Imagine being charged with a crime, but an imaginary friend
takes the rap for you.
That is essentially what happened when Pfizer, the world's
largest pharmaceutical company, was caught illegally
marketing Bextra, a painkiller that was taken off the market
in 2005 because of safety concerns.
When the criminal case was announced last fall, federal
officials touted their prosecution as a model for tough,
effective enforcement. "It sends a clear message" to the
pharmaceutical industry, said Kevin Perkins, assistant
director of the FBI's Criminal Investigative Division.
But beyond the fanfare, a CNN Special Investigation found
another story, one that officials downplayed when they
declared victory. It's a story about the power major
pharmaceutical companies have even when they break the laws
intended to protect patients.
Big plans for Bextra
The story begins in 2001, when Bextra was about to hit the
market. The drug was part of a revolutionary class of
painkillers known as Cox-2 inhibitors that were supposed to
be safer than generic drugs, but at 20 times the price of
Pfizer and its marketing partner, Pharmacia, planned to
sell Bextra as
a treatment for acute pain, the kind you have after surgery.
But in November 2001, the U.S. Food and Drug Administration
said Bextra was not safe for patients at high risk of heart
attacks and strokes.
The FDA approved Bextra only for arthritis and menstrual
cramps. It rejected the drug in higher doses for acute,
Promoting drugs for unapproved uses can put patients at risk
by circumventing the FDA's judgment over which products are
safe and effective. For that reason, "off-label" promotion
is against the law.
But with billions of dollars of profits at stake, marketing
and sales managers across the country nonetheless targeted
anesthesiologists, foot surgeons, orthopedic surgeons and
oral surgeons. "Anyone that use[d] a scalpel for a living,"
one district manager advised in a document prosecutors would
A manager in Florida e-mailed his sales reps a scripted
sales pitch that claimed -- falsely -- that the FDA had
given Bextra "a clean bill of health" all the way up to a 40
mg dose, which is twice what the FDA actually said was safe.
Doctors as pitchmen
Internal company documents show that Pfizer and Pharmacia
(which Pfizer later bought) used a multimillion-dollar
medical education budget to pay hundreds of doctors as
speakers and consultants to tout Bextra.
Pfizer said in court that "the company's intent was
pure": to foster a legal exchange of scientific information
But an internal marketing plan called for training
physicians "to serve as public relations spokespeople."
According to Lewis Morris, chief counsel to the inspector
general at the U.S. Department of Health and Human Services,
"They pushed the envelope so far past any reasonable
interpretation of the law that it's simply outrageous."
Pfizer's chief compliance officer, Doug Lanker, said that
"in a large sales force, successful sales techniques spread
quickly," but that top Pfizer executives were not aware of
the "significant mis-promotion issue with Bextra" until
federal prosecutors began to show them the evidence.
By April 2005, when Bextra was taken off the market, more
than half of its $1.7 billion in profits had come from
prescriptions written for uses the FDA had rejected.
Too big to nail
But when it came to prosecuting Pfizer for its fraudulent
marketing, the pharmaceutical giant had a trump card: Just
as the giant banks on Wall Street were deemed too big to
fail, Pfizer was considered too big to nail.
Why? Because any company convicted of a major health care
fraud is automatically excluded from Medicare and Medicaid.
Convicting Pfizer on Bextra would prevent the company from
billing federal health programs for any of its products. It
would be a corporate death sentence.
Prosecutors said that excluding Pfizer would most likely
lead to Pfizer's collapse, with collateral consequences:
disrupting the flow of Pfizer products to Medicare and
Medicaid recipients, causing the loss of jobs including
those of Pfizer employees who were not involved in the
fraud, and causing significant losses for Pfizer
"We have to ask whether by excluding the company [from
Medicare and Medicaid], are we harming our patients," said
Lewis Morris of the
Department of Health and Human Services.
So Pfizer and the feds cut a deal. Instead of charging
Pfizer with a crime, prosecutors would charge a Pfizer
subsidiary, Pharmacia & Upjohn Co. Inc.
The CNN Special Investigation found that the subsidiary is
nothing more than a shell company whose only function is to
According to court documents, Pfizer Inc. owns (a) Pharmacia
Corp., which owns (b) Pharmacia & Upjohn LLC, which owns (c)
Pharmacia & Upjohn Co. LLC, which in turn owns (d) Pharmacia
& Upjohn Co. Inc. It is the great-great-grandson
of the parent company.
Public records show that the subsidiary was incorporated in
Delaware on March 27, 2007, the same day Pfizer lawyers and
federal prosecutors agreed that the company would plead
guilty in a kickback case against a company Pfizer had
acquired a few years earlier.
As a result, Pharmacia & Upjohn Co. Inc., the subsidiary,
was excluded from Medicare without ever having sold so much
as a single pill. And Pfizer was free to sell its products
to federally funded health programs.
An imaginary friend
Two years later, with Bextra, the shell company once again
pleaded guilty. It was, in effect, Pfizer's imaginary friend
stepping up to take the rap.
"It is true that if a company is created to take a criminal
plea, but it's just a shell, the impact of an exclusion is
minimal or nonexistent," Morris said.
Prosecutors say there was no viable alternative.
"If we prosecute Pfizer, they get excluded," said Mike
Loucks, the federal prosecutor who oversaw the
investigation. "A lot of the people who work for the company
who haven't engaged in criminal activity would get hurt."
Did the punishment fit the crime? Pfizer says yes.
It paid nearly $1.2 billion in a criminal fine for Bextra,
the largest fine the federal government has ever collected.
It paid a billion dollars more to settle a batch of civil
suits -- although it denied wrongdoing -- on allegations
that it illegally promoted 12 other drugs.
In all, Pfizer lost the equivalent of three months' profit.
It maintained its ability to do business with the federal
Pfizer says it takes responsibility for the illegal
promotion of Bextra. "I can tell you, unequivocally, that
Pfizer perceived the Bextra matter as an incredibly serious
one," said Doug Lankler, Pfizer's chief compliance officer.
To prevent it from happening again, Pfizer has set up what
it calls "leading-edge" systems to spot signs of illegal
promotion by closely monitoring sales reps and tracking
It's not entirely voluntary. Pfizer had to sign a corporate
integrity agreement with the Department of Health and Human
Services. For the next five years, it requires Pfizer to
disclose future payments to doctors and top executives to
sign off personally that the company is obeying the law.
Pfizer says the company has learned its lesson.
But after years of overseeing similar cases against other
major drug companies, even Loucks, isn't sure $2 billion in
penalties is a deterrent when the profits from illegal
promotion can be so large.
"I worry that the money is so great," he said, that dealing
with the Department of Justice may be "just of a cost of