Feds Found Pfizer Too Big to Nail
Imagine being charged with a crime, but an imaginary friend takes the rap for you.
is essentially what happened when Pfizer, the world's largest
pharmaceutical company, was charged with illegally marketing Bextra, a
painkiller that was taken off the market in 2005 because of safety
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
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
Big plans for Bextra
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.
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.
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.
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
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."
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
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
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
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
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.
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.
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.
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
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.
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.
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
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
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.
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.
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."