Wyeth and Pfizer pay $784.6 million over drug overpricing probe whistleblowers to receive $98 million

Pharmaceutical companies Wyeth and Pfizer Inc.will 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.  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. PPI drugs are used to treat symptoms of, among other things, acid reflux.  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.  Through this bundled arrangement, Wyeth sought to induce hospitals to buy and use Protonix Oral, which hospitals otherwise would have had little incentive to use, because other pre-existing oral PPI drugs were priced competitively and were considered to be as safe and effective.  Wyeth wanted to control the hospital market because patients discharged from the hospital on Protonix Oral were likely to stay on the drug for long periods of time, rather than switch to competing PPIs, during which time payers, including Medicaid, would pay nearly full price for the drug.

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.

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.  Under the terms of today’s settlement, Wyeth will pay $413,248,820 to the federal government and $371,351,180 to state Medicaid programs.

The settlement resolves allegations filed under the False Claims Act by Lauren Kieff, a former hospital sales representative for the pharmaceutical company AstraZeneca Pharmaceuticals, LP, and William St. John LaCorte, a physician practicing in New Orleans, Louisiana.  Under the False Claims Act, private parties may sue on behalf of the government for false claims for government funds and to receive a share of any recovery.

The case is captioned United States ex rel. Kieff and LaCorte v. Wyeth and Pfizer, Inc., Nos. 03-12366 and 06-11724-DPW (D. Mass.).

Jeffrey Newman represents whistleblowers but not individuals involved in this case