Pfizer 2007 Annual Report Download - page 77

a part of the labeled indications for the product. The plaintiffs seek
to represent nationwide and certain statewide classes consisting
of health and welfare funds and other third-party payors that
purchased Lipitor for such patients or reimbursed such patients
for the purchase of Lipitor since January 1, 2002. The plaintiffs
allege, among other things, fraud, unjust enrichment and a
violation of the federal Racketeer Influenced and Corrupt
Organizations Act (’’RICO’’) and certain state consumer fraud
statutes and seek monetary and injunctive relief, including treble
damages. In September 2007, plaintiffs filed an amended
complaint adding allegations that, primarily as the result of the
Company’s purported failure to fully disclose the risks of alleged
side-effects of Lipitor, the prices that plaintiffs paid for Lipitor were
higher than they otherwise would have been.
In 2004, a former employee filed a “whistleblower” action against
us in the U.S. District Court for the Eastern District of New York.
The complaint remained under seal until September 2007, at
which time the U.S. Attorney for the Eastern District of New York
declined to intervene in the case. We were served with the
complaint on December 19, 2007. Plaintiff alleges that, through
patient and medical education programs, written materials and
other actions aimed at doctors, consumers, payors and investors,
the Company promoted Lipitor for use by certain patients contrary
to national cholesterol guidelines that plaintiff claims are a part
of the labeled indications for the product. Plaintiff alleges
violations of the Federal Civil False Claims Act and the false claims
acts of certain states and seeks treble damages and civil penalties
on behalf of the U.S. Government and the specified states as the
result their purchase, or reimbursement of patients for the
purchase, of Lipitor allegedly for such “off-label” uses. Plaintiff
also seeks compensation as a whistleblower under those federal
and state statutes. In addition, plaintiff alleges that he was
wrongfully terminated, in violation of the anti-retaliation
provisions of the Federal Civil False Claims Act, the Civil Rights Act
of 1964 and applicable New York law, for raising concerns about
the alleged “off-label” promotion of Lipitor and about alleged
instances of sexual harassment in the workplace, and he seeks
damages and the reinstatement of his employment.
C. Commercial and Other Matters
Average Wholesale Price Litigation
A number of states as well as most counties in New York have sued
Pharmacia, Pfizer and other pharmaceutical manufacturers
alleging that they provided average wholesale price (AWP)
information for certain of their products that was higher than the
actual prices at which those products were sold. The AWP is used
to determine reimbursement levels under Medicare Part B and
Medicaid and in many private-sector insurance policies and
medical plans. The plaintiffs claim that the alleged spread between
the AWPs at which purchasers were reimbursed and the actual
prices was promoted by the defendants as an incentive to purchase
certain of their products. In addition to suing on their own behalf,
many of the plaintiff states seek to recover on behalf of individual
Medicare Part B co-payors and private-sector insurance companies
and medical plans in their states. These various actions generally
assert fraud claims as well as claims under state deceptive trade
practice laws, and seek monetary and other relief, including civil
penalties and treble damages. Several of the suits also allege
that Pharmacia and/or Pfizer did not report to the states their best
price for certain products under the Medicaid program.
In addition, Pharmacia, Pfizer and other pharmaceutical
manufacturers are defendants in a number of purported class
action suits in various federal and state courts brought by
employee benefit plans and other third-party payors that assert
claims similar to those in the state and county actions. These
suits allege, among other things, fraud, unfair competition and
unfair trade practices and seek monetary and other relief,
including civil penalties and treble damages.
All of these state, county and purported class action suits were
transferred for consolidated pre-trial proceedings to a Multi-
District Litigation (In re Pharmaceutical Industry Average Wholesale
Price Litigation MDL-1456) in the U.S. District Court for the District
of Massachusetts. Certain of the state and private suits have been
remanded to their respective state courts. In November 2006, the
claims against Pfizer in the Multi-District Litigation were dismissed
with prejudice; the claims against Pharmacia are still pending.
Monsanto-Related Matters
In 1997, Monsanto Company (Former Monsanto) contributed
certain chemical manufacturing operations and facilities to a
newly formed corporation, Solutia Inc. (Solutia), and spun off the
shares of Solutia. In 2000, Former Monsanto merged with
Pharmacia & Upjohn to form Pharmacia Corporation (Pharmacia).
Pharmacia then transferred its agricultural operations to a newly
created subsidiary, named Monsanto Company (New Monsanto),
which it spun off in a two-stage process that was completed in
2002. Pharmacia was acquired by Pfizer in 2003 and is now a
wholly owned subsidiary of Pfizer.
In connection with its spin-off that was completed in 2002, New
Monsanto assumed, and agreed to indemnify Pharmacia for, any
liabilities related to Pharmacia’s former agricultural business.
New Monsanto is defending and indemnifying Pharmacia for
various claims and litigation arising out of or related to the
agricultural business.
In connection with its spin-off in 1997, Solutia assumed, and
agreed to indemnify Pharmacia for, liabilities related to Former
Monsanto’s chemical businesses. In addition, in connection with
its spinoff that was completed in 2002, New Monsanto assumed,
and agreed to indemnify Pharmacia for, any liabilities primarily
related to Former Monsanto’s chemical businesses, including any
such liabilities that Solutia assumed. Solutia’s and New Monsanto’s
assumption of and agreement to indemnify Pharmacia for these
liabilities apply to pending actions and any future actions related
to Former Monsanto’s chemical businesses in which Pharmacia is
named as a defendant, including, without limitation, actions
asserting environmental claims, including alleged exposure to
polychlorinated biphenyls.
In December 2003, Solutia filed a petition in the U.S. Bankruptcy
Court for the Southern District of New York seeking reorganization
under Chapter 11 of the U.S. Bankruptcy Code. Solutia asked the
Bankruptcy Court to relieve it from liabilities related to Former
Monsanto’s chemical businesses that were assumed by Solutia in
1997. In addition, motions were filed by Solutia in the Chapter 11
proceeding and other actions were filed in the Bankruptcy Court
2007 Financial Report 75
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies