Pfizer 2005 Annual Report Download - page 67

66 2005 Financial Report
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
Practices and Product Liability Litigation MDL-1699) in the U.S.
District Court for the Northern District of California.
Beginning in late 2004, actions, including purported class and
shareholder derivative actions, have been filed in various federal
and state courts against Pfizer, Pharmacia and certain current and
former officers, directors and employees of Pfizer and Pharmacia.
These actions include: (i) purported class actions alleging that
Pfizer and certain officers of Pfizer violated federal securities laws
by misrepresenting the safety of Celebrex and Bextra; (ii) purported
shareholder derivative actions alleging that certain of Pfizer’s
current and former officers and directors breached fiduciary duties
by causing Pfizer to misrepresent the safety of Celebrex and, in
certain of the cases, Bextra; and (iii) purported class actions filed
by persons who claim to be participants in the Pfizer or Pharmacia
Savings Plan alleging that Pfizer and certain officers, directors and
employees of Pfizer or, where applicable, Pharmacia and certain
former officers, directors and employees of Pharmacia, violated
certain provisions of the Employee Retirement Income Security
Act of 1974 (ERISA) by selecting and maintaining Pfizer stock as an
investment alternative when it allegedly no longer was a suitable
or prudent investment option. In June 2005, the federal securities,
fiduciary duty and ERISA actions were transferred for consolidated
pre-trial proceedings to a Multi-District Litigation (In re Pfizer Inc.
Securities, Derivative and “ERISA” Litigation MDL-1688) in the U.S.
District Court for the Southern District of New York.
In July 2005, an action was filed by the Attorney General of the
State of Louisiana in the Civil District Court for Orleans Parish,
Louisiana, against Pfizer seeking to recover amounts paid by the
Louisiana Medicaid program for Celebrex and Bextra and for
medical services to treat persons allegedly injured by Celebrex or
Bextra. The action also seeks injunctive relief to prevent the sale
of Celebrex and any resumption of the sale of Bextra in Louisiana.
E. Other Matters
Monsanto-Related Matters
In 1997, Monsanto Company (Former Monsanto) contributed
certain chemical manufacturing operations and facilities to a
newly formed corporation, Solutia Inc. (Solutia), and spun off the
shares of Solutia. In 2000, Former Monsanto merged with
Pharmacia & Upjohn to form Pharmacia Corporation (Pharmacia).
Pharmacia then transferred its agricultural operations to a newly
created subsidiary, named Monsanto Company (New Monsanto),
which it spun off in a two-stage process that was completed in
2002. Pharmacia was acquired by Pfizer in 2003 and is now a
wholly owned subsidiary of Pfizer.
In connection with its spin-off that was completed in 2002, New
Monsanto assumed, and agreed to indemnify Pharmacia for, any
liabilities related to Pharmacia’s former agricultural business.
New Monsanto is defending and indemnifying Pharmacia for
various claims and litigation arising out of or related to the
agricultural business.
In connection with its spin-off in 1997, Solutia assumed, and
agreed to indemnify Pharmacia for, liabilities related to Former
Monsanto’s chemical businesses. As a result, while Pharmacia
remains a defendant in various legal proceedings involving Former
Monsanto’s chemical businesses, Solutia manages the litigation
and is responsible for all costs and expenses and any judgment or
settlement amounts. In addition, in connection with its spin-off
that was completed in 2002, New Monsanto assumed, and agreed
to indemnify Pharmacia for, any liabilities primarily related to
Former Monsanto’s chemical businesses, including any such
liabilities that Solutia assumed. Solutia’s and New Monsanto’s
assumption of and agreement to indemnify Pharmacia for these
liabilities apply to pending actions and any future actions related
to Former Monsanto’s chemical businesses in which Pharmacia is
named as a defendant, including, without limitation, actions
asserting environmental claims, including alleged exposure to
polychlorinated biphenyls.
In December 2003, Solutia filed a petition in the U.S. Bankruptcy
Court for the Southern District of New York seeking reorganization
under Chapter 11 of the U.S. Bankruptcy Code. Solutia asked the
Bankruptcy Court to relieve it from liabilities related to Former
Monsanto’s chemical businesses that were assumed by Solutia in
1997. In addition, motions were filed by Solutia in the Chapter 11
proceeding and other actions were filed in the Bankruptcy Court
by Solutia and by a committee representing the interests of Solutia’s
shareholders that seek to avoid all or a portion of Solutia’s
obligations to Pharmacia. Should the Bankruptcy Court grant such
relief, New Monsanto would be responsible for such liabilities
under its indemnification agreement with Pharmacia.
In December 2003, Solutia filed an action, also in the U.S.
Bankruptcy Court for the Southern District of New York, seeking
a determination that Pharmacia rather than Solutia is responsible
for an estimated $475 million in health care benefits for certain
Solutia retirees. A similar action was filed in May 2004 in the
same Bankruptcy Court against Pharmacia and New Monsanto by
a committee appointed to represent Solutia retirees in the
Bankruptcy Court proceedings. The parties have agreed to a
standstill of these actions. In the event that the standstill
terminates, Pharmacia and New Monsanto will vigorously defend
these actions. Under its indemnification agreement with Pharmacia,
New Monsanto will be responsible for the costs and expenses
and any judgment or settlement amounts in these actions.
On February 14, 2006, Solutia filed its plan of reorganization in the
Bankruptcy Court. The plan, which must be approved by the
Bankruptcy Court, provides that all lawsuits filed against Pharmacia
in the Bankruptcy court by Solutia, the committee representing
Solutia retirees and the committee representing Solutia’s
shareholders will be dismissed or withdrawn with prejudice.
The plan provides that Solutia’s indemnity obligations to Pharmacia
that arose in connection with Solutia’s 1997 spin-off will be shared
between Solutia and New Monsanto. New Monsanto will be
financially responsible for all environmental remediation costs at
certain sites that Solutia never owned or operated. Solutia will
continue to be financially responsible for all environmental
remediation costs at sites that Solutia has owned or operated. New
Monsanto and Solutia will share the environmental remediation
costs of certain other sites. The plan also provides that Solutia will
indemnify Pharmacia for any environmental remediation costs
that Solutia continues to be liable for under the plan. In addition,
the plan provides that New Monsanto will be financially responsible
for all current and future personal injury tort claims related to
Former Monsanto’s chemical businesses that Solutia assumed in
connection with the 1997 spin-off.
The plan also will implement a settlement entered into between
Solutia and the committee representing Solutia retirees. Under the
settlement, the retirees will agree to certain modifications to
their benefit plan. The settlement also provides that New Monsanto
will contribute $175 million to help Solutia fund certain legacy
healthcare, life and disability insurance benefits. The retirees will