Pfizer gets an off-label message
Suit against drug maker over Lipitor prescription could be precursor as states, health plans look to save money.
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - Pfizer faces a lawsuit claiming it marketed the cholesterol-reducing drug Lipitor for non-approved purposes -- a claim it may hear a lot as states battle costs due to expanded Medicare drug coverage.

Pfizer (down $0.45 to $25.36, Research) acknowledged it was sued Monday by the Welfare Fund of Teamsters Local Union 863 in U.S. District Court in Newark, N.J., for allegedly marketing Lipitor, a drug that totaled $12.2 billion in 2005 sales, for uses outside federal guidelines.

The union filed suit because it allegedly made overpayments for member prescriptions, according to Reuters, and several other employee health care funds are expected to sue Tuesday.

Pfizer denied the allegation in the suit.

"Based on the information provided to us, we believe there is absolutely no merit to the claims regarding the promotion of Lipitor," said Pfizer spokesman Andrew McCormick, in a prepared statement.

Separately, Pfizer acknowledged that an investigation has been initiated against it by the U.S. Attorney's office in Brooklyn, N.Y., reportedly because of marketing practices.

"We do not know who initiated or why an investigation was initiated in Brooklyn, but we have been cooperating with that investigation, and have seen no merit of the claims in that matter," said McCormick.

A way to cut costs

Organizations that pay for drug coverage could see the suits as a way to save money. The suits could also affect prescription drug plans, which differ from state to state, even though they're under the umbrella of the federal Medicare program.

"States are going to tighten up this sort of thing because it's a way to control Medicare costs," said Les Funtleyder, analyst for Miller Tabak. "If suits like this start proving to be successful, then you'll start to see a cascade effect."

In some ways, the Lipitor case resembles a similar Medicare fraud suit involving the drug Neurontin that the drug maker lost in 2004. As in the Lipitor case, Pfizer was accused of marketing its drugs off label, or for uses that were not approved by the Food and Drug Administration.

In the Neutrontin case, Pfizer paid a $430 million fine for its subsidiary Warner-Lambert's marketing of the drug Neurontin for treatment of neuropathic pain, which was not approved by the FDA. The drug was approved to treat epileptic seizure.

But experts are skeptical that the Lipitor suit will have the same outcome as the Neurontin case. They say plaintiffs will have a tough time proving off-label marketing for a cholesterol drug like Lipitor, because its treatment is so expansive and can be used for patients with heart disease and diabetes.

"It's not like it's being used for a vastly different indication," said Barbara Ryan, analyst for Deutsche Bank North America. "At the end of the day, no one's using Lipitor for anything other than lowering LDL [cholesterol.]"

Ryan said that, in the Neurontin case, the majority of the drug's sales came from indications that had little to do with its approved use.

A 'gray area'

Funtleyder said the Lipitor case doesn't pose much of a threat to Pfizer, because cholesterol treatment is more of a "gray area," involving more people with a broader range of health problems than treatment for epileptic seizures.

Dr. Bryan Liang, executive director of the Institute of Health Law Studies at California Western School of Law, said the Lipitor allegations of off-label marketing will be hard to prove because "the distinctions aren't nearly as clear as with other cases."

"This is not a clear attempt at applying the drug to something that's completely irrelevant," said Liang.

Nonetheless, Liang said Pfizer faces a difficult situation: the company can't settle, because that would encourage more lawsuits, but going to trial always carries the risk of losing, because sometimes the juries are biased against big business.

"Juries can draw their own conclusions," said Liang. "Sometimes juries just want to get back at corporations. Going to trial is always a risk."

But when it comes to financial risks, analysts say that Pfizer faces a much greater threat from the impending patent loss of Merck's (down $0.45 to $35.57, Research) $4.4 billion cholesterol drug Zocor, set to lose patent protection in June. Zocor's price will drop dramatically when generic versions of the drug become available, and this could undermine sales for the more expensive Lipitor.

Some analysts say that patients are already switching over to Zocor in anticipation of the generic availability, and this is why Lipitor sales slowed toward the end of last year.

To try and protect its product and glean more sales, Pfizer has been testing Lipitor, which lowers LDL or "bad" cholesterol, in conjunction with another drug, torcetrapib, which increases HDL or "good" cholesterol. Successful tests could help Pfizer distinguish the Lipitor-torcetrapib combination as a completely separate drug from generic Zocor.

Al Rauch, analyst for A.G. Edwards, has projected that the drug combination could add $8 billion in annual sales for Pfizer.

The analysts interviewed for this story do not own shares of Pfizer stock, but Deutsche Bank North America does own Pfizer shares.

To read about Pfizer's new strategy to building up its pipeline, click hereTop of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.