims involving Bextraand other drugs. It was Pfizers fourth settlement over illegal marketing activities since 2002.

Among the factors we considered in calibrating this severepunishment was Pfizers recidivism, saidMichael K. Loucks, acting United States attorney for the Massachusetts district.

Amy W. Schulman, Pfizers general counsel, said that Pfizer had reformed again.

The reasons to trust Pfizer are because, as I have walked the halls at Pfizer, you would see that thevast majority of our employees spend their lives dedicated to bringing truly important medications topatients and physicians in an appropriate manner, she said.

The government charged that executives and sales representatives throughout Pfizers ranks plannedand executed schemes to illegally market not only Bextra but also Geodon, an antipsychotic; Zyvox, anantibiotic; and Lyrica, which treats nerve pain. While the government said the fine was a record sum,the $2.3 billion fine amounts to less than three weeks of Pfizers sales.

Much of the activities cited Wednesday occurred while Pfizer was in the midst of resolving allegationsthat it illegally marketedNeurontin, an epilepsy drug for which the company in 2004 paid a $430million fine and signed a corporate integrity agreement a companywide promise to behave.

John Kopchinski, a former Pfizer sales representative whose complaint helped prompt thegovernments Bextra case, said that company managers told him and others to dismiss concerns aboutthe Neurontin case while pushing them to undertake similar illegal efforts on behalf of Bextra.

The whole culture of Pfizer is driven by sales, and if you didnt sell drugs illegally, you were not seenas a team player, said Mr. Kopchinski, whose personal share of the Pfizer settlement is expected toexceed $50 million. Mr. Kopchinski left Pfizer in 2003.

Altogether, six whistle-blowers will collect $102 million from the federal share of the settlement andmore from states shares. Forty-nine states and the District of Columbia will collect $331 million, with

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New York State alone getting $66 million. Only South Carolina chose not to participate in thesettlement.

As news of the riches earned by whistle-blowers spread through the industry in recent years, scores offraud cases have been filed by former drug sales representatives using a Civil War-era law that pays abounty for fraud alerts. The cases charge that illegal drug marketing cost the federal Medicare andMedicaid program millions.

Under the agreement with the Justice Department, Pfizer will pay a $1.3 billion criminal penalty relatedto Bextra and $1 billion in civil fines related to other medicines. In addition, a Pfizer subsidiary,Pharmacia and Upjohn, will plead guilty to violating the Food, Drug and Cosmetic Act for itspromotion of Bextra. The company has agreed to sign another corporate integrity agreement thatrequires senior company executives to annually certify legal compliance and mandates that Pfizer poston its Web site many of its payments to doctors.

Consumer advocates heaped scorn on Pfizer and said that illegal marketing was still common in thedrug industry.

Consumers should ask their doctor whether the medication being prescribed is F.D.A.-approved fortheir condition, advised Lisa Gill, editor ofConsumer Reports Best Buy Drugs. If a drug is not

approved for their condition, patients should press their doctors to explain their reasoning for the drugsuse.

Almost every major drug maker has been accused in recent years of giving kickbacks to doctors orshortchanging federal programs. Prosecutors said that they had become so alarmed by the growingcriminality in the industry that they had begun increasing fines into the billions of dollars and wouldmore vigorously prosecute doctors as well.

Dr. Scott Gottlieb, a top F.D.A. official in the Bush administration who now consults for drug makers,said that government prosecutors were increasingly criminalizing what reasonable people might argueis a reasonable exchange of important clinical information between drug companies and doctors.

Bextra was approved in 2001 by the Food and Drug Administration to treat arthritis and menstrualcramps. The drug was not approved for the treatment of acute pain, nor was it shown to be any morepowerful than ibuprofen. But Pfizer instructed its sales representatives to tell doctors that the drugcould be used to treat acute and surgical pain and at doses well above those approved, even though thedrugs dangers which included kidney, skin and heart risks increased with the dose, thegovernment charged. The drug was withdrawn in 2005 because of its risks to the heart and skin.

Mr. Loucks, the prosecutor, accused Pfizer of aggressive marketing tactics.

Among other things, Pfizer did the following: Pfizer invited doctors to consultant meetings, many inresort locations. Attendees expenses were paid; they received a fee just for being there, he said. Suchweekend getaways for doctors are still common throughout the drug and medical device industries.

Top Republican officials rarely publicized drug marketing cases or appeared during news conferencesabout them. Eli Lilly agreed to pay $1.4 billion over its marketing of Zyprexa, an antipsychotic, inJanuary, before President Obama took office. The announcement was made by prosecutors inPhiladelphia.

Ms. Sebeliuss decision to make the Pfizer announcement in Washington suggests that the politicalenvironment for the pharmaceutical industry has become more treacherous despite the industryscommitment to save the government $80 billion as part of efforts to change the health care system.

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