In the ruling that came down yesterday, Kaiser's health plans and hospitals sued Pfizer for marketing epilepsy drug Neurontin for migraines and other indications for which the Food and Drug Administration hadn't approved it. Kaiser claims that the marketing caused it to overpay for treatment, and was awarded $47 million, which was automatically tripled to $141 million under RICO.
Doctors are allowed to prescribe drugs for any indication that they feel will help the patient, but drug companies are only allowed to market their drugs for indications approved by the FDA.
Pfizer claims that Kaiser's doctors continue to prescribe the drug off-label, so Kaiser is being a bit hypocritical in claiming that it was wronged. That's kind of like the mafia pointing out that the government collects taxes without asking, so they should be able to take money, too. Sorry Pfizer, it doesn't work that way. Take your lumps and move on.
This isn't Pfizer's first run-in with off-label marketing. In 2004, Pfizer pleaded guilty to illegally marketing Neurontin, and it recently settled with the Department of Justice over the marketing of its antipsychotic Geodon. Pfizer's not the only company in trouble for illegally marketing drugs, either: Merck, Eli Lilly
I get the feeling that drug companies have mostly cleaned up their acts, but current shareholders still have to pay for past transgressions. Unfortunately, that's just part of being in an investing family.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is an Income Investor selection and Motley Fool Options recommended buying calls on the stock. The Motley Fool owns shares of GlaxoSmithKline. The Fool's disclosure policy has been in the family for longer than I can remember.