Pfizer Inc., the world's largest drug maker, will pay a record $2.3-billion US civil and criminal penalty over unlawful prescription drug promotions.

Announcing the settlement Wednesday, the Justice Department said that it included the largest criminal fine in U.S. history — $1.2 billion. The agreement also included a criminal forfeiture of $105 million.

Drugmaker Pfizer Inc. has paid a record fine of $2.3 billion US in a court settlement. (CBC)

Authorities called Pfizer a repeat offender, noting it is the fourth such settlement of government charges in the last decade. They said the government would monitor the company's conduct for the next five years to rein in the abuses.

Perks for drugs

To promote the drugs, authorities said Pfizer invited doctors to consultant meetings at resort locations, paying their expenses and providing perks.

"They were entertained with golf, massages and other activities," said Mike Loucks, the U.S. attorney in Massachusetts.

Loucks said that even as Pfizer was negotiating deals on past misconduct, they were continuing to violate the same laws with other drugs.

Blowing the whistle

Six corporate whistleblowers who first brought the misconduct to light will share $102 million of the settlement money.

FBI Assistant Director Kevin Perkins praised the whistleblowers who decided to "speak out against a corporate giant that was blatantly violating the law and misleading the public through false marketing claims."

Associate Attorney General Thomas Perelli said the settlement illustrates ways the department "can help the American public at a time when budgets are tight and health care costs are rising."

Record settlement

The overall settlement is the largest ever paid by a drug company for alleged violations of federal drug rules.

The government said the company promoted four prescription drugs, including the painkiller Bextra, as treatments for medical conditions different than those the drugs had been approved for by federal regulators.

Use of drugs for so-called "off-label" medical conditions is not uncommon, but drug manufacturers are prohibited from marketing drugs for uses that have not been approved by the Food and Drug Administration.

Bextra, one of a class of painkillers known as Cox-2 inhibitors, was pulled from the U.S. market in 2005 amid mounting evidence it raised the risk of heart attack, stroke and death.

A Pfizer subsidiary, Pharmacia and Upjohn Inc., which was acquired in 2003, has entered an agreement to plead guilty to one count of felony misbranding. The criminal case applied only to Bextra.

The $1 billion in civil penalties was related to Bextra and a number of other medicines. A portion of the civil penalty will be distributed to 49 states and the District of Columbia, according to agreements with each state's Medicaid program.

"These agreements bring final closure to significant legal matters and help to enhance our focus on what we do best — discovering, developing and delivering innovative medicines to treat patients dealing with some of the world's most debilitating diseases," said Amy Schulman, Pfizer's senior vice-president and general counsel.

Justice officials discussed details of the deal at a news conference with FBI, federal prosecutors and U.S. Health and Human Services Department officials.

In financial filings in January, the company had indicated that it would pay $2.3 billion over allegations it had marketed the pain reliever Bextra and possibly other drugs for medical conditions different than their approved use. The civil settlement announced Wednesday also covered Pfizer's promotions of three other drugs: blockbuster nerve pain and epilepsy treatment Lyrica, schizophrenia medicine Geodon, antibiotic Zyvox and nine other medicines.

Pfizer said the agreement with the Justice Department resolves the investigation into promotion of all those drugs, plus several related whistleblower lawsuits.

Paying back government

Under terms of the settlement, Pfizer must pay $1 billion to compensate Medicaid, Medicare and other federal health-care programs. Some of that money will be shared among the states: New York, for example, will receive $66 million, according to the state's attorney general, Andrew Cuomo.

"Pfizer ripped off New Yorkers and taxpayers across the country to pad its bottom line," Cuomo said.

3-month stock chart for Pfizer Inc.

"Pfizer's corrupt practices went so far as sending physicians on exotic junkets as well as wining and dining health-care professionals to persuade them to prescribe the company's drugs for patients in taxpayer-funded programs," he said.

Pfizer spokesman Chris Loder confirmed Wednesday that the $2.3 billion charge to the company's earnings had been taken in the fourth quarter of 2008.

"No additional charge to the company's earnings will be recorded in connection with this settlement," he said.

Apology issued

In her statement, Pfizer's Schulman said: "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls and pioneer new procedures so that we not only comply with state and federal laws, but also meet the high standards that patients, physicians and the public expect from a leading worldwide company dedicated to healing and better health."

"Corporate integrity is an absolute priority for Pfizer," she said, "and we will continue to take appropriate actions to further enhance our compliance practices and strengthen public trust in our company."

When Pfizer originally disclosed the settlement figure, it also announced plans to acquire rival Wyeth for $68 billion. That deal, which would bolster Pfizer's position as the world's top drug maker by revenue, is expected to close before year's end.