Risk Management

Pfizer Unit Settles Kickback Charges

A company the pharmaceutical company acquired four years ago will pay $34.7 million in penalties.
Stephen TaubApril 26, 2007

A Pfizer subsidiary will pay a $19.68 million fine after pleading guilty in federal court to offering a kickback to a pharmacy benefit manager in exchange for getting a higher ranking on a list of pharmaceutical recommendations. As part of its sentencing announced on Wednesday, the Pfizer unit, Pharmacia and Upjohn Co. Inc., can no longer participate in federal health-care programs.

Federal prosecutors alleged that Pharmacia offered $12.3 million in inflated payments to a subsidiary of a pharmacy benefit manager (PBM) to administer a distribution contract with the expectation Pharmacia would receive better positioning and benefits for its drug products. Pharmacia had expected to earn that amount or higher if the PBM had met those assumptions.

PBMs acts as a middleman between pharmaceutical companies and health insurers. They often recommend pharmaceutical products to health plans. “Pharmacia’s offer of a kickback to the PBM was designed to undermine the independent manner in which PBMs are supposed to make drug recommendations to millions of Americans,” according to the U.S. attorney’s press release. “Those choices should be made based on the efficacy, safety, and cost of the each drug, rather than a kickback.”

Resolving the kickback allegation with a federal judge was just one of two charges Pharmacia faced this month. On April 2, Pharmacia & Upjohn LLC agreed to pay $15.4 million in a deal with federal prosecutors. The company had promoted that its product Genotropin could be used for anti-aging and cosmetic purposes, aspects of the product that the Food and Drug Administration had not approved. Pfizer, which acquired Pharmacia in 2003, later admitted the promotions of the growth hormone had been unlawful.

According to published reports, Pfizer stressed that both of these cases involve activities that occurred before it acquired Pharmacia.

The charge of illegally promoting a drug for a use not approved by the government is not new for a Pfizer unit. In 2004, Warner-Lambert agreed to plead guilty and pay more than $430 million to resolve criminal charges and civil liabilities in connection with its Parke-Davis division’s “illegal and fraudulent promotion of unapproved uses” for its drug Neurontinm, according to an announcement by the Justice Department at the time. Pfizer bought Warner Lambert in 2000.

At the time, Pfizer claimed that the alleged misconduct occurred before the acquisition, while Parke-Davis owned Neurontin.

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