Department of Justice (DOJ) recently entered into a settlement of a qui tam lawsuit against Pfizer, Inc. and its subsidiary Wyeth LLC.  Pursuant to the settlement, Pfizer will pay $784.6 million. According to the allegations of the case, from 2001 to 2006, Wyeth engaged in healthcare fraud by failing to inform Medicaid about the discounts that it offered to its private purchasers, such as hospitals, on two medications that are commonly used to treat acid reflux disease. Wyeth’s deceptive practices led to the company’s underpayment of millions of dollars in drug rebates to Medicaid.

Headquartered in New York City, Pfizer, Inc. is one of the world’s largest pharmaceutical companies, manufacturing many name-brand products such as Advil and Lipitor. In 2009, Pfizer purchased Wyeth LLC for approximately $68 billion, which was one of the largest corporate mergers in history. The merger, which was largely backed by Wall Street, established Pfizer’s global dominance in the pharmaceutical industry, and it was estimated that the acquisition would save the company $4 billion annually.

Prior to the company’s acquisition by Pfizer, in 2000, Wyeth released the proton pump inhibitor (PPI) Protonix Oral onto the market as a medication that could be used to treat the symptoms of acid reflux disease, among other conditions. Wyeth followed the release of this drug with Protonix I.V. in 2001, which is another PPI medication that can be taken intravenously. Around the time of the release of Protonix I.V., Wyeth began to offer bundle sales on both of their PPI drugs if they were purchased together due to the lower demand for the Protonix I.V. medication because of its shorter-term use compared to the Protonix Oral drug.

Two separate relators (which is the technical term for a whistleblower in a qui tam case filed under the False Claims Act) filed lawsuits against Wyeth alleging that the company failed to inform Medicaid about the bundled discounts that it was offering on its PPI medications to its private hospital customers. Within their Complaints, relators Lauren Kieff, who at the time was employed as a pharmaceutical sales specialist for AstraZeneca, and William St. John LaCorte, M.D., a physician who specializes in geriatrics, allege that Wyeth did not comply with the Medicaid Drug Rebate Program, which requires that pharmaceutical companies report the best prices to Medicaid that they offer to their other customers. Pharmaceutical companies are then supposed to pay rebates to state Medicaid programs so that they also receive the discounts that are given to their private consumers. Pfizer and Wyeth recently agreed to settle the cases after 14 years of litigation, and they also agreed to not dispute the claims that were made by the government.

As a federally and state-funded healthcare program, Wyeth’s failure to inform Medicaid about the bundled discounts that it was providing to its hospital customers is in direct violation of the False Claims Act (“FCA”). Under the FCA, an individual can act as a qui tam relator, or whistleblower, and is able to bring a lawsuit on behalf of the United States if they believe that fraudulent claims are being submitted to the government. If the case settles, the whistleblower is entitled to a portion of the recovery, known as the relator’s share.  That share typically ranges from between 15% to 30% of the amount recovered by the government. In this case, the relators who blew the whistle on Pfizer received more than $98 million.