Pfizer, Wyeth Pay $785M to Resolve Medicaid Rebate Case

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April 27 — Pfizer Inc. and subsidiary Wyeth will pay $371.3 million and $413.2 million to the federal government and state Medicaid programs, respectively, to settle a False Claims Act lawsuit alleging they failed to report to Medicaid certain drug rebates that were given to hospitals.

Drug companies are generally required to alert Medicaid to the best prices offered to other purchasers of name brand drugs.

The settlement announced April 27 by the Department of Justice was the product of two whistle-blower lawsuits filed by former AstraZeneca Pharmaceuticals LP sales rep Lauren Kieff and Louisiana physician William St. John LaCorte. Kieff filed suit in November 2003 and LaCorte in March 2002. The whistle-blowers will receive $98 million of the total settlement proceeds.

False Pricing Allegations

Joseph E.B. “Jeb” White, a partner with Nolan Auerbach & White PA in Philadelphia, told Bloomberg BNA April 27 that FCA actions “predicated on false pricing are extremely rare and difficult.” But White said the settlement result was a signal “to the pharmaceutical world that these cases are still ripe for would-be whistle-blowers.”

The settlement was a signal “to the pharmaceutical world that these cases are still ripe for would-be whistle-blowers,” attorney Joseph E.B. “Jeb” White said.

The whistle-blowers alleged that Wyeth failed to report the price rebates on proton pump inhibitor (PPI) drugs Protonix Oral and Protonix IV that were used to induce hospitals' purchase of the two drugs over competing PPI drugs. The DOJ acknowledged that the alleged conduct occurred prior to Wyeth's purchase by Pfizer in 2009.

The impending settlement and settlement amount had been disclosed by Pfizer in a Feb. 16 8-K report. In a statement provided to Bloomberg BNA, Pfizer's Executive Vice President and General Counsel Doug Lankler said the company was “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.”

He said the “resolution of these claims reflects our desire to put these historic cases behind us and to focus on the needs of patients.”

Kieff's counsel Jeanne Markey at Cohen Milstein Sellers & Toll PLLC said in a statement that Kieff and LaCorte “deserve thanks not only for bringing this case to the government’s attention, but for stepping up to the plate and working collaboratively to assist the government in its simply outstanding prosecution of this large and complex lawsuit against corporations with the financial wherewithal to fight back long and hard at every turn.”

Yates Memo Effect

A noteworthy aspect of the settlement is included in paragraph 14, which states that Wyeth will cooperate with investigations relating to the allegations and other “individuals and entities not released” from liability in the settlement. The provision specifically states that Wyeth will make “former directors, officers, and employees available for interviews and testimony,” and that Wyeth will produce nonprivileged documents to the government concerning the conduct covered in the settlement.

This language hasn't appeared in FCA settlements with pharmaceutical companies since a spate of FCA settlements involving illegal off-label drug marketing between September 2009 and November 2011, one of which also involved Pfizer paying $1.3 billion (7 PLIR 1047, 9/11/09).

White said the inclusion of this language “is likely the product of the much-discussed Yates memo.” The Yates memo, issued by Deputy Attorney General Sally Quillian Yates in September 2015, implored prosecutors to pursue charges against employees in companies accused of fraud, in addition to focusing on obtaining money damages from corporations.

White said the “DOJ is clearly living up to the promises outlined in the Yates memo.”

Kieff was represented by Cohen Milstein Sellers & Toll PLLC, and Shapiro Weissberg & Garin LLP. LaCorte was represented by The Sakla Law Firm APLC. Wyeth and Pfizer were represented by Ropes & Gray LLP.

To contact the reporter on this story: Eric Topor in Washington at

To contact the editor responsible for this story: Janey Cohen at

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