Drugmaker Pfizer to Pay Record Penalty In Improper-Marketing Case

By Carrie Johnson
Washington Post Staff Writer
Thursday, September 3, 2009

The Obama administration intensified its public campaign against health-care fraud Wednesday, putting drugmakers on notice that they will be forced to atone for improper marketing practices as prosecutors unveiled a record $2.3 billion settlement with Pfizer.

Officials at the departments of Justice and Health and Human Services called the agreement with Pfizer and one of its subsidiaries a cautionary example of their strategy to team up with states to police errant health-care businesses.

The Pfizer unit Pharmacia & Upjohn pleaded guilty to a single felony charge that accused the company of marketing its anti-inflammatory drug Bextra for broader uses and higher dosages than those approved by the Food and Drug Administration.

The company allegedly enticed doctors to prescribe the drug for pain relief by taking them on lavish trips, created sham requests for medical information as an excuse to send unsolicited advertising materials to physicians, and drafted articles promoting the pills without disclosing its role in preparing the stories.

In connection with the settlement, Pharmacia & Upjohn consented to pay $1.3 billion in fines and forfeiture, the biggest criminal penalty ever imposed in the United States, prosecutors said. Pfizer paid an additional $1 billion to state and federal authorities to resolve civil allegations of improper marketing over Bextra and three more drugs: Geodon, an antipsychotic medicine; Zyvox, an antibiotic; and Lyrica, an epilepsy medicine. In the bulk of the civil allegations, the company did not admit wrongdoing.

The settlement comes as federal agencies pursue a wider strategy to target wrongdoing in the deep-pocketed health-care industry.

Earlier this year, Justice and HHS deployed a task force of prosecutors and federal agents to bring criminal charges against the ringleaders of small groups that had bilked Medicare and Medicaid out of hundreds of millions of dollars through schemes involving wheelchairs, medical equipment and costly HIV/AIDS treatments. Authorities have rolled out dozens of indictments over the past several months in Miami, Houston, Detroit and Los Angeles.

The Justice Department's civil division, led by Tony West, also has pledged to devote more attention to whistleblowers at drug companies and insurance firms who flag improper payments and marketing schemes. The department is on track this fiscal year to collect more than $3 billion in False Claims Act cases; most of the money will go back to the U.S. Treasury.

The announcement yesterday came amid the escalating political debate on health-care reform, which hinges in part on concerns over the ballooning costs of medical care and prescription drugs.

Associate Attorney General Tom Perrelli called the Pfizer case "an example of the department's ongoing and intensive efforts to protect the American public" from fraud and abuse, which costs the Treasury billions of dollars a year. The bulk of the investigation was conducted under the Bush administration, which also began negotiating with the company on a settlement.

Mike Loucks, the acting U.S. attorney in Massachusetts, said that, in negotiating the financial penalties, authorities considered Pfizer's "recidivist" history. The world's largest drugmaker, he said, has entered into four settlements with the Justice Department over the past decade. Pfizer voluntarily withdrew Bextra from the market in 2005 amid concerns about its link to such health problems as strokes, heart attacks and blood clots in the lungs.

Health and Human Services Secretary Kathleen Sebelius said her department's inspector general will heighten scrutiny of the company to make sure it does not run afoul of the law.

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