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Pfizer shamed with $2.3bn fine for marketing fraud

Published on 03/09/09 at 08:10am

The US government has imposed a $2.3 billion fine on Pfizer for a string of offences including illegal off-label prescribing and bribery of officials.

The fine represents the country's biggest ever fraud settlement against a pharmaceutical company, and covers criminal and civil charges.

The US Department of Justice announced the deal which would resolve criminal and civil liability linked to Pfizer's illegal off-label marketing of its painkiller Bextra for several uses and doses that the FDA had specifically declined to approve due to safety concerns.

Launched in 2002, Bextra was withdrawn just three years later in April 2005, after the FDA concluded its risks outweighed its benefits.

Pfizer pleaded guilty to the charges, and will pay a fine of $1.195 billion, the largest criminal fine ever imposed in the US for any matter. The company's subsidiary Pharmacia & Upjohn will also forfeit $105 million, for a total criminal resolution of $1.3 billion.

Pfizer has also agreed to pay $1 billion to resolve allegations under the civil False Claims Act that the company illegally promoted four drugs - Bextra; Geodon, an anti-psychotic drug; antibiotic Zyvox, an antibiotic and epilepsy treatment Lyrica.

The deal also settles allegations that Pfizer caused false claims to be submitted to government health care programmes for unlicensed indications, and which were therefore not covered by those insurance schemes.

The civil settlement also resolves allegations that Pfizer paid bribes to health care professionals to induce them to prescribe these and other drugs. The civil settlement will be divided between the federal government, to receive over $668.5 million, and the state Medicaid system, which receives $331.4 million.

Pfizer also has agreed to take part in a large scale 'corporate integrity agreement' with the Office of Inspector General of the Department of Health and Human Services. This means procedures and reviews will be put in place to avoid and promptly detect similar transgressions taking place.

The US authorities were alerted to the wrongdoing by whistleblowers. As part of the deal, six whistleblowers will receive payments worth more than $102 million, taken from the government's share of the settlement.

A victory for government agencies

The investigation involved many different federal and state bodies working together, and they have not stinted in underlining their victory.

"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 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 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."

"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."

"This resolution protects the FDA in its vital mission of ensuring that drugs are safe and effective. When manufacturers undermine the FDA's rules, they interfere with a doctor's judgment and can put patient health at risk," commented Michael Levy, US Attorney for the Eastern District of Pennsylvania. "The public trusts companies to market their drugs for uses that FDA has approved, and trusts that doctors are using independent judgment. Federal health dollars should only be spent on treatment decisions untainted by misinformation from manufacturers concerned with the bottom line."

The corporate integrity agreement requires senior Pfizer executives and board members to complete annual compliance certifications and opens Pfizer to more public scrutiny by requiring it to make detailed disclosures on its website.

Pfizer had already anticipated the fines in its last quarterly results of 2008. As a result of setting aside money for the fine, the company's profits for the three month period dropped 90% to $268 million.

Sales managers sentenced

The only individuals to be prosecuted for the offences are two former regional sales managers at Pfizer, Thomas Farina and Mary Holloway.

Holloway, based in New Jersey, was fined $75,000 and received a two year probation period, while Farina, a New York regional manager, was sentenced to home confinement and electronic monitoring for six months, and will serve a three year-probation period.

Farina was given his confinement sentence because he had tried to conceal his actions once an investigation was launched, including deleting and falsely backdating computer records.

Holloway claimed that her actions had been supported by managers and other colleagues in the company, and produced some evidence in her trial to back up her claims.

Whether or not Holloway was singled-out from a more widespread culture of off-label promotion looks unlikely to be established, but Pfizer must now face greater external scrutiny.

Amy Schulman, the company's general counsel, commented: "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls and pioneer new procedures so that we not only comply with state and federal laws, but also meet the high standards that patients, physicians and the public expect from a leading worldwide company dedicated to healing and better health.

She concluded: "Corporate integrity is an absolute priority for Pfizer, and we will continue to take appropriate actions to further enhance our compliance practices and strengthen public trust in our company."

Pfizer now has a dedicated chief compliance officer, a code of conduct and extensive compliance training for it staff. The company will now also ask an 'independent review organisation' to help it assess how its 'promotional and product-related' departments are run.

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