Pfizer 2008 Annual Report Download - page 91

Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
Average Wholesale Price Litigation
A number of states as well as most counties in New York have sued Pharmacia, Pfizer and other pharmaceutical manufacturers
alleging that they provided average wholesale price (AWP) information for certain of their products that was higher than the actual
prices at which those products were sold. The AWP is used to determine reimbursement levels under Medicare Part B and Medicaid
and in many private-sector insurance policies and medical plans. The plaintiffs claim that the alleged spread between the AWPs at
which purchasers were reimbursed and the actual sale prices was promoted by the defendants as an incentive to purchase certain
of their products. In addition to suing on their own behalf, many of the plaintiff states seek to recover on behalf of individual Medicare
Part B co-payers and private-sector insurance companies and medical plans in their states. These various actions generally assert
fraud claims as well as claims under state deceptive trade practice laws, and seek monetary and other relief, including civil penalties
and treble damages. Several of the suits also allege that Pharmacia and/or Pfizer did not report to the states their best price for
certain products under the Medicaid program.
In addition, Pharmacia, Pfizer and other pharmaceutical manufacturers are defendants in a number of purported class action suits in
various federal and state courts brought by employee benefit plans and other third-party payers that assert claims similar to those in
the state and county actions. These suits allege, among other things, fraud, unfair competition and unfair trade practices and seek
monetary and other relief, including civil penalties and treble damages.
All of these state, county and purported class action suits were transferred for consolidated pre-trial proceedings to a Multi-District
Litigation (In re Pharmaceutical Industry Average Wholesale Price Litigation MDL-1456) in the U.S. District Court for the District of
Massachusetts. Certain of the state and private suits have been remanded to their respective state courts. In November 2006, the
claims against Pfizer in the Multi-District Litigation were dismissed with prejudice; the claims against Pharmacia are still pending.
In April 2008, the court in the Multi-District Litigation granted preliminary approval with respect to the fairness of a proposed
settlement of the claims against 11 defendants, including Pharmacia, for a total of $125 million. The court has scheduled a hearing
in March 2009 to consider final approval of the settlement. If the settlement is approved, Pharmacia’s contribution would be
immaterial.
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 Company 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 the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s
indemnification obligations related to Former Monsanto’s chemical businesses are limited to sites that Solutia has owned or
operated. In addition, in connection with its spinoff 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, but not limited to, 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.
Pharmacia Cash Balance Pension Plan
In 2006, several current and former employees of Pharmacia Corporation filed a purported class action in the U.S. District Court for
the Southern District of Illinois against the Pharmacia Cash Balance Pension Plan (the Plan), Pharmacia Corporation, Pharmacia &
Upjohn Company and Pfizer Inc. Plaintiffs seek monetary and injunctive relief on behalf of a class consisting of certain current and
former participants in the Plan who accrued a benefit in the Monsanto Company Pension Plan prior to its conversion to a cash
balance plan in 1997. In January 2002, after various corporate reorganizations, certain of the assets and liabilities of the Monsanto
Company Pension Plan were transferred to the Plan. Plaintiffs claim that the Plan violates the age discrimination provisions of the
Employee Retirement Income Security Act of 1974 by providing certain credits to such participants only to age 55. This action has
been consolidated in the U.S. District Court for the Southern District of Illinois (Walker, et al., v. The Monsanto Company Pension
Plan et al.) with purported class actions pending in the same court that make largely similar claims against substantially similar cash
balance plans sponsored by Monsanto Company and Solutia Inc., two former affiliates of Pharmacia. In May 2008, at the request of
the parties, the court issued an order permitting the case to proceed as a class action.
Trade Secrets Action in California
In 2004, Ischemia Research and Education Foundation (IREF) and its chief executive officer brought an action in California Superior
Court, Santa Clara County, against a former IREF employee and Pfizer. Plaintiffs allege that defendants conspired to misappropriate
certain information from IREF’s allegedly proprietary database in order to assist Pfizer in designing and executing a clinical study of
a Pfizer drug. In December 2008, the jury returned a verdict for compensatory damages of approximately $38.7 million. In February
2009, the judge held a hearing on plaintiffs’ motions seeking punitive damages (which, under applicable law, may not exceed two
times compensatory damages) as well as prejudgment interest from 2002 to the present. We are awaiting rulings on those motions.
Separately, we will be filing motions for judgment notwithstanding the verdict and for a new trial.
2008 Financial Report 89