Wyeth and Pfizer Agree to Pay $784.6 Million to Resolve Lawsuit

The pharmaceutical companies Wyeth and Pfizer Inc. have agreed to pay $784.6 million to resolve allegations that Wyeth knowingly reported to the government false and fraudulent prices on two of its proton pump inhibitor (PPI) drugs, Protonix Oral and Protonix IV, according to a statement from the Justice Department.

In a complaint filed in 2009, the government alleged that Wyeth failed to report deep discounts on Protonix Oral and Protonix IV that it made available to thousands of hospitals nationwide. According to the government’s complaint, Wyeth sold Protonix Oral and Protonix IV through a bundled sales arrangement, in which a hospital could earn deep discounts on both drugs if it placed them on formulary and made them “available” within the hospital.

Principal Deputy Assistant Attorney General Benjamin C. Mizer said, “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 – programs that protect the poor and disabled – for drugs sold to commercial customers at much lower prices.”

U.S. Attorney Carmen Ortiz for the District of Massachusetts added, “This significant settlement illustrates that the government will not permit drug companies to dodge their obligations to the Medicaid program or create elaborate pricing schemes to deceive Medicaid into paying more than it should for drugs.”

Under the Medicaid program, which is the nation’s provider of health insurance to the poor and disabled, drug companies must report to the government the best prices they offer other customers for their brand name drugs. Based on these reported best prices, the drug companies pay rebates to the state Medicaid programs so that Medicaid, a large purchaser of drugs, receives the benefit of the same discounts drug companies offer to other large customers in the marketplace.

According to the settlement, Wyeth will pay $413,248,820 to the federal government and $371,351,180 to state Medicaid programs. This is in addition to the $784.6 million in fines. “When we make agreements with others we expect follow-through,” said Special Agent in Charge Phillip Coyne of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Similarly, taxpayers rightly expect large pharmaceutical companies will not falsely report prices to boost profits.

The government alleged that Wyeth hid from Medicaid the bundled discounts Wyeth gave to hospitals on Protonix Oral and Protonix IV. As a result, Wyeth wrongfully avoided paying hundreds of millions of dollars in rebates to Medicaid during the period from 2001 to 2006. Pfizer, which is headquartered in New York City, acquired New Jersey-based Wyeth in 2009, approximately three years after Wyeth had ended the conduct that gave rise to the settlement.”