Pfizer to pay $420 million
in Illegal
marketing case
May 14, 2004--Pfizer Inc., the world's
biggest drug company, has agreed to settle criminal and civil charges
and pay fines of more than $430 million, the Justice Department and
federal prosecutors in Massachusetts said today. .
The settlement ends federal and
various state investigations into the marketing of Neurontin, a drug
that was originally approved for epilepsy but that rung up sales of
billions of dollars in the last decade after doctors began prescribing
it for an array of other maladies.
The settlement covers sales of
Neurontin from 1994 through mid-2000, when it was sold by Parke-Davis, a
subsidiary of the Warner-Lambert Company. Pfizer, which bought
Warner-Lambert in June 2000, said in a statement on its Web site today
that any misconduct had occurred before it acquired Warner-Lambert.
Still, Pfizer agreed to sign a
``corporate integrity'' agreement that allows for the monitoring of
future marketing practices.
The settlement, announced in
Washington by Associate Attorney General Robert D. McCallum Jr. and the
United States Attorney for Massachusetts, Michael J. Sullivan, stems
from a federal investigation of collusion among drug companies and
doctors to bill government health programs for free samples given as
promotions.
A lawsuit against Parke-Davis and
Warner-Lambert was originally filed in 1996 by Dr. David Franklin, a
former Parke-Davis medical liaison, who asserted that the company had
used an illegal marketing plan to drive up sales of Neurontin. As part
of today's settlement, Dr. Franklin will receive approximately $24.6
million of the civil penalty as a reward under federal whistle-blower
statutes. The False Claims Act, as the law has been known since Congress
passed it in 1863 as a tool against widespread fraud against the
government by Civil War contractors, authorizes individuals to bring
suits on behalf of the government and to receive as their reward a share
of any recovery.
In his original lawsuit, Dr. Franklin
charged that Warner-Lambert promoted the drug for relieving pain,
headaches, bipolar disorder and other psychiatric illnesses. The company
paid doctors to attend so-called ``consultants meetings,'' in which
physicians received a fee for attending expensive dinners or conferences
during which presentations about off-label uses of Neurontin were made.
In its statement, the Justice
Department said that these events included ``lavish weekends and trips
to Florida, the 1996 Atlanta Olympics and Hawaii.'' There was ``little
or no'' significant consulting provided by the physicians at these
events, the Justice Department statement said.
In his statement, Mr. Sullivan said:
``This illegal and fraudulent promotion scheme corrupted the information
process relied upon by doctors in their medical decision making, thereby
putting patients at risk.
``This scheme deprived federally
funded Medicaid programs across the country of the informed, impartial
judgment of medical professionals - judgment on which the program relies
to allocate scarce financial resources to provide necessary and
appropriate care to the poor.''
Once a drug is approved by the Food
and Drug Administration, doctors can prescribe it for any use. But the
promotion of drugs for so-called ``off-label uses'' is prohibited by the
Food and Drug Cosmetic Act.
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 F.D.A.,'' the Justice
Department said in a statement announcing the settlement. ``Once
approved, the drug may not be marketed or promoted for so-called
`off-label' uses - any use not specified in an application approved by
the F.D.A.''
Recent studies indicate that more than
90 percent of Neurontin's sales are ``off label.'' Since 1995, sales of
the drug have jumped, from $97.5 million that year to nearly $2.7
billion last year.
As part of the agreement,
Warner-Lambert agreed to plead guilty to two counts of violating the
Food, Drug & Cosmetic Act, and to pay a $240 million criminal fine.
In addition, Warner Lambert agreed to
pay the government $83.6 million, plus interest, in civil damages for
losses suffered by the Medicaid program as a result of Neurontin's
fraudulent promotion.
To settle civil liability claims with
the 50 states and the District of Columbia for losses state Medicaid
programs suffered, Warner-Lambert agreed to pay $68.4 million, plus
interest. And the company also agreed to pay an additional $38 million,
plus interest, to the states to cover hard caused to consumers by the
marketing scheme.
Last May, federal prosecutors in
Boston filed a brief in support of Dr. Franklin's lawsuit.
Pfizer has been in settlement
negotiations since then. In January, the company said it was taking a
pretax charge of $427 million and $403 million after taxes to settle the
negotiations.
Neurontin's basic patent expired 10
years ago. Pfizer has maintained that other patents protect the drug
from generic competition for years to come.
Those claims are being contested in
court, however, and many drug analysts say they expect to see generic
drugs on the market later this year, or sometime in 2005.
Pfizer has a successor to Neurontin,
called Lyrica, that is awaiting F.D.A. approval. In addition to
epilepsy, the Lyrica application seeks approval of the drug for
treatment of neuropathic pain and generalized anxiety disorder.
In early afternoon trading on the New
York Stock Exchange, Pfizer shares were down 44 cents, at $35.27.
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