Pfizer Agrees To Pay 894 Million To Settle Claims

Pfizer Inc. (PFE) agreed to pay $894 million to settle the bulk of litigation and state government probes surrounding its pain drugs Celebrex and Bextra, which were linked to increased risk for heart attacks and strokes.

The New York drug maker said it reached agreements in principle to resolve personal-injury cases, consumer-fraud cases and claims by state attorneys general regarding Bextra, which Pfizer pulled from the market in 2005.

However, the settlement isn't final, and Pfizer's announcement apparently caught some parties off-guard. Connecticut Attorney General Richard Blumenthal issued a statement Friday afternoon saying "no settlement has been filed or approved by the court," and that Pfizer's announcement was "premature and inappropriate." Connecticut is part of the 33-state coalition that's been looking into Pfizer's drug marketing. Pfizer noted they are agreements in principle.

In addition, claims surrounding Celebrex - which remains on the market - will be resolved following what Pfizer described as "key court rulings" in its favor. Pfizer said the settlement is expected to resolve about 90% of the personal- injury cases for both Celebrex and Bextra.

Pfizer didn't disclose the number of lawsuits it faces over the drugs, or the average payout expected to plaintiffs. Jayne Conroy, one of the plaintiffs' attorneys in the case, estimated there are about 8,000 to 12,000 cases. In May, The Wall Street Journal reported that Pfizer had struck tentative settlements with some law firms representing plaintiffs, with an average offer of about $ 200,000 per Bextra client and $40,000 to $50,000 per Celebrex client.

The personal-injury lawsuits generally alleged that use of the drugs caused heart attacks and other problems, and that Pfizer failed to adequately warn of the risks.

"It puts the substantial majority of the civil litigation the company is facing with regard to [Celebrex and Bextra] behind us," said Amy Schulman, senior vice president and general counsel of Pfizer. "And I think the view was, putting these matters substantially behind us was the right thing to do."

In an interview, Schulman said the company is hopeful that it can resolve the remaining 8% to 10% of the Celebrex and Bextra personal injury cases that were not included in the settlement. None of those cases have reached the trial stage. "We are fully prepared to try one of these cases if we need to," Schulman said.

The settlement also doesn't resolve a U.S. Department of Justice investigation of the marketing and safety of the drugs, primarily Bextra. State probes in Mississippi and Louisiana aren't part of the settlement. And the settlement does not cover securities fraud litigation that has been filed in connection with Celebrex and Bextra.

Conroy said plaintiffs agreed to the settlement because of the risk that a trial jury might not agree with plaintiffs' depiction of the "dangers of the drugs." She also acknowledged that court rulings favorable to Pfizer in the Celebrex arm of the litigation factored into the decision. Conroy represents about 200 clients in the personal-injury litigation at the law firm Hanly Conroy Beirstein Sheridan Fisher & Hayes in New York.

The Pfizer settlement comes nearly a year after Merck & Co. (MRK) agreed to pay about $4.85 billion to settle personal-injury claims for its former pain drug, Vioxx, which Merck pulled from the market in 2004 after it was linked to higher risk for heart attacks.

Vioxx, Celebrex and Bextra all belong to the same class of pain drugs known as selective Cox-2 inhibitors. They were designed to provide effective pain relief while minimizing certain side effects, such as gastrointestinal problems, associated with older pain relievers like ibuprofen. But studies began to emerge several years ago suggesting the Cox-2 drugs might increase the risk for heart problems.

In 2005, the Food and Drug Administration concluded the increased heart risk appeared to be a class effect of non-steroidal anti-inflammatory drugs, or NSAIDs, which include not only selective Cox-2 inhibitors but also older drugs like ibuprofen. The FDA asked Pfizer to voluntarily remove Bextra from the market in April 2005 after concluding the drug had an unfavorable risk-benefit profile.

FDA also said Celebrex was associated with an increased risk in a long-term trial compared with a placebo, but didn't ask Pfizer to remove the drug from the market.

Pfizer has since strengthened the prescribing label for Celebrex to warn of the potential heart risk. Pfizer said Friday it stands by the safety and efficacy profile of Celebrex, which is approved to relieve arthritis pain, stiffness and inflammation.

Celebrex had $2.29 billion in sales last year, up 12% from 2006. Sales have rebounded since a decline in 2005 over the safety concerns.

Pfizer said it has received favorable rulings in federal and New York state courts concluding that plaintiffs' lawyers failed to present reliable scientific evidence to prove Celebrex can cause heart attacks or strokes at its most commonly prescribed dose, 200 milligrams. Pfizer said these rulings probably would have limited the scope of the cases if the litigation had continued.

Pfizer also is settling consumer-fraud allegations in which plaintiffs alleged economic loss relating to the promotion of Celebrex and Bextra.

The consumer-fraud cases included those brought by about 30,000 insurers, union health plans and consumers who alleged they paid too much for Bextra, arguing that Pfizer promoted the drug as superior to older pain relievers even though it wasn't, according to plaintiffs attorney Steve Berman of the law firm Hagens Berman Sobol Shapiro in Seattle. Pfizer disputed these claims.

The consumer-fraud plaintiffs chose to settle because "we're facing risks on getting a class certified, risks in proving the case, and we had many years of litigation ahead of us," Berman said. "We felt that given the size of the settlement the class is better off taking the settlement."

The company reached agreements in principle to resolve claims brought by 33 states and the District of Columbia, primarily relating to alleged Bextra promotional practices. Pfizer will pay $60 million to the states and adopt compliance measures that complement policies previously established by the company.

Pfizer has taken a third-quarter pretax charge of $894 million, comprising the $60 million to be paid to the states; $745 million to resolve to personal-injury cases; and $89 million for the consumer-fraud class action claims. Pfizer said it has insurance coverage for a portion of the personal-injury settlements. The charge will total $640 million after tax.