Pfizer Inc., the world's largest pharmaceutical firm, agreed yesterday to pay more than $430 million to settle criminal and civil charges that one of its divisions fraudulently marketed a popular drug, Neurontin, for unapproved uses.
The company pleaded guilty to charges that its Warner-Lambert division engaged in a widespread, coordinated effort -- offering kickbacks, one-sided education classes and free trips to the Olympics and to Florida -- to encourage doctors to prescribe Neurontin for uses not approved by the Food and Drug Administration.
First approved by the FDA in 1993, Neurontin became a major drug, with $2.2 billion of sales in the United States last year; worldwide sales were $2.7 billion, about 6 percent of Pfizer's total revenue of $45.2 billion. Law enforcement officials said yesterday a month's prescription costs about $200 and that about 90 percent of the prescriptions are for unapproved uses.
The FDA has approved Neurontin only to treat epilepsy and shingles, but Warner-Lambert promoted it to treat a variety of psychiatric ailments (including bipolar disorder and attention deficit disorder), back pain, migraines and amyotrophic lateral sclerosis (Lou Gehrig's disease), the Justice Department said yesterday.
"This illegal and fraudulent promotion scheme corrupted the information process relied upon by doctors in their medical decision making, thereby putting patients at risk," U.S. Attorney Michael J. Sullivan of Massachusetts said in a written statement. Also participating in the settlement were the 50 state attorneys general.
Pfizer, in a written statement, said that by settling, it would no longer have the expense and uncertainty associated with the allegations. In January, the company announced a pretax charge of $427 million in connection with the investigations. Pfizer stock closed yesterday at $35.40 a share, down 31 cents.
The Pfizer statement said the underlying allegations in the case originated in 1996, before it acquired Warner-Lambert in 2002 and "the allegations and conduct pertain solely to Warner-Lambert practices."
The case is part of a government crackdown on the pharmaceutical and health care industry.
"Increasing pharmaceutical prices are a huge issue for federal and state government, insurance companies and consumers, so governmental entities are looking at actions that have caused drains on state and federal budgets and added greatly to the increased cost of health care for Americans," said Vermont Attorney General William H. Sorrell, who took a leading role in the settlement on behalf of the states.
In previous cases, Sorrell said, the government went after drugmakers who were paying off companies to keep generic drugs off the market, making misstatements to federal authorities to prolong their patent protections and engaging in kickbacks or illegal pricing schemes.
Pfizer agreed to pay a criminal fine of $240 million and $190 million in civil fines to be divided among the states and federal government. It is the second-largest criminal fine ever imposed in a health care fraud prosecution.
The largest, $290 million, was assessed in 2001, on TAP Pharmaceuticals, a venture of Abbott Laboratories Inc. and Takeda Chemical Industries Ltd., which was charged with using kickbacks, travel and free goods and services to illegally market its prostate cancer drug, Lupron.
In the Neurontin case, law enforcement officials said, Warner-Lambert promoted the drug even when scientific studies showed it wasn't effective and made false or misleading statements regarding its efficacy and FDA approval. The company also paid doctors to allow sales representatives to accompany them while they saw patients, with the salesmen offering advice that was "biased toward the use of Neurontin," the Justice Department said.
Warner-Lambert also paid doctors to attend "consultants' meetings" that included expensive dinners, tickets to the 1996 Olympic Games in Atlanta and one-sided presentations about using Neurontin for uses other than those approved by the FDA. The company also used "medical liaisons" who represented themselves -- "often falsely," the Justice Department said -- as scientific experts to promote Neurontin's unauthorized use.
It was through one such liaison, David Franklin, that Warner-Lambert's activities first became known. Under the settlement, he will receive more than $24 million under the law that permits whistle-blowers to share the proceeds in successful lawsuits against corporate wrongdoing.
Also under the settlement, a $28 million fund will be set up for the states to sponsor a program to provide doctors and consumers with fair and balanced information about drugs. Although small compared with the marketing budgets of drug companies, "it's a lot more than nothing," Sorrell said.