Feds found Pfizer too big to nail, so they looked the other way on massive fraud

Monday, 23 August 2010 05:25

Written by Bailout Main Street Now

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When the world's largest pharmaceutical company was found to have engaged in a massive illegal marketing campaign, federal prosecutors decided the company was too big to punish -- so they let it set up a shell corporation to take the blame.

In 2001, the FDA approved Bextra for the relief of arthritis and menstrual cramps, but did not approve it for more severe surgical pain. Yet Pfizer aggressively promoted the drug to anesthesiologists and surgeons -- "anyone that use[d] a scalpel for a living," in the words of one internal company document. Company employees also told doctors that the FDA had approved Bextra as safe in doses as high as 40 milligrams, whereas the agency had actually only approved doses up to 20 milligrams.

Yet when the government threatened Pfizer with prosecution for off-label marketing fraud, it realized that a conviction would, under federal law, require that Pfizer be excluded from Medicare and Medicaid -- and that this would probably put the company out of business.

"If we prosecute Pfizer, they get excluded," said federal prosecutor Mike Loucks. "A lot of the people who work for the company who haven't engaged in criminal activity would get hurt."

Prosecutors were also concerned that forcing the company out of business might take important drugs off the market.

"We have to ask whether by excluding the company, are we harming our patients," said Lewis Morris of the Department of Health and Human Services.

So Pfizer and the government agreed that a subsidiary of the company would plead guilty instead. That subsidiary, Pharmacia & Upjohn Co. Inc., was formed in 2007 to plead guilty to another charge and has never conducted any business.

"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.

In the end, Pfizer ended up paying $1.5 billion in fines and another billion to settle multiple lawsuits -- the equivalent of three months' profit.

Sources for this story include: http://edition.cnn.com/2010/HEALTH/....