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Pfizer agrees to record $2.3-billion healthcare fraud settlement

September 2, 2009 |  9:13 am

Pfizer Inc. and a subsidiary have agreed to a record healthcare fraud settlement and will pay $2.3 billion to resolve civil and criminal complaints in connection with the illegal promotion of some drugs, the Justice Department announced this morning.

The agreement demonstrates that "combating healthcare fraud is one of this administration’s top priorities," Associate Atty. Gen. Thomas J. Perrelli said. "By all accounts, every year we lose tens of billions of dollars in Medicare and Medicaid funds to fraud."

Today's action also comes as the Obama administration gears up for the autumn battle over healthcare reform. Obama has argued that part of the funding for any healthcare initiative should come from eliminating waste and fraud, particularly in the two government programs, Medicare and Medicaid.

According to the Justice Department, Pfizer touted four prescription drugs -- including the anti-inflammatory painkiller Bextra -- as treatments for medical conditions different from those the drugs had been approved for by federal regulators.

A Pfizer subsidiary, Pharmacia and Upjohn Inc., which was acquired in 2003, agreed to plead guilty to one count of felony misbranding.  The department said the $2.3-billion settlement included a $1.2-billion criminal fine, the largest criminal fine in U.S. history. The agreement also included a criminal forfeiture of $105 million.

The overall settlement is the largest ever paid by a drug company for alleged violations of federal drug rules.
Other drugs involved in the agreement were Geodon, an anti-psychotic drug; Zyvox, an antibiotic; and Lyrica, an anti-epileptic drug.

Under terms of the settlement, some of money will be shared among the states, which pay for part of Medicare and Medicaid.

"As part of the settlement, Pfizer also has agreed to enter into an expansive corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services. That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter,” the Justice Department said.

Six whistle-blowers will receive payments totaling more than $102 million from the federal share of the civil recovery, the government also said.

“These agreements bring final closure to significant legal matters and help to enhance our focus on what we do best -- discovering, developing and delivering innovative medicines to treat patients dealing with some of the world’s most debilitating diseases,” Amy W. Schulman, senior vice president and general counsel of Pfizer, said in a prepared statement.  “We regret certain actions taken in the past, but are proud of the action we’ve taken to strengthen our internal controls.”

See the Department of Justice announcement here.

-- Michael Muskal