Pfizer to Settle Drug Marketing Suit for $400 Mln

Date Published:

May 13 (Bloomberg) — Pfizer Inc., the world’s largest drugmaker, agreed to pay at least $400 million to settle civil charges its Parke-Davis unit paid kickbacks to encourage doctors to prescribe the epilepsy drug Neurontin for other ailments, people familiar with the case said.

The settlement stems from a U.S. investigation of collusion among drug companies and doctors to bill government health programs for free samples given as promotions. AstraZeneca Plc and Tap Pharmaceuticals Inc. pleaded guilty to criminal charges and agreed to settlements totaling more than $1.2 billion.

“The cost, while seeming to be a lot, probably is worth it to get this issue out of the way,” said Ira Loss, a health-policy analyst at Washington Analysis, which advises institutional investors on federal policy. “Pfizer doesn’t want to have a trial about this, and I don’t think any other major company would either. It’s just easier to pay it off and move on.”

Pfizer, which acquired Parke-Davis when it bought Warner- Lambert Co. for about $120 billion in June 2000, said in a regulatory filing in March it set aside $427 million in the fourth quarter in connection with efforts to resolve investigations into the promotion of Neurontin. The alleged misconduct occurred before Pfizer acquired Warner-Lambert, Pfizer said in its annual report. Pfizer said Neurontin sales exceeded $1 billion last year.

Whistleblower
The lawsuit was originally filed by former Parke-Davis employee Thomas Franklin, who alleged that the company lavished doctors with dinners, trips to the Olympics and resorts in an effort to market Neurontin as a treatment for other ailments such as migraines and sought reimbursement from Medicaid, the government’s health insurance program for low-income people.

Pfizer spokesman Paul Fitzhenry and Justice Department spokesman Charles Miller declined to comment. The Justice Department said in an e-mail to reporters it will hold a noon news conference today about a “health matter” that will include Associate Attorney General Robert D. McCallum and Michael J. Sullivan, the U.S. attorney in Boston whose office investigated the Pfizer case.

The Justice Department is also investigating the marketing of the Genotropin growth hormone and Bextra painkiller, Pfizer said in a regulatory filing two months ago. Those drugs were obtained last year when Pfizer bought Pharmacia Corp. Pfizer and a dozen other drug companies are also accused in a lawsuit by Pennsylvania Attorney General Jerry Pappert of inflating drug prices with marketing costs.

Wider Probe
The government also has scrutinized the marketing practices of other drugmakers, including Bristol-Myers Squibb Co., Eli Lilly & Co., Schering-Plough Corp. and Barr Laboratories Inc.

AstraZeneca Plc pleaded guilty in 2003 to criminal conspiracy and paid $355 million to settle charges that government health programs were billed for free samples of the prostate drug Zoladex given to doctors.

Tap Pharmaceutical Products Inc., a joint venture of Abbott Laboratories and Takeda Chemical Industries Ltd., agreed in 2001 to pay $875 million to settle criminal and civil charges it encouraged doctors to bill government health programs for samples of the cancer drug Lupron.

Last month, 11 current and former Tap sales representatives and executives went on trial in federal court in Boston on charges they gave doctors free samples, cash, trips to Hawaii and Rolling Stones concert tickets to promote the company’s drugs.

The investigation of Tap was also triggered by a lawsuit filed by a former sales vice president under a statute that allows whistleblowers to share in the proceeds of judgments against companies that defraud the government.

The law was passed during the Civil War to help crack down on war profiteering. In the Tap case, Douglas Durand, the former sales executive, was awarded $77 million for his role in the case.

To contact the reporter on this story:
James Rowley in Washington at jarowley@bloomberg.net
To contact the editor of this story:
Glenn Hall at ghall@bloomberg.net.

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