Pfizer to pay $2.3 billion, agrees to criminal plea

By Ransdell Pierson and Jeremy Pelofsky

NEW YORK/WASHINGTON (Reuters) - Pfizer Inc (PFE.N) agreed on Wednesday to plead guilty to a U.S. criminal charge relating to promotion of its now-withdrawn Bextra pain medicine and will pay a record $2.3 billion to settle allegations it improperly marketed 13 medicines.

The world's biggest drugmaker was slapped with the huge fines after being deemed a repeat offender in pitching drugs to patients and doctors for unapproved conditions.

Pfizer, whose shares slid 0.5 percent, had pleaded guilty in 2004 to an earlier criminal charge of improper sales tactics and its marketing practices have been under federal supervision since then.

The company in January said it took a $2.3 billion charge late last year to resolve allegations involving Bextra and other drugs, but did not provide details at the time.

Wednesday's agreement was unveiled by the U.S. Department of Justice and Health and Human Services Department. [ID:nN02539956]

"The size and seriousness of this resolution, including the huge criminal fine of $1.3 billion, reflect the seriousness and scope of Pfizer's crimes," said Mike Loucks, acting U.S. attorney for the District of Massachusetts.

The settlement includes a $1.3 billion criminal fine related to methods of selling Bextra, which was withdrawn from the market in 2005 on safety concerns. Pfizer acquired Bextra in its 2003 purchase of Pharmacia Corp.

Pfizer's marketing team promoted Bextra for acute pain, surgical pain and other unapproved uses, while its salesforce promoted the drug directly to doctors for those unapproved uses and dosages, according to the Justice Department.

The company and Pharmacia also used advisory boards, consultant meetings and provided travel to lavish resorts to improperly promote Bextra to doctors and made false and misleading claims about the drug's safety and efficacy, the government said.

The settlement also includes $1 billion in civil payments related to so-called "off-label" sales of drugs -- meaning for uses not authorized by the U.S. Food and Drug Administration -- and payments to healthcare professionals. Pfizer denied all of the civil allegations, except for acknowledging improper promotions of the antibiotic Zyvox.

"We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls," said Amy Schulman, Pfizer's general counsel.

Justice Department officials said cracking down on fraud in the healthcare industry was a key priority and comes as President Barack Obama is trying to push through reforms of the $2.5 trillion healthcare system to clip soaring costs.

The settlement and guilty plea are not expected to significantly hurt Pfizer's ability to sell drugs, Morningstar analyst Damien Conover said, "however, it could send the wrong message at a time when you're making some pretty critical negotiations with the U.S. government on healthcare reform."

Sandra Jordan, a former federal prosecutor and professor at the Charlotte School of Law in North Carolina, said: "Pfizer can survive this and pay the money. If it had fought the government at trial and lost, and a judge imposed a criminal sentence, that could have resulted in a corporate death penalty. That would have put Pfizer out of business."

The settlement is the largest to date for improper marketing of prescription drugs, topping the $1.42 billion Eli Lilly and Co (LLY.N) agreed to pay earlier this year for off-label sales of its Zyprexa schizophrenia drug.