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In Settlement, A Warning To Drugmakers
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.

The four-year investigation of Pfizer was ignited by whistleblowers inside the company who quietly sounded alarms about questionable marketing practices, said Kevin Perkins, assistant director of the FBI's criminal investigative division.

Under the False Claims Act, which dates to the Civil War, the corporate insiders who helped expose the fraudulent schemes -- which were costly to Medicare and Medicaid -- will receive a portion of the financial recovery. John Kopchinski, a West Point graduate and Gulf War veteran who joined Pfizer as a salesman in Florida, is set to collect more than $51 million.

"In the Army, I was expected to protect people at all costs," Kopchinski said in a statement distributed by his attorneys at the Washington firm Phillips & Cohen. "At Pfizer I was expected to increase profits at all costs, even when sales meant endangering lives. I couldn't do that."

Pfizer officials said they already had reserved funds in the 2008 books for the settlement, the broad outlines of which were known to the company.

"These agreements bring final closure to significant legal matters and help to enhance our focus on what we do best," said Amy W. Schulman, Pfizer senior vice president and general counsel.

Sidney Wolfe, director of Public Citizen's Health Research Group, said the Pfizer settlement "may sound large, but it's not enough to ensure drug companies will curb their bad behavior." Wolfe pointed out that the Pfizer agreement topped a landmark settlement set by Eli Lilly in January, when that company paid more than $500 million in criminal penalties for improper marketing of the antipsychotic drug Zyprexa. Five other major drug manufacturers logged smaller settlements over the past decade.

"The U.S. pharmaceutical industry, long one of the most profitable in the country, with profits last year of close to $50 billion, has engaged in an unprecedented amount of criminal activity in the past decade," Wolfe said. "Unfortunately, the ever-escalating fines are unlikely to stop drug companies from continuing to bribe doctors because they represent just a fraction of drug company profits and no one has gone to jail."

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