Pfizer 2013 Annual Report Download - page 112

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2013 Financial Report 111
A3. Legal Proceedings––Commercial and Other Matters
Average Wholesale Price Litigation
Pfizer, certain of its subsidiaries and other pharmaceutical manufacturers were sued in various state courts by a number of states alleging that
the defendants provided average wholesale price (AWP) information for certain of their products that was higher than the actual average
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. All but two of those actions have been resolved through settlement, dismissal or
final judgment. The plaintiff states in the two remaining actions 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, the two states seek to recover on behalf of individuals, private-sector insurance companies and medical plans in
their states. These actions allege, among other things, fraud, unfair competition, unfair trade practices and the violation of consumer protection
statutes, and seek monetary and other relief, including civil penalties and treble damages.
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 in connection with 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. Solutia and New Monsanto are defending and indemnifying Pharmacia in
connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses.
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
2008, the jury returned a verdict for compensatory damages of approximately $38.7 million. In March 2009, the court awarded prejudgment
interest, but declined to award punitive damages. In July 2009, the court granted our motion for a new trial and vacated the jury verdict. In
February 2013, the trial court's decision was affirmed by the California Court of Appeal, Sixth Appellate District. In May 2013, the action was
remanded for further proceedings to the California Superior Court, Santa Clara County.
Environmental Matters
In 2009, we submitted to the U.S. Environmental Protection Agency (EPA) a corrective measures study report with regard to Pharmacia
Corporation's discontinued industrial chemical facility in North Haven, Connecticut and a revised site-wide feasibility study with regard to
Wyeth Holdings Corporation's discontinued industrial chemical facility in Bound Brook, New Jersey. In September 2010, our corrective
measures study report with regard to the North Haven facility was approved by the EPA, and we commenced construction of the site remedy
in late 2011 under an Updated Administrative Order on Consent with the EPA. In July 2011, Wyeth Holdings Corporation finalized an
Administrative Settlement Agreement and Order on Consent for Removal Action with the EPA with regard to the Bound Brook facility. In May
2012, we completed construction of an interim 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. In March 2013, Wyeth Holdings Corporation entered into an
Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy
for the main plant area and to perform a focused feasibility study for two adjacent lagoons. 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 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 are in discussions with the EPA seeking to resolve these matters.