Commentary

Pfizer Settles A Case, Beats Estimates, Breaks Into 3 Units

Pfizer yesterday publicly agreed to pay $490.9 million in a settlement of two lawsuits filed in federal courts in Oklahoma and Pennsylvania over the illegal marketing of the kidney-transplant drug Rapamune by Wyeth Pharmaceuticals, a company it acquired in 2009. Pfizer reportedly cooperated fully with the investigation once it learned of the charges.

If the story seems like old news, it is -- in two ways. 

“Pfizer disclosed the settlement on a preliminary basis in a November 2012 securities filing,” reports Reuters’ David Ingram. “U.S. District Judge Vicki Miles-LaGrange in Oklahoma City unsealed the final court papers on Tuesday.” But the tort trail goes back eight years.

advertisement

advertisement

Two former Wyeth employees first filed a whistle-blower lawsuit in 2005, alleging the company was also promoting Rapamune for use by liver transplant patients, a practice not approved by the Food and Drug Administration. It also claimed the company was  “targeting African-American patients for these unapproved uses despite the higher risk of adverse effects among this group of patients,” according to a synopsis of the case on the website of Aylstock, Witkin, Kreis & Overholtz, PLLC. By the time the suit was made public in 2010, it had been joined by the Justice Dept. and the attorneys general of several states. A separate whistleblower suit was also filed.

“Marketing drugs for unapproved uses is wholly inappropriate, and the resultant false billing to government health care programs costs every one of us,” said acting attorney general John J. Hoffman said in a report published on NJTODAY. New Jersey’s share of the settlement is $700,000, the story reports.

Another reason you won’t see screaming headlines about the off-label violation of the False Claims Act is because we have see so many of them over the past decade (including a $2.3 billion settlement by Pfizer subsidiary Pharmacia & Upjohn Company in 2009 for “misbranding” the anti-inflammatory drug Bextra “with the intent to defraud or mislead.”)

Reuben A. Guttman, a lawyer representing two whistle-blowers, tells The New York Times’ Katie Thomas that “the spate of pharmaceutical settlements in recent years had blunted reaction to what he said were shameful practices.”

“Everybody’s been asking me why this case is different than any other,” Guttman said. “We used to trust these companies. You can’t trust these companies anymore.”

The record fine settlement so far is $3 billion — an agreement reached last year with GlaxoSmithKline over its promotion of its “best-selling antidepressants for unapproved uses and failing to report safety data about a top diabetes drug,” as Katie Thomas and Michael S. Schmidt reported in the New York Times

In other developments, Pfizer announced Monday that is will be separating its commercial operations into three business segments worldwide in January 2014 -- “two of which will include Innovative business lines and a third which will include the Value business line,” according to a release. 

One of the former segments –- the Innovative Products Group -- will generally include therapeutic products that are expected to have market exclusivity beyond 2015. The areas include Inflammation and Immunology, CV/Metabolic, Neuroscience and Pain, Rare Diseases and Women’s /Men’s Health. The other Innovative business segment will include Vaccines, Oncology and Consumer Healthcare (and carries that name).

“Each of these businesses will operate as a separate global business and require distinct specialization in terms of the science, talent, and market approach required to deliver value to consumers and patients,” the company says.

In addition to generics, the Value business segment will include, among other offerings and collaborations, “mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets.”

Barron.com’s Johanna Bennett suggests that the action is “boosting speculation that a breakup is on the horizon” despite Pfizer’s “adamant” denial that such an action is likely -– at least in the near term.

"Everyone expects a breakup but Pfizer has not committed to anything," BMO Capital Markets analyst Alex Arfaei tells Bennett. "Three years from now, they may decide a breakup makes sense. But if they suffer R&D setbacks, they may not move ahead. But right now, they are creating the option and they have improved visibility."

Pfizer yesterday reported second-quarter earnings that were slightly ahead of estimates, according to Reuters’ Ben Hirschler and Sakthi Prasad. They report that “improved profit margins, helped by cost controls, were responsible for the slightly better-than-expected profit,” according to Atlantic Equities analyst Richard Purkiss.

And after all was said and done, Pfizer’s stock was up about 1%.

Next story loading loading..