There May Be A Silver Lining In The Pfizer Settlement

There May Be A Silver Lining In The Pfizer Settlement

On September 2, 2009, a Department of Justice press release proudly announced that Pfizer, Inc. had agreed to pay $2.3 billion to settle criminal and civil claims for fraudulent marketing. The Justice Department let Pfizer, like Purdue Pharma before it, have Pharmacia & Upjohn Company, Inc. plead guilty to a felony for illegal marketing instead of Pfizer itself. If Pfizer had admitted guilt to a felony, it would have effectively been out of business because it would no longer be allowed to do business with the federal government and most state governments.

By having their subsidiary plead guilty, they can just transfer any activity being done by the subsidiary to a new subsidiary and no problem. Readers of these newsletters know that we often are very critical of the “hand-slaps” given to drug companies who place their profits over any concern for people’s lives. It is clear to us that until these drug company executives, who not only tolerate but encourage this immoral behavior, are sent to jail, this will continue and more people will die or have their health worsened. In this case, $2.3 billion is a lot of money.

However, one commentator calculated that it was equivalent to about three weeks of Pfizer's sales. It is just another cost of doing business. $1.3 billion is allocated to criminal fines from Pfizer's admitted criminal activity and $1 billion is allocated to the settlement of combined federal and state civil False Claims Act suits.


When drugs are approved by the FDA for marketing to the public, they are approved for designated uses. Bextra, a drug that Pfizer had to pull from the market in 2005 because it was creating such serious health problems, was approved in 2001 by the FDA for the signs and symptoms associated with osteoarthritis, rheumatoid arthritis and menstrual cramps. While it is not a violation of federal law for a doctor to prescribe any medication for any purpose, it is a violation of federal law for a drug company to promote their drug for off-label uses. In order to maximize the profits, from 2002 through April 2005, Pfizer admitted that it used false and misleading claims of safety and efficacy to promote Bextra for unapproved uses and for dosages above the approved level. Pfizer admitted that:

  • Their marketing department created sales materials to promote Bextra for these off-label uses including that it was for “acute pain”;
  • They drafted and distributed documents for physicians and hospitals calling for the unapproved uses;
  • They paid physicians to promote Bextra to other physicians for the unapproved uses and to make false and misleading claims as to Bextra's safety and results;
  • They set up meetings at expensive resorts and paid the travel costs for physicians to attend and gave them this false and misleading information;
  • They used continuing medical information programs, which they sponsored, to promote the unapproved uses;
  • They paid for medical articles, without disclosing that the writers were paid by Pfizer, to promote the unapproved uses.
Many of us know that the above activities are things for which many drug companies have been caught and many more are probably guilty. Why? Because they are only interested in selling more of their drugs and the more uses they can promote, the more drugs will be sold. Pfizer might have just walked away with a smaller fine but they had a recent history of being caught ignoring the law. Their prior convictions were:
  • In 2007, Pfizer subsidiary Pharmacia & Upjohn, Inc. paid $34 million and pled guilty to paying kickbacks for formulary placement of its drugs, and entered into a Deferred Prosecution Agreement for off-label distribution of the drug Genotropin;
  • In 2004, Pfizer subsidiary Warner-Lambert pled guilty and paid more than $430 million to resolve criminal charges and civil liability in connection with its fraudulent marketing practices with respect to the drug Neurontin;
  • In 2002, Pfizer, and its subsidiaries Warner-Lambert and Parke-Davis paid $49 million to resolve civil claims that it had failed to report best prices for its drug Lipitor as is required under the Medicaid Drug Rebate Statute.


Part of the settlement agreement also provides that Pfizer be on probation. The terms of the probation agreement are bothersome because it would seem that any company should be doing this. However, I guess these common sense requirements only apply if the company even cares about following the law. Pfizer, like many of the other drug companies, has proven that laws are for other companies—particularly if the laws get in the way of profits. Called a Corporate Integrity Agreement, Pfizer has agreed:

  • An Audit Committee of Pfizer’s Board of Directors will annually review the company’s compliance program and certify as to its effectiveness;
  • Senior executives will annually certify compliance with the agreement;
  • To notify doctors about their crime and punishment; [do you mean the off-label marketing?]
  • To provide a way for doctors to report any inappropriate conduct by a sales representative;
  • To disclose on its website payments to doctors, such as money, travel, or lodging;
  • To identify potential risks associated with its drugs and to implement a plan to mitigate the identified risks;

If Pfizer doesn't meet these seemingly common sense and ethical rules when dealing with the lives of the public, the agreement does state that the government may seek to exclude Pfizer from any federal health care program. If the government did this, then Pfizer will either comply with the law or go out of business. If the Pfizer Board of Directors takes this threat seriously, they will start rewarding executives not just for profits, but profits earned ethically and honestly.


There is an old proverb that says, ”Every cloud has a silver lining.” While we continue to be disappointed at the “hand-slap” and lack of punishment of the executives at Pfizer, we think that the civil settlement may actually signal a real change. The $1 billion was paid by Pfizer to settle claims brought under the federal False Claims Act which is often referred to as the Qui Tam law. This is a law that has its roots in England's Qui Tam laws. Qui Tam translates as “one who sues on behalf of the King as well as for himself”. In the United States it was expanded by President Lincoln because of the enormous fraud by some suppliers of government goods.

Today, the act allows someone to sue a company dealing with the federal government if the company defrauded the government. The people most likely to know that a company is defrauding the federal government are the employees of the company. They witness the fraud and can become “whistleblowers” by alerting the authorities to their employer's crimes. Even though there are laws against punishing a whistleblower, the reality is that turning in your employer for committing a crime is not going to be a good career move.

To encourage people to report their employer's fraud, the False Claims Act provides that the whistleblower is entitled to share in any recovery that the government receives. Even better, the whistleblower is not required to pay any of the legal costs of any False Claims Act case that the government accepts. Without this provision that allows the millions of dollars of legal expenses to be borne by the government, few private parties could ever effectively sue a drug company. In this case, False Claim Act suits were filed alleging that, in addition to the felony crimes relating to the false marketing of Bextra, Pfizer also committed similar crimes with other Pfizer drugs. The suits alleged:

  • The FDA approved Geodon (ziprasidone) for schizophrenia and acute episodes experienced by patients suffering from bipolar disorder, but it was marketed for depression, mood disorder, dementia, and other indications;
  • Zyvox (linezolid) was promoted for infections for which it had not been approved by the FDA;
  • Lyrica (pregabalin) was promoted for a variety of types of pain—none of which was an approved FDA use.
The $1 billion that is allocated to settle the False Claims Act suits is going to be divided between Medicare, Medicaid and the whistleblowers. Pursuant to the terms of the civil settlement agreement, the United States has agreed to pay the whistleblowers a total of $102 million. These are the names of the whistleblowers and the amounts that they will receive:
  • John Kopchinski: $51,500,999
  • Stefan Kruszewski: $29,013,420
  • Ronald Rainero: $9,321,369
  • Glenn DeMott: $7,431,505
  • Dana Spencer: $2,743,637
  • Blair Collins: $2,354,582


Again, while $2.3 billion is a large number, when you have sales of $48 billion per year, it is just a “cost of doing business.” Like Eli Lilly which settled its suits for a small amount compared to its sales of Zyprexa, this settlement will not likely stop similar behavior by other drug companies. Companies either have to be put out of business, or the executives who sanctioned the illegal activities have to know that they will be prosecuted and jailed. However, the most serious criminal activities of the drug companies can only be done with the help of the drug company employees.

Employees know if the company receives reports of adverse effects of a drug that are not disclosed. Employees know if the drugs are being marketed for dangerous off-label uses. John Kopchinski was an employee of Pfizer who became a whistleblower. He lost a $100,000-a-year job at Pfizer and worked for years for much less money, but he was rewarded for doing the right thing. He received $51,500,999 as his portion of the money paid to the whistleblowers.

Maybe Mr. Kopchinski would have done the right thing even if there was no possibility of a monetary reward. However, we are delighted that he did receive a reward and hope that this will encourage others to do the right thing and blow the whistle on the criminal acts of the drug companies. It will save lives and one day might lead to investors and the government actually forcing a company to make profits because the products that they sell are actually helping people.

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