Sept. 4 (Bloomberg) -- Pfizer Inc. sales folks had one tough customer in psychiatrist Stefan Kruszewski. He didn’t buy their pitch to prescribe the anti-psychotic drug Geodon to children, a use that hadn’t been approved by federal regulators.

Nor did he go for the so-called off-label uses they suggested, such as treating dementia in the elderly.

Kruszewski didn’t just say no. He went and checked the research and saw Geodon could have serious cardiac side effects not mentioned by the salesmen, who boasted of its relative safety, according to his lawyer, Brian Kenney. And he noticed that Pfizer was paying his peers to promote the drug to other psychiatrists.

But the worst for Pfizer was that Kruszewski didn’t keep it to himself. He found a lawyer, Kenney, who specializes in whistleblower cases, and they took what they had to the government.

So did John Kopchinski, who sold Pfizer’s arthritis drug Bextra but not as aggressively as the bosses wanted. They told the sales force to pitch it for post-surgical pain, acute pain, migraines and a host of other conditions for which the drug had been rejected by the U.S. Food and Drug Administration, says Kopchinski’s lawyer, Erika Kelton.

Nor would he advise doctors to boost the recommended dosage to two, four, even eight times the amount approved, though other salespeople did.

“The sales managers were having us do what was blatantly illegal,” Kopchinski told the BBC. Those who did were rewarded financially. He refused, was fired and spent the next six years depleting his retirement funds.

Bextra Banned

Bextra, by the way, was yanked from the market in 2005 because it increased the risk of heart attacks and strokes. Thousands of users have sued, and Pfizer settled.

Now Pfizer, while denying almost all of the charges, is paying a record sum of $2.3 billion to settle criminal and civil government allegations. The Justice Department says the company marketed off-label uses for Bextra, Geodon, Zyvox and Lyrica and paid kickbacks to doctors for pitching and prescribing those and other drugs. We are talking everything from Aricept to Zyrtec.

“We regret certain actions taken in the past, but are proud of the action we’ve taken to strengthen our internal controls,” Amy W. Schulman, senior vice president and general counsel of Pfizer said in a statement.

Value of Information

The Pfizer case shows the value of inside information, and how federal law rewards those who provide it. For blowing the whistle on the world’s largest drug company and, in some cases, for putting their livelihoods at risk, the six Pfizer whistleblowers are getting anywhere from $2.3 million to $51.5 million each, taken from the $2.3 billion settlement.

The salesman, Kopchinski of San Antonio gets the top reward. Kruszewski, a Harvard-trained psychiatrist in Harrisburg, Pennsylvania, is next with $29 million.

Federal and state medical programs will get a chunk of the settlement to reimburse them for having made payments based on false claims.

However hefty the settlement, Pfizer is fortunate to avoid criminal prosecution. Given the scope of the alleged misconduct, potential for harm to the public, mistreatment of employees who insisted on following the law and its history as a repeat- offender (excuse me, make that a repeat-settler), it got off lightly.

Four times before the drug giant or its subsidiaries have been slammed by the government for the same kind of conduct.

To resolve claims it promoted off-label uses of Neurontin, an anti-seizure drug, Warner-Lambert, owned by Pfizer, paid $430 million in 2004, and Pfizer said it would institute a compliance program.

Growth Hormone

Three years later, Pfizer’s Pharmacia & Upjohn Co. divisions agreed to pay almost $35 million to settle charges related to the human-growth hormone Genotropin. Among the allegations was that the drug was being promoted as an anti- aging treatment.

That same subsidiary has again pleaded guilty, this time as part of the overall settlement with Pfizer for its promotion of Bextra.

So how does Pfizer get away with civil settlements given its history? The penalties have ranged from hand slaps to a light punch in the gut, none of which have hurt the company enough for things to change. Last year Pfizer earned $8.1 billion on sales of $48.3 billion.

The New York-based company repeatedly winds up as the target of government accusations. Its misdeeds cost federal and state programs hundreds of millions of dollars, says the Justice Department, not to mention the human suffering that comes with taking the wrong drug in the wrong dosage.

Just Like AIG

But Pfizer is the pharmaceutical equivalent of insurance giant American International Group Inc., which was too interwoven into the global economy to be allowed to fail. Likewise, if Pfizer were convicted of a crime, it would face debarment from federal programs. And that would mean that Medicaid and Medicare patients would have to either somehow pay pocket for vital medicines the company produces or go without.

“You have to balance the desire, an appropriate desire, to punish the company against the harm to patients,” says attorney Kelton.

Pfizer is again pledging to beefing up its compliance program, and there is a way to make it credible.

This time, it should put Kruszewski and Kopchinski in charge of it, assuming they still want to work.

(Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net.

Last Updated: September 3, 2009 21:00 EDT