Pfizer to Pay $784.6 Million to Resolve Drug Discount Case

  • Wyeth unit avoided `hundreds of millions,' U.S. says
  • Two whistle-blowers will share $98.1 million of settlement

Pfizer Inc. agreed to pay $784.6 million to resolve a 14-year-old lawsuit claiming its Wyeth unit overcharged the government by hiding the discounts it was giving hospitals for drugs used to treat acid-related damage to the esophagus.

The hidden discounts meant that Medicaid paid “hundred of millions of dollars” more for the drugs than it should have from 2001 to 2006, according to a statement Wednesday from U.S. Attorney Carmen Ortiz in Boston. Pfizer, which acquired Wyeth in 2009, announced the broad terms of the agreement in February. The accord covers bundled discounts given for Protonix Oral and Protonix IV.

“This settlement demonstrates our unwavering commitment to hold pharmaceutical companies responsible for pursuing pricing schemes that attempt to manipulate and overcharge federal health care programs,” Benjamin C. Mizer, deputy assistant attorney general at the Department of Justice, said in a separate statement.

Several other drugmakers have resolved cases accusing them of failing to give Medicaid required drug discounts related to the best prices offered to private purchasers. Under the Pfizer accord, $413.2 million will go the U.S. and $371.4 million to state governments.

Pfizer didn’t admit liability in the settlement.

“We are pleased to have finalized the agreement to resolve these cases, which involve historic conduct that occurred at least 10 years ago, before we acquired Wyeth,” Pfizer General Counsel Doug Lankler said in a statement. “The resolution of these claims reflects our desire to put these historic cases behind us and to focus on the needs of patients.”

The settlement resolves two lawsuits filed under the False Claims Act, which lets citizens sue on behalf of the government and share in any recovery. Two whistle-blowers, Lauren Kieff and William St. John LaCorte, will share $98.1 million, according to the Justice Department. 

Whistle-Blowers

LaCorte, a physician in New Orleans, will get $64 million plus interest, according to the settlement agreement. He sued in 2002, while Kieff, a former hospital sales representative in Massachusetts for AstraZeneca Plc, sued a year later. LaCorte claimed that Wyeth sold Protonix Oral tablets to hospitals for as low as 16 cents per tablet while not reporting that price to federal programs, according to the settlement.

“This was my 14-year, get-rich-quick scheme,” said LaCorte in a phone interview. “I must not have been thinking straight or I wouldn’t have done it.”

LaCorte said he lives modestly despite sharing an earlier award with other whistle-blowers when Merck & Co. agreed in 2008 to pay more than $649 million to resolve federal and state claims on drug pricing. He estimated that he collected $34 million in the Merck case, and said he has won other cases involving drugmakers. 

Kieff was marketing competing drugs for AstraZeneca and believed that Wyeth had an unfair advantage, said her attorney, Jeanne Markey. 

“Hospitals were buying the drug and getting incredible discounts, and the government was not getting the benefit of those prices,” Markey said.

Brick by Brick

Proving the case was a “very difficult, complicated” process, partly because the regulations for best drug prices were rewritten in 2007, she said. Markey praised the work of the Justice Department, which intervened and filed its own complaint in 2009.

“The government used brick by brick its analytical skills, its data-mining skills and its ability to elicit testimony and build a case showing there was knowledge of the fraud at Wyeth, or alternatively, willful blindness,” Markey said.

The cases are U.S. ex rel. LaCorte v. Wyeth, U.S. District Court, Eastern District of Louisiana and U.S. ex rel. Kieff v. Wyeth, 03-cv-12366, U.S. District Court, District of Massachusetts (Boston).

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