Is the Pfizer settlement with the US DOJ Punishment or a Gift?

Most of the media has focused on the $2.3 billion Department of Justice settlement with Pfizer for criminal marketing practices without noticing a far greater financial give-away by the government to Pfizer in a sweetheart settlement.

In 2004, Pfizer pled guilty to criminal off-label marketing of Neurontin. The company settled with the Department of Justice for $430 million AND accepted a Certificate of Integrity Agreement (CIA) with the Office of the Inspector General of the US Department of Health and Human Services. The CIA included a potent financial penalty if Pfizer violated the agreement which required compliance with ALL federal healthcare laws, namely; Pfizer would risk exclusion from federal healthcare programs–i.e, loss of revenues from Medicare, Medicaid, VA.   See: http://oig.hhs.gov/fraud/cia/agreements/pfizer_5_11_2004.pdf

The Certificate of Integrity Agreement (2004) stipulated (among other things) that Pfizer would institute a compliance procedure with written annual reports, to ensure that Pfizer is in compliance with all FDA and federal healthcare requirement programs. The CIA specified the circumstances leading to Exclusion from participation if federal healthcare programs and the scope of the exclusion:
 "Exclusion shall have national effect and shall apply to all Federal procurement and non-procurement programs." p. 35:

Pfizer would have 30 days to take corrective measures or be excluded from federal healthcare programs.

Although the exclusion provision was not enforced, the settlement provided the legal basis for enforcement.

What’s more, The 2004 CIA shall be binding on the successors, assigns, and transferees of Pfizer. p… 37

The 2009 DOJ-Pfizer settlement stands in sharp contrast to the settlement under the Bush Administration: the Obama DOJ settlement absolves Pfizer from compliance with the 2004 settlement, specifically absolving Pfizer from the Civil Monetary Penalties Law (42 U.SC. sec. 1320a-7a), and from compliance under ( 42 US.C. sec 1320-7(b)(7), "the permissive exclusion [from federal healthcare programs] for fraud, kickbacks, and other prohibited activities…"

The DOJ-Pfizer settlement (2009 ) states:
"The Office of Inspector General of HHS agrees to release and refrain from instituting, directing, or maintaining any administrative action seeking exclusion from Medicare, Medicaid and other Federal healthcare programs against Pfizer."

"OPM [Office of Policy and Management] agrees to release and refrain from instituting, directing, or maintaining any administrative action against Pfizer under 5 U.S.C… sec. 8902a or 5CFR pt. 970…. See: p. 10-12

It is difficult to comprehend, why the Obama administration, which has made cost-cutting a legislative centerpiece of healthcare reform, would remove the most potent, financial penalty in its existing legal arsenal from its settlement with Pfizer. 

Do DOJ officials pretend that $2.3 billion is a punishment for a company that stands to make tens of billions of dollars from unaffected federal healthcare reimbursement??? The settlement is a disincentive to compliance with federal law….
 

Vera Hassner Sharav

ASSOCIATED PRESS
DOJ-Pfizer $2.3 Billion settlement Removes Sting of 2004 Compliance Aggreement
 
Fines unlikely to end off-label drug marketing
Upside is too great for pharmaceutical firms to worry about penalty
Fri., Sept . 4, 2009

INDIANAPOLIS – Pfizer Inc. was slapped this week with a record $2.3 billion in fines for illegally marketing some drugs, but critics say even that eye-popping total is unlikely to end the sometimes-dangerous practice of promoting drugs for unapproved uses.

The penalty pales compared to the billion dollars or more in annual revenue that blockbuster drugs generate, and new government guidelines stir worry that the marketing of medicines for unapproved uses will become easier.

"Drug companies will continue to market off-label unless the financial downside makes it unprofitable," said Dr. Adriane Fugh-Berman, a Georgetown University associate medical professor.

Off-label marketing is a tricky issue. Doctors say prescriptions for uses not noted on a drug’s package label — the fine-print insert that comes with the prescription — play a crucial role in treating patients, especially those with deadly illnesses and few treatment options.
However, the Food and Drug Administration prohibits companies from promoting their drugs for uses it has not approved.

Slap on the wrist
Huge fines for those caught violating these rules usually just nibble at drug company sales totals.
Pfizer’s fine is the largest health care fraud settlement in U.S. Justice Department history. But that $2.3 billion total stands small compared to the $44.2 billion in pharmaceutical sales the world’s largest drugmaker rang up last year.

"$2.3 billion looks like a lot of money," Fugh-Berman said. "But these are highly profitable drugs. It will not take them very long to make up that deficit."

The Georgetown professor has served as a paid witness in court cases over drug marketing and founded the watchdog Web site pharmedout.org.

Pfizer accounted for the settlement in last year’s fourth quarter. The charge dragged down its quarterly profit by 90 percent to $268 million.

Prosecutors said Pfizer promoted four prescription drugs, including the discontinued pain killer Bextra and the blockbuster Lyrica, for epilepsy and nerve pain such as fibromyalgia, as treatments for medical conditions not approved by federal regulators. Lyrica alone registered $2.6 billion in sales last year.

Authorities also accused the drugmaker of plying doctors with free golf, massages and resort junkets.

In 2004, Pfizer also paid $430 million to settle allegations it marketed the epilepsy drug Neurontin for pain and psychiatric illnesses. A plaintiff’s attorney in a civil case over the drug has estimated that Pfizer made about $10 billion in Neurontin sales for unapproved uses from 1999 to 2004.

Not just Pfizer
But Pfizer by no means corners the market on off-label marketing fines.

Earlier this year, Indianapolis-based Eli Lilly & Co. agreed to pay $1.42 billion to settle a case over the marketing of its top seller Zyprexa, an anti-psychotic drug.

Court documents say Lilly made "hundreds of millions of dollars" through off-label Zyprexa promotions, but it’s hard to pin down the exact impact of improper marketing.

Zyprexa’s annual U.S. sales nearly doubled between 1999 and 2003, to $2.64 billion. But company officials note that regulators approved some additional uses for Zyprexa in that span, and that gave doctors more information about its safety and effectiveness.

The drug industry — and even some doctors — downplay the frequency of illegal promotions and their effect on off-label prescriptions, which give doctors treatment flexibility.

For example, the standard treatment for years for severe psoriatic arthritis was methotrexate, but the drug actually was approved to treat rheumatoid arthritis, said Dr. Eric Ruderman, a rheumatologist at the Northwestern University Feinberg School of Medicine.

"If you had to stick to labeling, you couldn’t treat people," said Ruderman, who has done some consulting work for Abbott Laboratories and received research grants from several drugmakers.

Ruderman noted that common uses often are technically off-label because it’s expensive — and often unprofitable — for companies to pursue FDA approval for every possible use of their drug.

Still, Ruderman said off-label marketing is never appropriate and noted that decisions about off-label use should be left to doctors weighing "published evidence" supporting it.

Potentially dangerous loophole
Under new rules established this year by the FDA, salespeople may distribute to doctors copies of scientific journal articles that discuss off-label uses. Industry critics see that as a potentially dangerous loophole.

The rules come with qualifiers. For instance, the articles should come from peer-reviewed journals, and the reports cannot be edited by the drugmaker.

Despite the precautions, Fugh-Berman calls the guidance "a horrible idea."
"When you go to the Volvo dealer, do you really expect an accurate comparison of their cars with other manufacturer’s cars?" she said.

The drug industry says that it does a much better job policing against off-label marketing than it did 10 or 15 years ago and that most companies have mandatory training.

Fugh-Berman said fines alone will not end off-label marketing, but they can curb the practice when coupled with corporate integrity agreements like one the Justice Department imposed on Pfizer. These can force companies to disclose doctor payments or other information they’d rather keep under wraps.

"Our sense is that companies fear corporate integrity agreements more than fines," Fugh-Berman said. "We don’t want fines to become just another line item in their budget."

Copyright 2009 The Associated Press. All rights reserved.
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BLOOMBERG NEWS
AIG of Drugmakers Pfizer Is Too Big to Be Guilty
Commentary by Ann Woolner

EXCERPT
Four times before the drug giant or its subsidiaries have been slammed by the government for the same kind of conduct.

To resolve claims it promoted off-label uses of Neurontin, an anti-seizure drug, Warner-Lambert, owned by Pfizer, paid $430 million in 2004, and Pfizer said it would institute a compliance program.

Growth Hormone
Three years later, Pfizer’s Pharmacia & Upjohn Co. divisions agreed to pay almost $35 million to settle charges related to the human-growth hormone Genotropin. Among the allegations was that the drug was being promoted as an anti- aging treatment.

That same subsidiary has again pleaded guilty, this time as part of the overall settlement with Pfizer for its promotion of Bextra.

So how does Pfizer get away with civil settlements given its history? The penalties have ranged from hand slaps to a light punch in the gut, none of which have hurt the company enough for things to change. Last year Pfizer earned $8.1 billion on sales of $48.3 billion.

The New York-based company repeatedly winds up as the target of government accusations. Its misdeeds cost federal and state programs hundreds of millions of dollars, says the Justice Department, not to mention the human suffering that comes with taking the wrong drug in the wrong dosage.

Just Like AIG
But Pfizer is the pharmaceutical equivalent of insurance giant American International Group Inc., which was too interwoven into the global economy to be allowed to fail. Likewise, if Pfizer were convicted of a crime, it would face debarment from federal programs. And that would mean that Medicaid and Medicare patients would have to either somehow pay pocket for vital medicines the company produces or go without.

“You have to balance the desire, an appropriate desire, to punish the company against the harm to patients,” says attorney Kelton.

Pfizer is again pledging to beefing up its compliance program, and there is a way to make it credible.

This time, it should put Kruszewski and Kopchinski in charge of it, assuming they still want to work.

(Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net.