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September 2, 2009 3:50 PM

Ropes Leads on Pfizer's Record Settlement

Posted by Zach Lowe

Ropes & Gray took the lead among several firms in advising Pfizer on its decision today to pay $2.3 billion in fines and penalties to settle charges it illegally marketed several drugs for off-label uses and paid kickbacks to doctors, according to lawyers on the deal. The settlement is believed to be the largest health care fraud settlement in U.S. history, according to The Wall Street Journal and the U.S. Department of Justice.

About $1.3 billion of the total penalty goes toward resolving criminal charges that Pfizer illegally marketed the anti-inflammatory drug Bextra for off-label uses, according to the DOJ and the WSJ. A Pfizer subsidiary, Pharmacia & Upjohn Company, pleaded guilty to a felony count of violating federal laws on drug branding.

The remaining $1 billion will cover civil penalties stemming from other claims, including three separate whistle-blower cases filed in federal courts in Kentucky, Pennsylvania, and Massachusetts. In all, six whistle-blowers will split $102 million in proceeds from the settlement; the legal fees paid are confidential.

The company also has agreed to pay $33 million to 42 states and Washington, D.C., to resolve allegations that it violated consumer protection laws in the marketing of the anti-psychotic drug Geodon. The company allegedly marketed the drug to seniors and children, groups for whom the medication had not been approved, says W. Scott Simmer, a partner at Blank Rome who represented three whistle-blowers involved in the handful of lawsuits settled today.

"This was just a mammoth case," says Simmer, whose whistle-blower clients previously worked as sales representatives at Pfizer before becoming uncomfortable with the company's push for off-label marketing. "It was a very cooperative effort between lots and lots of lawyers." (Simmer notes Blank Rome is one of the few Am Law 200 firms that has a regular whistle-blower practice; the other whistle-blowers in the case turned to small boutiques that focus exclusively on such matters.)

Ropes & Gray served as Pfizer's lead outside counsel in negotiating the settlement agreement, says Brien O'Connor, a partner in the firm's white-collar practice. Ropes led a multifirm team working with Pfizer's in-house staff to resolve the various probes and lawsuits. O'Connor would not name the other firms involved, but lawyers for whistle-blowers tell The Am Law Daily that Davis Polk & Wardwell and DLA Piper (the former home of Pfizer's general counsel, Amy Schulman) were among the firms working most closely with Pfizer and Ropes. We've previously reported that Cadwalader, Wickersham & Taft played a role in crafting the settlement.

Lawyers for whistle-blowers have been working on the cases for about three years, according to Simmer and Barbara Bonar, name partner at the Kentucky-based litigation boutique B. Dahlenburg Bonar and another one of the whistle-blower attorneys. Bonar represented Robert Liter, a former Pfizer salesman who marketed the anti-epilepsy drug Lyrica, she says. Once the federal government got involved in the whistle-blower cases, Bonar says she focused primarily on obtaining information and passing it along to the government. Simmer says the whistle-blower attorneys mostly focused on tracking down other Pfizer sales reps to corroborate their clients' stories.

For a long time, the lawyers heard very little back from federal prosecutors and investigators, Bonar says. "It was a one-way street," she says. Then, about two months ago, word came down that a settlement was imminent and, Bonar says, her phone started ringing more often. Lawyers for all of the parties involved hashed out settlement terms that were as fair as possible for everyone. "It was about balancing our clients' interests with the ultimate goal of resolving the case," Bonar says.

In a statement, Pfizer denied most of the civil claims filed against the company, including that it had any sort of organized kickback program.

The company will have to abide by a new Corporate Integrity Agreement reached with federal regulators as part of the settlement.

In one swoop, Pfizer has resolved a huge chunk of litigation, O'Connor says. "The company has wiped the slate clean," he says.

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