Feds found Pfizer too big to nail

CNN Special Investigations Unit
By Drew Griffin and Andy Segal,
April 2, 2010

CNN's Special Investigations Unit reveals internal company documents on Bextra and Pfizer's health care fraud. Watch at 3 p.m. ET Saturday on CNN.

VIEW VIDEO OF THIS STORY HERE:
www.youtube.com/watch?v=7ehUWAsSvFw

(CNN) -- Imagine being charged with a crime, but an imaginary friend takes the rap for you.

That is essentially what happened when Pfizer, the world's largest pharmaceutical company, was caught illegally marketing Bextra, a painkiller that was taken off the market in 2005 because of safety concerns.

When the criminal case was announced last fall, federal officials touted their prosecution as a model for tough, effective enforcement. "It sends a clear message" to the pharmaceutical industry, said Kevin Perkins, assistant director of the FBI's Criminal Investigative Division.

But beyond the fanfare, a CNN Special Investigation found another story, one that officials downplayed when they declared victory. It's a story about the power major pharmaceutical companies have even when they break the laws intended to protect patients.

Big plans for Bextra

The story begins in 2001, when Bextra was about to hit the market. The drug was part of a revolutionary class of painkillers known as Cox-2 inhibitors that were supposed to be safer than generic drugs, but at 20 times the price of ibuprofen.

Pfizer and its marketing partner, Pharmacia, planned to sell Bextra as a treatment for acute pain, the kind you have after surgery.

But in November 2001, the U.S. Food and Drug Administration said Bextra was not safe for patients at high risk of heart attacks and strokes.

The FDA approved Bextra only for arthritis and menstrual cramps. It rejected the drug in higher doses for acute, surgical pain.

Promoting drugs for unapproved uses can put patients at risk by circumventing the FDA's judgment over which products are safe and effective. For that reason, "off-label" promotion is against the law.

But with billions of dollars of profits at stake, marketing and sales managers across the country nonetheless targeted anesthesiologists, foot surgeons, orthopedic surgeons and oral surgeons. "Anyone that use[d] a scalpel for a living," one district manager advised in a document prosecutors would later cite.

A manager in Florida e-mailed his sales reps a scripted sales pitch that claimed -- falsely -- that the FDA had given Bextra "a clean bill of health" all the way up to a 40 mg dose, which is twice what the FDA actually said was safe.

Doctors as pitchmen

Internal company documents show that Pfizer and Pharmacia (which Pfizer later bought) used a multimillion-dollar medical education budget to pay hundreds of doctors as speakers and consultants to tout Bextra.

Pfizer said in court that "the company's intent was pure": to foster a legal exchange of scientific information among doctors.

But an internal marketing plan called for training physicians "to serve as public relations spokespeople."

According to Lewis Morris, chief counsel to the inspector general at the U.S. Department of Health and Human Services, "They pushed the envelope so far past any reasonable interpretation of the law that it's simply outrageous."

Pfizer's chief compliance officer, Doug Lanker, said that "in a large sales force, successful sales techniques spread quickly," but that top Pfizer executives were not aware of the "significant mis-promotion issue with Bextra" until federal prosecutors began to show them the evidence.

By April 2005, when Bextra was taken off the market, more than half of its $1.7 billion in profits had come from prescriptions written for uses the FDA had rejected.

Too big to nail

But when it came to prosecuting Pfizer for its fraudulent marketing, the pharmaceutical giant had a trump card: Just as the giant banks on Wall Street were deemed too big to fail, Pfizer was considered too big to nail.

Why? Because any company convicted of a major health care fraud is automatically excluded from Medicare and Medicaid. Convicting Pfizer on Bextra would prevent the company from billing federal health programs for any of its products. It would be a corporate death sentence.

Prosecutors said that excluding Pfizer would most likely lead to Pfizer's collapse, with collateral consequences: disrupting the flow of Pfizer products to Medicare and Medicaid recipients, causing the loss of jobs including those of Pfizer employees who were not involved in the fraud, and causing significant losses for Pfizer shareholders.

"We have to ask whether by excluding the company [from Medicare and Medicaid], are we harming our patients," said Lewis Morris of the Department of Health and Human Services.

So Pfizer and the feds cut a deal. Instead of charging Pfizer with a crime, prosecutors would charge a Pfizer subsidiary, Pharmacia & Upjohn Co. Inc.

The CNN Special Investigation found that the subsidiary is nothing more than a shell company whose only function is to plead guilty.

According to court documents, Pfizer Inc. owns (a) Pharmacia Corp., which owns (b) Pharmacia & Upjohn LLC, which owns (c) Pharmacia & Upjohn Co. LLC, which in turn owns (d) Pharmacia & Upjohn Co. Inc. It is the great-great-grandson of the parent company.

Public records show that the subsidiary was incorporated in Delaware on March 27, 2007, the same day Pfizer lawyers and federal prosecutors agreed that the company would plead guilty in a kickback case against a company Pfizer had acquired a few years earlier.

As a result, Pharmacia & Upjohn Co. Inc., the subsidiary, was excluded from Medicare without ever having sold so much as a single pill. And Pfizer was free to sell its products to federally funded health programs.

An imaginary friend

Two years later, with Bextra, the shell company once again pleaded guilty. It was, in effect, Pfizer's imaginary friend stepping up to take the rap.

"It is true that if a company is created to take a criminal plea, but it's just a shell, the impact of an exclusion is minimal or nonexistent," Morris said.

Prosecutors say there was no viable alternative.

"If we prosecute Pfizer, they get excluded," said Mike Loucks, the federal prosecutor who oversaw the investigation. "A lot of the people who work for the company who haven't engaged in criminal activity would get hurt."

Did the punishment fit the crime? Pfizer says yes.

It paid nearly $1.2 billion in a criminal fine for Bextra, the largest fine the federal government has ever collected.

It paid a billion dollars more to settle a batch of civil suits -- although it denied wrongdoing -- on allegations that it illegally promoted 12 other drugs.

In all, Pfizer lost the equivalent of three months' profit.

It maintained its ability to do business with the federal government.

Pfizer says it takes responsibility for the illegal promotion of Bextra. "I can tell you, unequivocally, that Pfizer perceived the Bextra matter as an incredibly serious one," said Doug Lankler, Pfizer's chief compliance officer.

To prevent it from happening again, Pfizer has set up what it calls "leading-edge" systems to spot signs of illegal promotion by closely monitoring sales reps and tracking prescription sales.

It's not entirely voluntary. Pfizer had to sign a corporate integrity agreement with the Department of Health and Human Services. For the next five years, it requires Pfizer to disclose future payments to doctors and top executives to sign off personally that the company is obeying the law.

Pfizer says the company has learned its lesson.

But after years of overseeing similar cases against other major drug companies, even Loucks, isn't sure $2 billion in penalties is a deterrent when the profits from illegal promotion can be so large.

"I worry that the money is so great," he said, that dealing with the Department of Justice may be "just of a cost of doing business."

Pfizer's huge fine: A disturbing trend Do the increasing penalties against drug companies really cure the problem?

Salon.com
By Vincent Rossmeier
Sep. 03, 2009 |

$2.3 billion: That's the price pharmaceutical giant Pfizer agreed to pay in a settlement Wednesday over its misleading marketing for the painkiller Bextra, the antipsychotic Geodon, the antibiotic Zyvox, and another painkiller, Lyrica. It's a record settlement that included the highest fine charged in U.S. history and came as the result of a lengthy Department of Justice investigation into healthcare fraud.

Though Pfizer voluntarily withdrew Bextra from the market in 2005, in the settlement, the company concedes that they had pushed doctors to prescribe unsafe doses of the drug prior to that point. The drug was approved by the FDA in 2001 for the treatment of pain associated with menstrual cramps and arthritis, but Pfizer encouraged its sales representatives to entice doctors to prescribe the drug in doses higher than those approved by the FDA. The escalated doses increased the chances that users of the drug would suffer a heart attack or a stroke. Pfizer also marketed Zyvox as a treatment for specific kinds of bacteria on which the drug had no effect.

A former Pfizer sales representative, John Kopchinski, whose questioning of the company's marketing tactics helped lead to the investigation, will receive over $51 million from the settlement. Kopchinski lost his job as a result of blowing the whistle on Pfizer's illegal schemes. Pfizer will have to pay settlements in 42 states and the District of Columbia.

However, the hefty cost will probably barely affect Pfizer's overall profit margins: The company purchased rival Wyeth in January for $68 billion and had revenues of over $48 billion last year. As the New York Times pointed out, "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." This is the fourth time Pfizer has reached a settlement over fraudulent marketing since 2002.

In the wake of Pfizer's settlement, here's a look at some of the larger Big Pharma settlements in recent history:

* Zyprexa, 2009 -- Eli Lilly was accused of selling its top-selling drug Zyprexa widely -- even to those people without bipolar disorder or schizophrenia for which the drug was supposed to be used. The drug can cause severe weight gain, as well as increasing the risk of a patient developing diabetes. In January, Eli Lilly reached a settlement with the government for $1.4 billion.
* OxyContin, 2007 -- Introduced in 1996 by Purdue Pharma, OxyContin was advertised as a softer, gentler painkiller. However, the drug is actually highly addictive, acting like heroin if taken incorrectly. OxyContin has become a scourge to communities across the U.S. and has also led to numerous overdose deaths. Perhaps the most notorious abuser of OxyContin was conservative radio talk show host Rush Limbaugh. In 2007, Purdue Pharma agreed to cough up $634.5 million in fines for its false claims about the drug.
* Vioxx, 2007 -- When 47,000 people are involved in a lawsuit against you, you know you have a problem. Thus, Merck, the maker of the painkiller Vioxx, reached a $4.85 billion settlement in 2007 to get rid of all the pending cases brought against it due to Vioxx's negative side effects. Vioxx was found to double the risk of heart attacks and strokes and thus Merck pulled the pill from pharmacies in 2004.
* Serostim, 2005 -- Serono, a Swiss technology company, had to pay $700 million in 2005 as a result of its fraudulent marketing for the AIDS drug Serostim. Serono developed a test that inflated the seriousness of the symptoms of a patient afflicted with AIDS and also sponsored junkets for doctors in order to get them to prescribe the drug.
* Neurontin, 2004 -- Pfizer reached a settlement of $430 million to end criminal and civil charges about its practice of paying doctors to prescribe Neurontin, a drug for epilepsy, to patients with bipolar disorder, for which it was not approved.
* Cipro, 2003 -- Bayer reached a $257 million settlement in 2003, the largest Medicaid fraud settlement at that time, after being charged by federal investigators with overcharging for the antibiotic Cipro. Bayer, however, didn't act alone: It received advice on how to go about the scheme from healthcare giant Kaiser Permanente.
* Paxil and Flonase, 2003 -- GlaxoSmithKline allegedly didn't want to miss out on all the fun and profits Bayer was having in overcharging for Cipro. It was accused of running a scheme with Kaiser Permanente to bilk Medicaid for the antidepressant Paxil and the allergy spray medication Flonase. GlaxoSmithKline paid $87.6 million in 2003 to settle the case.
* Lupron, 2001 -- TAP Pharmaceuticals Inc. came up with a clever way to get doctors to use its prostate cancer drug, Lupron, instead of those of rival drug companies: namely, pay them. TAP offered one doctor $25,000 to go back to prescribing Lupron after he'd switched to a competitor's drug. But the doctor alerted authorities, who conducted a massive sting resulting in TAP dishing out a $875 million settlement in 2001.
* Fen-Phen, 1999 -- Billed as a miracle diet drug by the drug company American Home Products Corp. (AHP), Fen-Phen was just as good at promoting heart valve disease as it was at helping people shed excess pounds. AHP removed Fen-Phen in 1997 after a damaging report showed that those who took the drug for more than two years increased their risk of developing heart valve disease by 17 percent. Though AHP agreed to pay $3.75 billion to the users of the drug, it did not have to admit to any wrongful actions in its marketing of Fen-Phen.

Pfizer Pays $2.3 Billion to Settle Marketing Case

New York Times
September 3, 2009

By GARDINER HARRIS
,
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