Pfizer 2013 Annual Report Download - page 113

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
112
2013 Financial Report
A4. Legal Proceedings––Government Investigations
Like other pharmaceutical companies, we are subject to extensive regulation by national, state and local government agencies in the U.S. and
in the other countries in which we operate. As a result, we have interactions with government agencies on an ongoing basis. It is possible that
criminal charges and substantial fines and/or civil penalties could result from government investigations. Among the investigations by
government agencies is the matter discussed below.
In 2009, the U.S. Department of Justice (DOJ) filed a civil complaint in intervention in two qui tam actions that had been filed under seal in the
U.S. District Court for the District of Massachusetts. The complaint alleges that Wyeth’s practices relating to the pricing for Protonix for
Medicaid rebate purposes between 2001 and 2006, prior to Wyeth's acquisition by Pfizer, violated the Federal Civil False Claims Act and
federal common law. The two qui tam actions have been unsealed and the complaints include substantially similar allegations. In addition, in
2009, several states and the District of Columbia filed a complaint under the same docket number asserting violations of various state laws
based on allegations substantially similar to those set forth in the civil complaint filed by the DOJ. We are exploring with the DOJ various ways
to resolve this matter.
A5. Legal Proceedings––Certain Matters Resolved During 2013
During 2013, certain matters, including those discussed below, were resolved or substantially resolved or were the subject of definitive
settlement agreements or settlement agreements-in-principle.
Protonix (pantoprazole sodium)
Wyeth has a license to market Protonix in the U.S. from Nycomed GmbH (Nycomed), which owns the patents relating to Protonix. Nycomed
was acquired by Takeda Pharmaceutical Company Limited (Takeda) in 2011. The basic patent (including the six-month pediatric exclusivity
period) for Protonix expired in January 2011.
In June 2013, Pfizer announced a settlement of Pfizer’s and Takeda’s patent-infringement action against Teva Pharmaceutical Industries Ltd.
(Teva Pharmaceutical Industries) and Sun Pharmaceutical Industries Ltd. (Sun) in the U.S. District Court for the District of New Jersey that
provides for the payment of a total of $2.15 billion by the two generic companies. In that action, Pfizer and Takeda sought compensation for
damages resulting from Teva Pharmaceutical Industries’ and Sun’s “at-risk” launches of Protonix in the U.S. prior to the expiration of the basic
patent. Pursuant to the settlement agreement: (i) Teva Pharmaceutical Industries paid Pfizer and Takeda a total of $800 million in 2013 and
agreed to pay Pfizer and Takeda an additional $800 million by October 2014, and (ii) Sun paid Pfizer and Takeda a total of $550 million in
2013. Pfizer is entitled to 64% and Takeda is entitled to 36% of the settlement proceeds.
Separately, Wyeth and Nycomed were defendants in purported class actions in the U.S. District Court for the District of New Jersey that
alleged violation of antitrust laws in connection with the procurement and enforcement of the patents for Protonix. These actions had been
stayed pending resolution of the underlying patent litigation discussed above. In July 2013, after the settlement and dismissal of the underlying
patent litigation, these purported class actions were dismissed with the consent of the parties.
Asbestos––Quigley
Quigley Company, Inc. (Quigley or, subsequent to the effectiveness of the amended reorganization plan on November 4, 2013, Reorganized
Quigley), a wholly owned subsidiary, was acquired by Pfizer in 1968 and sold products containing small amounts of asbestos until the early
1970s. In September 2004, Pfizer and Quigley took steps that were intended to resolve all pending and future claims against Pfizer and
Quigley in which the claimants allege personal injury from exposure to Quigley products containing asbestos, silica or mixed dust. We
recorded a charge of $369 million pre-tax ($229 million after-tax) in the third quarter of 2004 in connection with these matters.
In September 2004, Quigley 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. In March 2005, Quigley filed a reorganization plan in the Bankruptcy Court. In connection with that
filing, Pfizer entered into settlement agreements with lawyers representing more than 80% of the individuals with claims related to Quigley
products against Quigley and Pfizer. The agreements provide for a total of $430 million in payments, of which $215 million became due in
December 2005 and has been and is being paid to claimants upon receipt by Pfizer of certain required documentation from each of the
claimants. The reorganization plan provided for the establishment of a trust (the Asbestos Personal Injury Trust) for the evaluation and, as
appropriate, payment of all unsettled pending claims, as well as any future claims alleging injury from exposure to Quigley products.
In September 2010, the Bankruptcy Court declined to confirm the amended reorganization plan. As a result, Pfizer recorded additional charges
for this matter of approximately $1.3 billion pre-tax (approximately $800 million after-tax) in 2010.
In March 2011, Pfizer entered into a settlement agreement with a committee (the Ad Hoc Committee) representing approximately 40,000
claimants in the Quigley bankruptcy proceeding (the Ad Hoc Committee claimants). Pursuant to the settlement agreement and consistent with
the charges previously recorded with respect to Quigley, Pfizer, among other things, paid an aggregate of $800 million to the Ad Hoc
Committee for the benefit of the Ad Hoc Committee claimants.
In July 2013, the Bankruptcy Court entered an order confirming the amended reorganization plan, and the District Court entered an order
issuing an injunction directing pending and future claims alleging asbestos-related personal injury from exposure to Quigley products to the
Asbestos Personal Injury Trust, with certain exceptions. The District Court’s judgment on its order became final and non-appealable on
October 17, 2013. The amended reorganization plan became effective on November 4, 2013, at which time, consistent with the charges
previously recorded with respect to Quigley, we contributed an additional amount of cash (approximately $277 million), a money market
investment valued at approximately $447 million and non-cash items (including an insurance receivable, insurance policies valued at face
value, a business operation and the value of certain debt forgiveness) to Reorganized Quigley and the Asbestos Personal Injury Trust with a
total value of approximately $1.08 billion; the value of the non-cash items was finalized and approved by the Bankruptcy Court.