Pfizer takes a $784M hit with Medicaid pricing settlement

Pfizer ($PFE) is forking over $784 million to settle claims that its Wyeth unit overcharged Medicaid for its heartburn med Protonix. The agreement marks one of the biggest settlements to date from drugmakers facing similar allegations.

The settlement "does not include an admission of liability" by Wyeth, and it is still subject to a final settlement agreement and court approval, the company said in a statement. But the agreement does mark the end of a long chapter for Pfizer, which inherited the case after buying Wyeth in 2009.

That year, the U.S. Department of Justice (DOJ) filed a lawsuit against Wyeth over Medicaid rebates for Protonix. The DOJ claimed that between 2001 and 2006, the company did not give state Medicaid programs the same discounts for the drug that it did for nongovernment customers, running afoul of federal law. A trial in the case was slated for March 7 in a Boston federal court, The Wall Street Journal reports.

Doug Lankler, Pfizer's general counsel

Even though the latest settlement number is large, it's less than the more than $2 billion that the DOJ had previously estimated, the WSJ points out. Pfizer, for its part, seems eager to leave the legal drama in the past. "The resolution of these cases reflects a desire by the company to put these cases behind us and to focus on the needs of the patients," Pfizer's general counsel Doug Lankler said in a statement.

Pfizer is also adjusting its financial results to reflect the settlement charge, the drugmaker said in a statement. The company's Q4 results now show a loss of $172 million. Earlier this month, Pfizer posted a Q4 profit of $613 million.

The Justice Department's allegations stem in part from two earlier whistleblower lawsuits filed against Wyeth by a physician and a former AstraZeneca ($AZN) sales rep, according to the WSJ story. The U.S. False Claims Act allows individuals to file suits accusing companies or individuals of defrauding the government, and potentially get some money back for doing so.

Pfizer is not the only company facing Medicaid pricing claims. Back in July, AstraZeneca and Teva Pharmaceutical's ($TEVA) Cephalon unit said that they would fork over more than $50 million to settle allegations that they underpaid rebates owed to Medicaid programs. The legal scuffle grew out a whistleblower suit filed by a pharmacist and attorney, who claimed that the drugmakers intentionally lowered rebates they owed to Medicaid.

- read the statement (PDF)
- here's the WSJ story (sub. req.)

Read more on