Pharma's Top 11 Marketing Settlements

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By Tracy Staton and Eric Palmer

The Justice Department is growing more and more impatient. For more than a decade, its lawyers and investigators have been slapping drugmakers around for their marketing misdoings. They've insisted on bigger and bigger penalties, especially during the last several years, with penalties and payments commonly topping $500 million. And yet the whistleblower lawsuits and off-label settlements keep coming.

Consider what's happened since 2004, when Pfizer ($PFE) inked a $430 million settlement with the feds for its misbegotten promotions of the seizure drug Neurontin. In 2005, Serono agreed to a $704 million deal for conspiring to market its AIDS-wasting drug Serostim off-label. Two years later, Purdue Pharma and Bristol-Myers Squibb ($BMY) wrapped up their investigations for a combined $1.15 billion. By 2009, the penalties had skyrocketed: Pfizer and Eli Lilly's ($LLY) settlements together amounted to $3.7 billion.

The deals show no sign of stopping. At the end of 2011 came Merck's ($MRK) $950 million Vioxx deal. Abbott Laboratories' ($ABT) $1.6 billion Depakote deal was finalized earlier this year. GlaxoSmithKline ($GSK) finalized its $3 billion settlement, which covers off-label and safety-related claims. More marketing settlements are expected by year's end, too: Johnson & Johnson ($JNJ) is reportedly very close to a settlement of at least $1.6 billion, perhaps as much as $2.2 billion, covering its marketing of the antipsychotic Risperdal and a handful of other products.

In fact, as our ranking of the top 11 marketing settlements of the past 10 years shows, these drugmakers agreed to pay more than $11 billion for their misbehavior. And that doesn't include the smaller off-label deals that didn't make the list: Novartis' ($NVS) $422.5 million Trileptal deal, inked in 2010. Cephalon's ($CEPH) $425 million settlement. Schering-Plough's $435 million agreement. Pfizer's well-known $430 million in Neurontin penalties. AstraZeneca's ($AZN) long-ago, $355 million Zoladex settlement. Or Forest Laboratories' ($FRX) $313 million or Elan's $203 million. Add all that in, and the total is close to $14 billion.

A few other drugmakers have disclosed government probes. More than 900 whistleblower suits were filed last year. Historically, about 10% of whistleblower claims involve drugmakers, and only a small number of those will end up attracting the attention and backing of the Justice Department. Still, it's a steady stream of allegations. And some involve companies that previously stepped over the line, paid their fines and promised to stay clean. A few, more than once.

So, government prosecutors are brainstorming additional penalties to deter bad behavior. Since 2010, federal officials have been threatening action against pharma executives, not just their companies, perhaps under the "responsible corporate officer" doctrine. Another idea: Yanking disobedient drugmakers' patent rights.

The patent-loss idea wouldn't apply to settlements expected in the near term, only to infractions under investigation now. That means J&J and Amgen ($AMGN), all expected to finalize their settlements in 2012, won't likely be affected.

Some notes about our top settlements list: It includes deals wrapped up during the last decade, ranked by the total of criminal and civil payments. Johnson & Johnson's impending deal is included, and ranked based on the range of reported settlement amounts. Whether on the low end or high end of that range, the Risperdal deal fits firmly in second place.

Amgen's settlement could shake up the rankings, though. The company said it earmarked $780 million to settle allegations of kickbacks and other marketing infractions designed to boost sales of its anemia drugs. So, we'll update the list accordingly as deals are announced.