Pfizer (in the Guise of Pharmacia) Pfound to Violate Pfraud Law, While Pfizer CEO Made Pfederal Reserve Advisor

It was only a month ago that Pfizer Inc, the world's largest pharmaceutical company, submitted to a gargantuan $2.3 billion settlement and yet another corporate integrity agreement. As we posted here, this was the company's fourth major settlement of charges of unethical marketing behavior since 2002.

Now Pfizer is in trouble again. As reported by the AP,

A judge on Tuesday imposed $4.5 million in forfeitures on prescription drug company Pharmacia Inc.[a Pfizer Inc subsidiary] for misrepresenting prices and defrauding Wisconsin's Medicaid system.

A jury in February found that Pharmacia violated the state's Medicaid fraud law 1.44 million times over a decade. State Justice Department attorneys had demanded about $212 million in forfeitures, but Dane County Circuit Judge Richard Niess said jurors grossly overcalculated the number of violations.

After reviewing the evidence, the judge found the actual tally was 4,578.

He elected to set the forfeiture level at $1,000 per violation. The judge said he was concerned that if he ordered the maximum $68.6 million Pharmacia would pass the expense to consumers and nothing showed any of the fraudulent $7 million went directly to Pharmacia's profits.

On the other hand, the judge said, a $100 per violation forfeiture totaling $457,800 would 'not register so much as blip on Pharmacia's multibillion-dollar annual fiscal radar screen' and a higher amount would draw attention to the need to reform pharmaceutical reimbursement scales.

I must say that I do not understand the reasoning the judge used to set the penalties. If he thought that Pfizer would merely pass along a large penalty to patients, why would the company not pass along a smaller penalty to them.

In any case, this is just the latest in a long string of cases in which a health care corporation was found to have committed unethical or illegal acts, but the only the corporation itself, but not the people who actually performed, directed or authorized the acts, paid a penalty. And when the penalty is paid by the corporation, its impact can be spread over all stock-holders, all employees, and all patients, clients, or customers, thus diluting its effect, and protecting those who authorized, directed, or performed the acts in question.

I submit again that only when the people in health care leadership who perform, direct or authorize bad behavior pay penalties will bad behavior be deterred.

Note that while Pfizer may be the world's largest pharmaceutical corporation, it seems to be the corporation most often cited for, convicted of, or having to make settlements for bad behavior (see some recent examples here). (Although in the current case, you would have to read the news report very carefully to realize that Pfizer was involved. The fact that Pharmacia is a Pfizer subsidiary was only mentioned in passing.)

Nonetheless, one would think Pfizer's leadership would be ashamed, and their reputation would suffer. But no. At about the same time this latest settlement was announced, this report from Reuters appeared:

The Federal Reserve Bank of New York said on Thursday that Pfizer (PFE.N) chief executive Jeffrey Kindler and Loews Corp (L.N) chief executive James Tisch will fill the two vacancies on its board of directors.

Kindler was elected to finish a three-year term ending Dec. 31, taking the seat PepsiCo (PEP.N) chief executive Indra Nooyi resigned from in February.

Regional Federal Reserve banks' boards of directors offer recommendations on Fed policy, but have no policy-making powers. They also provide anecdotal information about the business conditions that help inform the central bank.

Regional Fed banks have three classes of directors: Class A, elected by member banks to represent banks; Class B, elected by member banks but representing the public; and Class C, which represent the public but are chosen by the Board of Governors in Washington.

Kindler and Tisch join Jeffrey Immelt, chairman and chief executive of General Electric (GE.N) as Class B directors.

I suppose Kindler could offer quite a bit of "anecdotal information" about bad behavior in the pharmaceutical industry. But it seems rather comic to think about the CEO of the world's biggest, and lately baddest pharmaceutical company as "representing the public." Rather, and more seriously, this is just the latest example of how leaders of health care organizations have joined the superclass, and how the superclass protects its own.