New York Times
September 3, 2009

WASHINGTON — The pharmaceutical giant Pfizer agreed to pay $2.3 billion to settle civil and criminal allegations that it had illegally marketed its painkiller Bextra, which has been withdrawn.

It was the largest health care fraud settlement and the largest criminal fine of any kind ever.

Although the investigation began and largely ended during the Bush administration, top Obama administration officials held a news conference on Wednesday to celebrate the settlement, thank each other for resolving it and promise more crackdowns on health fraud.

“It’s another step in the administration’s ongoing effort to prosecute any individual or organization that tries to rip off health care consumers and the federal government,” said Kathleen Sebelius, secretary of health and human services.

Republicans and Democrats on Capitol Hill have accused the Obama administration of failing to crack down adequately on health care fraud, arguing that huge savings in government health programs could be found with better enforcement. The settlement had been expected. Pfizer, which is acquiring a rival, Wyeth, reported in January that it had taken a $2.3 billion charge to resolve claims involving Bextra and other drugs. It was Pfizer’s fourth settlement over illegal marketing activities since 2002.

“Among the factors we considered in calibrating this severe punishment was Pfizer’s recidivism,” said Michael K. Loucks, acting United States attorney for the Massachusetts district.

Amy W. Schulman, Pfizer’s general counsel, said that Pfizer had reformed — again.

“The reasons to trust Pfizer are because, as I have walked the halls at Pfizer, you would see that the vast majority of our employees spend their lives dedicated to bringing truly important medications to patients and physicians in an appropriate manner,” she said.

The government charged that executives and sales representatives throughout Pfizer’s ranks planned and executed schemes to illegally market not only Bextra but also Geodon, an antipsychotic; Zyvox, an antibiotic; and Lyrica, which treats nerve pain. While the government said the fine was a record sum, the $2.3 billion fine amounts to less than three weeks of Pfizer’s sales.

Much of the activities cited Wednesday occurred while Pfizer was in the midst of resolving allegations that it illegally marketed Neurontin, an epilepsy drug for which the company in 2004 paid a $430 million fine and signed a corporate integrity agreement — a companywide promise to behave.

John Kopchinski, a former Pfizer sales representative whose complaint helped prompt the government’s Bextra case, said that company managers told him and others to dismiss concerns about the Neurontin case while pushing them to undertake similar illegal efforts on behalf of Bextra.

“The whole culture of Pfizer is driven by sales, and if you didn’t sell drugs illegally, you were not seen as a team player,” said Mr. Kopchinski, whose personal share of the Pfizer settlement is expected to exceed $50 million. Mr. Kopchinski left Pfizer in 2003.

Altogether, six whistle-blowers will collect $102 million from the federal share of the settlement and more from states’ shares. Forty-nine states and the District of Columbia will collect $331 million, with New York State alone getting $66 million. Only South Carolina chose not to participate in the settlement.

As news of the riches earned by whistle-blowers spread through the industry in recent years, scores of fraud cases have been filed by former drug sales representatives using a Civil War-era law that pays a bounty for fraud alerts. The cases charge that illegal drug marketing cost the federal Medicare and Medicaid program millions.

Under the agreement with the Justice Department, Pfizer will pay a $1.3 billion criminal penalty related to Bextra and $1 billion in civil fines related to other medicines. In addition, a Pfizer subsidiary, Pharmacia and Upjohn, will plead guilty to violating the Food, Drug and Cosmetic Act for its promotion of Bextra. The company has agreed to sign another corporate integrity agreement that requires senior company executives to annually certify legal compliance and mandates that Pfizer post on its Web site many of its payments to doctors.

Consumer advocates heaped scorn on Pfizer and said that illegal marketing was still common in the drug industry.

“Consumers should ask their doctor whether the medication being prescribed is F.D.A.-approved for their condition,” advised Lisa Gill, editor of Consumer Reports Best Buy Drugs. If a drug is not approved for their condition, patients should press their doctors to explain their reasoning for the drug’s use.

Almost every major drug maker has been accused in recent years of giving kickbacks to doctors or shortchanging federal programs. Prosecutors said that they had become so alarmed by the growing criminality in the industry that they had begun increasing fines into the billions of dollars and would more vigorously prosecute doctors as well.

Dr. Scott Gottlieb, a top F.D.A. official in the Bush administration who now consults for drug makers, said that government prosecutors were increasingly criminalizing “what reasonable people might argue is a reasonable exchange of important clinical information between drug companies and doctors.”

Bextra was approved in 2001 by the Food and Drug Administration to treat arthritis and menstrual cramps. The drug was not approved for the treatment of acute pain, nor was it shown to be any more powerful than ibuprofen. But Pfizer instructed its sales representatives to tell doctors that the drug could be used to treat acute and surgical pain and at doses well above those approved, even though the drug’s dangers — which included kidney, skin and heart risks — increased with the dose, the government charged. The drug was withdrawn in 2005 because of its risks to the heart and skin.

Mr. Loucks, the prosecutor, accused Pfizer of aggressive marketing tactics.

“Among other things, Pfizer did the following: Pfizer invited doctors to consultant meetings, many in resort locations. Attendees expenses were paid; they received a fee just for being there,” he said. Such weekend getaways for doctors are still common throughout the drug and medical device industries.

Top Republican officials rarely publicized drug marketing cases or appeared during news conferences about them. Eli Lilly agreed to pay $1.4 billion over its marketing of Zyprexa, an antipsychotic, in January, before President Obama took office. The announcement was made by prosecutors in Philadelphia.

Ms. Sebelius’s decision to make the Pfizer announcement in Washington suggests that the political environment for the pharmaceutical industry has become more treacherous despite the industry’s commitment to save the government $80 billion as part of efforts to change the health care system.

Copyright 2009 The New York Times Company