Pfizer Pays $2.3 Billion to Settle Marketing Case

By GARDINER HARRIS
NY Times

WASHINGTON — Top aides in the Obama administration announced a $2.3 billion settlement on Wednesday with the pharmaceutical giant Pfizer Inc. over the company’s illegal promotion of its now-withdrawn painkiller, Bextra.

It is the largest fine ever levied for fraud in the Medicare and Medicaid programs, and Obama administration officials — criticized by Republicans on Capitol Hill for failing to crack down on fraud in the government’s health programs — sought to highlight the case by having Health and Human Services Secretary Kathleen Sebelius make the announcement. The agreement also includes some promotional practices involving other Pfizer drugs — Zyvox, Geodon and Lyrica.

The settlement had been expected. Pfizer, which is acquiring a rival Wyeth, had reported in January that it had taken a $2.3 billion charge to resolve claims involving Bextra and other drugs.

Marketing fraud cases against pharmaceutical companies have become almost routine, with almost every major drug maker being accused of giving kickbacks to doctors or shortchanging the Medicaid program on prices. Prosecutors said that they have become so alarmed by the growing criminality in the industry that they have begun hiking fines into the billions of dollars and will soon start charging doctors individually as well.

Under the agreement with the Department of Justice, Pfizer will pay a $1.3 billion criminal penalty related to Bextra and $1 billion in civil fines related to a number of medicines. In addition, a Pfizer subsidiary, Pharmacia & Upjohn Company, will plead guilty to violating the Food, Drug, and Cosmetic Act for its promotion of Bextra.

In January, prosecutors announced that they would fine Eli Lilly $1.4 billion for its illegal marketing efforts on behalf of Zyprexa, an antipsychotic.

Although the fine amounts began to soar during the Bush administration, top administration officials rarely touted the cases or appeared during news conferences about them. The Zyprexa case was announced by federal prosecutors in Philadelphia.

Ms. Sebelius’s decision to make the Pfizer announcement in a news conference in Washington suggests that the political environment for the pharmaceutical industry has become more treacherous — despite the industry’s commitment to save the government $80 billion as part of efforts to change the health care system.

In addition, Pfizer has reached agreements with attorneys general in 42 states and the District of Columbia to settle state claims related to its promotional practices concerning Geodon. The company will pay $33 million to the settling states and will take a charge in that amount to third-quarter 2009 earnings.