Pfizer Sets Aside $403M For Possible Settlement
4th-quarter charge is aimed at closure in drug fraud casesJan 23, 2004 | Boston Globe
Pfizer Inc. indicated it is closer to settling allegations of drug fraud charges, saying it has set aside $403 million for federal and state prosecutors over its promotion of what has become the country's top-selling epilepsy drug, Neurontin.
As part of its 2003 financial results filed with federal regulators yesterday, Pfizer said it took a charge of $403 million in the fourth quarter, an amount the company believes "will be sufficient to resolve all outstanding federal and state governmental investigations related to Neurontin" as well as a civil whistle-blower lawsuit brought by a former Massachusetts employee.
If Pfizer settles the criminal and civil cases for close to that amount, it would be one of the largest settlements for drug fraud in US history. In June, drug maker AstraZeneca Pharmaceuticals agreed to pay $355 million to resolve criminal and civil allegations that the company inflated the price of its prostate cancer drug and bribed doctors to prescribe it. At the time, that settlement was second in size only to the $885 million TAP Pharmaceutical Products Inc. paid in 2001 to settle similar allegations in a Boston case.
Federal and state prosecutors, angry over the soaring costs of prescription drugs to the state and federal Medicaid program, use these settlements to recoup money spent by the government. In the Neurontin investigation, federal and state prosecutors have accused the company of illegally promoting the drug to doctors through a variety of methods including kickbacks.
The US attorney's office in Boston, which has been investigating Warner-Lambert's promotion of Neurontin, declined to comment on settlement talks yesterday. Pfizer bought Warner-Lambert in 2000 and with it any liability from Warner-Lambert's sales practices.
Last May, federal prosecutors made a filing in the whistle-blower case in US District Court in Boston that for the first time outlined their belief that Warner-Lambert engaged in an illegal marketing scheme to increase sales of its epilepsy drug.
Pfizer also declined to comment yesterday except to say that "discussions have recently advanced to a point where it is appropriate" to report an amount required to resolve the investigations. Pfizer spokesman Paul Fitzhenry declined to comment on whether the US attorney plans to file criminal charges against the company.
Former Warner-Lambert employee David Franklin and his attorney Thomas Greene filed the whistle-blower lawsuit more than six years ago, saying the company gave doctors illegal financial incentives to prescribe Neurontin and illegally promoted the drug for uses that were not approved by federal regulators.
Based largely on voice-mail messages and documents collected by Franklin, the US attorney's office said in its court filing that the company gave doctors kickbacks in the form of lavish trips and tickets disguised as educational or consulting payments. In one instance, prosecutors said, the company paid for doctors to stay five days in Atlanta during the 1996 Summer Olympics. The company covered the doctors' meals, use of a resort, and motorcoach travel to the games. Agendas for the meeting listed 10.5 hours of business meetings, including one session devoted to off-label uses for Neurontin, prosecutors said.
Prosecutors also said Warner-Lambert and its subsidiaries misled doctors into believing that programs discussing uses for Neurontin were independent educational programs when they actually were marketing efforts led by the company. Pfizer executives have repeatedly refused to comment on the charges, only saying the allegations concern company activities during the mid-1990s, years before Pfizer purchased Warner-Lambert.
Meanwhile, sales of Neurontin have soared. The company reported worldwide sales of Neurontin in 2003 grew 19 percent to $2.7 billion.
Pfizer said fourth-quarter net income fell to $602 million, or 8 cents a share, from $2.86 billion, or 46 cents, a year earlier. Excluding acquisition costs and legal expenses, profit was 53 cents a share, beating the average analyst estimate of 51 cents in a Thomson Financial survey. Sales jumped 52 percent, boosted by the takeover of Pharmacia Corp.
Fourth-quarter revenue at Pfizer climbed to $14.2 billion from $9.3 billion, helped by sales of Celebrex, Bextra, and Lipitor, a cholesterol-lowering drug Pfizer acquired with its purchase of Warner-Lambert.