Pfizer 2012 Annual Report Download - page 111

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
110
2012 Financial Report
remedy to address the discharge of impacted groundwater from that facility to the Raritan River. In September 2012, the EPA issued a final
remediation plan for the Bound Brook facility's main plant area, which is generally in accordance with one of the remedies evaluated in our
revised site-wide feasibility study. The estimated costs of the site remedy for the North Haven facility and the site remediation for the Bound
Brook facility are covered by accruals previously taken by us.
We are a party to a number of other proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended (CERCLA or Superfund), and other state, local or foreign laws in which the primary relief sought is the cost of past and/
or future remediation.
In February 2011, King received notice from the U.S. Department of Justice (DOJ) advising that the EPA has requested that DOJ initiate
enforcement action seeking injunctive relief and penalties against King for alleged non-compliance with certain provisions of the federal Clean
Air Act at its Bristol, Tennessee manufacturing facility. King has executed a tolling agreement with the DOJ in order to facilitate the possible
resolution of this matter. We do not expect that any injunctive relief or penalties that may result from this matter will be material to Pfizer.
In October 2011, we voluntarily disclosed to the EPA potential non-compliance with certain provisions of the federal Clean Air Act at our
Barceloneta, Puerto Rico manufacturing facility. We do not expect that any injunctive relief or penalties that may result from our voluntary
disclosure will be material to Pfizer. Separately, in October 2012, the EPA issued an administrative complaint and penalty demand of $216,000
to resolve alleged non-compliance with similar provisions of the federal Clean Air Act that the EPA identified as part of its March 2010
inspection of the Barceloneta facility. We have commenced discussions with the EPA seeking to resolve this latter matter.
A4. Legal Proceedings––Government Investigations
Like other pharmaceutical companies, we are subject to extensive regulation by national, state and local government agencies in the U.S. and
in the other countries in which we operate. As a result, we have interactions with government agencies on an ongoing basis. It is possible that
criminal charges and substantial fines and/or civil penalties could result from government investigations. Among the investigations by
government agencies is the matter discussed below.
The DOJ is conducting a civil investigation regarding Wyeth’s practices relating to the pricing for Protonix for Medicaid rebate purposes prior to
Wyeth's acquisition by Pfizer. In 2009, the DOJ filed a civil complaint in intervention in two qui tam actions that had been filed under seal in the
U.S. District Court for the District of Massachusetts. The complaint alleges that Wyeth’s practices relating to the pricing for Protonix for
Medicaid rebate purposes between 2001 and 2006 violated the Federal Civil False Claims Act and federal common law. The two qui tam
actions have been unsealed and the complaints include substantially similar allegations. In addition, in 2009, several states and the District of
Columbia filed a complaint under the same docket number asserting violations of various state laws based on allegations substantially similar
to those set forth in the civil complaint filed by the DOJ. We are exploring with the DOJ various ways to resolve this matter.
A5. Legal Proceedings––Certain Matters Resolved in 2012
As previously reported, during 2012, several matters, including those discussed below, were resolved or were the subject of definitive
settlement agreements or settlement agreements-in-principle.
Rapamune
In October 2012, Wyeth entered into an agreement-in-principle with the DOJ to resolve the previously reported civil and criminal investigation
with respect to Wyeth's promotional practices relating to Rapamune prior to Wyeth's acquisition by Pfizer. Under the agreement-in-principle,
we will pay approximately $257 million to resolve the civil allegations and approximately $234 million to resolve the criminal allegations, and
Wyeth will plead guilty to a misdemeanor misbranding offense under the U.S. Federal Food, Drug and Cosmetic Act. The resolution is subject
to the execution of final settlement agreements by the parties as well as court approval, which is expected to occur in the coming months. In
connection with the agreement-in-principle, we recorded a charge of $491 million, which is not deductible for income tax purposes, in the third
quarter of 2012.
Celebrex
Pfizer and several predecessor and affiliated companies, including Monsanto Company (Monsanto), were defendants in an action brought by
Brigham Young University (BYU) and a BYU professor in the U.S. District Court for the District of Utah alleging, among other things, breach by
Monsanto of a 1991 research agreement with BYU. Plaintiffs claimed that research under that agreement led to the discovery of Celebrex and
that, as a result, they were entitled to a share of the profits from Celebrex sales. Plaintiffs sought, among other things, compensatory and
punitive damages and equitable relief. On April 28, 2012, the parties reached an agreement-in-principle to settle this action for $450 million,
and we recorded a charge in that amount in the first quarter of 2012. In June 2012, the parties entered into a final settlement agreement, and
the action was dismissed with prejudice by the court.
B. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale of assets and businesses, we often indemnify our counterparties against
certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications
typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were
to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications
are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid
significant amounts under these provisions and, as of December 31, 2012, recorded amounts for the estimated fair value of these
indemnifications are not significant. See also Note 1E. Basis of Presentation and Significant Policies: Fair Value.