The Pfizer Neurontin off-label promotion settlement will fund $28 mil. in comparative efficacy studies for prescription drug products.

States participating in the settlement will create a fund for "the provision to drug prescribers of balanced information about drugs," Vermont Attorney General William Sorel said during a May 13 press conference in Washington, D.C.

The funding is part of the $430 mil. in civil and criminal fines Pfizer is paying to settle an investigation into Warner-Lambert's marketing practices for Neurontin (see ¹ Also see "Warner-Lambert GMP Conviction Plays Role In Neurontin Case" - Pink Sheet, 17 May, 2004.).

The settlement includes: $240 mil. in criminal fines; $83.6 mil. in civil damages to the federal Medicaid program; $68.4 mil. in civil damages relating to losses to the state Medicaid programs; and $38 mil. to the states for harm caused to consumers. The "whistleblower" who initiated the case, former Parke-Davis employee David Franklin, will receive $24.6 mil.

The comparative studies program represents a novel effort to use some of the settlements to address the underlying conduct in the case.

Pfizer entered into a corporate integrity agreement that will require the company to monitor and report off-label use trends for its products - but does not otherwise clarify the legal boundaries of off-label promotion.

The comparative research pool, on the other hand, will attempt to develop alternative sources of information about products to counter individual company's sales messages. Associate U.S. Attorney General Robert McCallum described the effort as a "first-of-its-kind remediation program" to "address the effects of Warner-Lambert's improper marketing scheme."

The funding will be distributed by the states in the form of grants to governmental entities, non-profit organizations and academic institutions. Roughly one-fourth, or $6 mil., of the funding will be specifically dedicated to Neurontin (gabapentin).

The state AGs are hopeful the grant program could lead to additional funding for comparative studies.

"We will use this $28 mil. fund to incentivize different approaches to getting this kind of information to prescribers and then seeing what works," Sorel said. "If we can then make a case for the appropriateness of more funding to expand this kind of approach, we will be able to do it."

The total payment by Pfizer is by far a record for an off-label promotion case.

However, in the context of other recent pharmaceutical industry prosecutions - and especially given Pfizer's vast resources - it is a relatively small figure.

The total payment represents less than 1% of Pfizer's annual sales volume. Pfizer has already accounted for the payment (² Also see "Pfizer Ready To Settle Neurontin Promotion Case; Reserves $427 Mil." - Pink Sheet, 26 January, 2004., p. 6).

The penalties were calculated based on an agreement among the parties that the damages from the Neurontin promotions amounted to $150 mil.

The settlement agreement notes that it is impossible to calculate an accurate figure for the impact of the promotions. In 1996, Warner-Lambert told analysts that 25% of Neurontin sales were for off-label uses.

The prosecutors noted that Pfizer took steps to correct Warner-Lambert's practices after it acquired the company in 2000 - one factor in limiting the size of the penalties. The settlement in effect adds about 0.5% to the $90 bil. purchase price for Warner-Lambert.

Neurontin has contributed over $6 bil. in U.S. sales to Pfizer since the Warner-Lambert deal closed - even though the product was expected to face generic competition in the near term at the time. Four years later, the timing of a generic entry remains uncertain (³ Also see "Teva, Ivax Move Closer To Marketing Generic Gabapentin" - Pink Sheet, 3 May, 2004., p. 17).

By another metric, the settlement is the equivalent of about nine weeks of U.S. sales of the anti-epileptic brand. First quarter sales of Neurontin were $570 mil. in the U.S.

The size of the penalty also illustrates the difference in the liabilities related to FD&C Act violations relative to False Claims Act or other fraud violations.

Pfizer will end up paying less than one-half the $875 mil. paid by TAP Pharmaceuticals to resolve the Boston prosecutor's investigation into Lupron and other products, which primarily involved anti-kickback laws (⁴ Also see "TAP To Audit Marketing Documents Related To Top Lupron, Prevacid Buyers" - Pink Sheet, 8 October, 2001., p. 3).

However, the terms of the settlement do not preclude future investigations into Neurontin pricing and False Claims Act issues.

"The agreement spells out exactly what the conditions of the agreement are and for which drug product the settlement has been reached on....We're not going to speculate with regards to any other ongoing investigations."

Sen. Charles Grassley (R-Iowa) responded to the settlement by asking HHS and the Department of Justice to brief the Senate Finance Committee about ongoing investigations of pharmaceutical companies.

While noting the recent series of large settlements, Grassley expressed concern that pharma companies are treating settlements as a cost of doing business, rather than fundamentally changing business practices.

[Editor's note: Additional coverage of the reaction to the Neurontin settlement will appear in "The Pink Sheet" DAILY. Visit our website, www.ThePinkSheetDAILY.com, to sign up for a free trial.]

Rx Comparative Studies Will Be Funded By Neurontin Settlement

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