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| Legal Proceedings and Contingencies |
Note 14.
Legal Proceedings and Contingencies
We
and certain of our subsidiaries are involved in various patent,
product liability, consumer, commercial, securities, environmental
and tax litigations and claims; government investigations; and
other legal proceedings that arise from time to time in the
ordinary course of our business. We do not believe any of them will
have a material adverse effect on our financial
position.
We
record accruals for income tax contingencies to the extent that we
conclude that a tax position is not sustainable under a “more
likely than not” standard, and we record our estimate of the
potential tax benefits in one tax jurisdiction that could result
from the payment of income taxes in another tax jurisdiction when
we conclude that the potential recovery is more likely than not. We
record accruals for all other contingencies to the extent that we
conclude their occurrence is probable and the related damages are
estimable, and we record anticipated recoveries under existing
insurance contracts when assured of recovery. If a range of
liability is probable and estimable and some amount within the
range appears to be a better estimate than any other amount within
the range, we accrue that amount. If a range of liability is
probable and estimable and no amount within the range appears to be
a better estimate than any other amount within the range, we accrue
the minimum of such probable range. Many claims involve highly
complex issues relating to causation, label warnings, scientific
evidence, actual damages and other matters. Often these issues are
subject to substantial uncertainties and, therefore, the
probability of loss and an estimation of damages are difficult to
ascertain. Consequently, we cannot reasonably estimate the maximum
potential exposure or the range of possible loss in excess of
amounts accrued for these contingencies. Our assessments are based
on estimates and assumptions that have been deemed reasonable by
management. Litigation is inherently unpredictable, and excessive
verdicts do occur. Although we believe we have substantial defenses
in these matters, we could in the future incur judgments or enter
into settlements of claims that could have a material adverse
effect on our results of operations or cash flows in any particular
period.
Patent
claims include challenges to the coverage and/or validity of our
patents on various products or processes. Although we believe we
have substantial defenses to these challenges with respect to all
our material patents, there can be no assurance as to the outcome
of these matters, and a loss in any of these cases could result in
a loss of patent protection for the drug at issue, which could lead
to a significant loss of sales of that drug and could materially
affect future results of operations.
The
principal pending matters to which we are a party are discussed
below. In determining whether a pending matter is a principal
matter, we consider both quantitative and qualitative factors in
order to assess materiality, such as, among other things, the
amount of damages and the nature of any other relief sought in the
proceeding, if such damages and other relief are specified; our
view of the merits of the claims and of the strength of our
defenses; whether the action purports to be a class action and our
view of the likelihood that a class will be certified by the court;
the jurisdiction in which the proceeding is pending; any experience
that we or, to our knowledge, other companies have had in similar
proceedings; whether disclosure of the action would be important to
a reader of our financial statements, including whether disclosure
might change a reader’s judgment about our financial
statements in light of all of the information about the Company
that is available to the reader; the potential impact of the
proceeding on our reputation; and the extent of public interest in
the matter. In addition, with respect to patent matters, we
consider, among other things, the financial significance of the
product protected by the patent.
A.
Patent Matters
Like
other pharmaceutical companies, we are involved in numerous suits
relating to our patents, including but not limited to those
discussed below. Most of the suits involve claims by generic drug
manufacturers that patents covering our products, processes or
dosage forms are invalid and/or do not cover the product of the
generic manufacturer. Also, counterclaims as well as various
independent actions have been filed claiming that our assertions
of, or attempts to enforce, our patent rights with respect to
certain products constitute unfair competition and/or violations of
the antitrust laws. In addition to the challenges to the U.S.
patents on a number of our products that are discussed below, we
note that the patent rights to certain of our products, including
without limitation Lipitor, are being challenged in various other
countries.
Lipitor (atorvastatin)
In
November 2008, Apotex Inc. notified us that it had filed an
abbreviated new drug application with the FDA seeking approval to
market a generic version of Lipitor. In December 2008, we filed
patent-infringement suits against Apotex Inc. in the U.S.
District Court for the District of Delaware and the U.S. District
Court for the Northern District of Illinois. In August 2009,
our action in the District of Delaware was transferred to the
Northern District of Illinois and consolidated with our pending
action there. Apotex Inc. asserts the invalidity of our patent
covering the crystalline form of atorvastatin, which (including the
pediatric exclusivity period) expires in 2017. We assert the
infringement of our crystalline patent and are defending against
the allegations of invalidity.
In
October 2009, Dr. Reddy's Laboratories Ltd. and Dr. Reddy’s
Laboratories, Inc. (collectively, Dr. Reddy's) and KUDCO Ireland,
Ltd. and Kremers Urban LLC (collectively, KUDCO) notified us that
they had filed abbreviated new drug applications with the FDA
seeking approval to market generic versions of Lipitor. Both of the
abbreviated new drug applications cover the 10, 20 and 40 mg dosage
strengths, and KUDCO’s abbreviated new drug application also
covers the 80 mg dosage strength. Dr. Reddy’s and KUDCO
assert the invalidity and/or non-infringement of our patent
covering the crystalline form of atorvastatin and two other Lipitor
patents. In December 2009, we filed actions against Dr.
Reddy’s and KUDCO in the U.S. District Court for the District
of Delaware asserting the infringement of our crystalline patent.
In addition, in December 2010, we filed an action against Dr.
Reddy’s in the same court asserting the infringement of the
same patent in connection with Dr. Reddy’s additional
abbreviated new drug application seeking approval to market a
generic version of the 80 mg dosage strength.
In
July 2010, Actavis, Inc. and Actavis Pharma Manufacturing Pvt. Ltd.
(collectively, Actavis) notified us that they had filed
an abbreviated new drug application with the FDA seeking
approval to market a generic version of Lipitor.
Actavis asserts the non-infringement of our patent covering
the crystalline form of atorvastatin and two other Lipitor patents.
In August 2010, we filed an action against Actavis in the U.S.
District Court for the District of Delaware asserting the
infringement of our crystalline patent.
In
May 2011, Aurobindo Pharma Ltd. (Aurobindo) notified us that it had
filed an abbreviated new drug application with the FDA seeking
approval to market a generic version of Lipitor. Aurobindo asserts
the non-infringement of our patent covering the crystalline form of
atorvastatin as well as two formulation patents, all of which
(including the six-month pediatric exclusivity period) expire in
2017. In June 2011, we filed an action against Aurobindo in the
U.S. District Court for the District of Delaware asserting the
validity and infringement of the challenged patents.
In
the U.K., on June 20, 2011, certain wholesalers and certain of
their pharmacy customers began selling generic atorvastatin that
had been supplied to the wholesalers by Teva UK Limited (Teva UK).
On the same day, we obtained a preliminary injunction from
the High Court of Justice prohibiting Teva UK and the
wholesalers from further sales of generic atorvastatin. On
July 11, 2011, Teva UK and the wholesalers consented to the
continuation of the preliminary injunction during the pendency of
the case. In the pending action, which also includes two of the
pharmacies that sold generic atorvastatin, Teva UK and the
wholesalers have asserted the invalidity of our basic U.K. patent
for Lipitor, and we have asserted the infringement of the patent
and denied the invalidity allegations. Our basic U.K. patent for
Lipitor, including the pediatric extension period, expires in May
2012.
Caduet (atorvastatin/amlodipine combination)
In
August 2009, Sandoz Inc., a division of Novartis AG (Sandoz),
notified us that it had filed an abbreviated new drug application
with the FDA seeking approval to market a generic version of
Caduet. In that filing and in a declaratory judgment action brought
by Sandoz in October 2009 in the U.S. District Court for the
District of Colorado, collectively, Sandoz asserts the invalidity
of our patent covering the atorvastatin/amlodipine combination,
which expires in 2018, and the invalidity and non-infringement of
three patents for Lipitor which (including the six-month pediatric
exclusivity period) expire between 2013 and 2017. In October 2009,
we filed suit against Sandoz in the U.S. District Court for the
District of Delaware and the U.S. District Court for the District
of Colorado asserting the infringement of the
atorvastatin/amlodipine combination patent. In February 2010, our
action and Sandoz’s action in the District of Colorado were
transferred to the District of Delaware and consolidated with our
pending action there.
Viagra (sildenafil)
In
March 2010, we brought a patent-infringement action in the U.S.
District Court for the Eastern District of Virginia against Teva
Pharmaceuticals USA, Inc. (Teva USA) and Teva Pharmaceutical
Industries Ltd. ( Teva Pharmaceutical Industries), which had filed
an abbreviated new drug application with the FDA seeking approval
to market a generic version of Viagra. Teva USA and Teva
Pharmaceutical Industries assert the invalidity and
non-infringement of the Viagra use patent, which expires in 2019,
but have not challenged the basic patent, which expires in
2012.
In
October 2010, we filed a patent-infringement action with respect to
Viagra in the U.S. District Court for the Southern District of New
York against Apotex Inc. and Apotex Corp., Mylan Pharmaceuticals
Inc. and Mylan Inc., Actavis and Amneal Pharmaceuticals LLC. These
generic manufacturers have filed abbreviated new drug applications
with the FDA seeking approval to market their generic versions of
Viagra. They assert the invalidity and non-infringement of the
Viagra use patent, but have not challenged the basic
patent.
In
May and June 2011, respectively, Watson Laboratories Inc. (Watson)
and Hetero Labs Limited (Hetero) notified us that they had filed
abbreviated new drug applications with the FDA seeking approval to
market their generic versions of Viagra. Each asserts the
invalidity and non-infringement of the Viagra use patent. Neither
has challenged the basic patent. In June and July 2011,
respectively, we filed actions against Watson and Hetero in the
U.S. District Court for the Southern District of New York asserting
the validity and infringement of the use patent.
Sutent (sunitinib malate)
In
May 2010, Mylan Pharmaceuticals Inc. notified us that it had filed
an abbreviated new drug application with the FDA seeking approval
to market a generic version of Sutent and challenging on various
grounds the Sutent basic patent, which expires in 2021, and two
other patents, which expire in 2020 and 2021. In June 2010, we
filed suit against Mylan Pharmaceuticals Inc. in the U.S. District
Court for the District of Delaware asserting the infringement of
those three patents.
Detrol and Detrol LA (tolterodine)
As
previously reported, we filed patent-infringement actions against
Teva USA with respect to Detrol LA and against Ivax
Pharmaceuticals, Inc., a wholly owned subsidiary of Teva USA, with
respect to Detrol. In May 2011, these actions were settled on terms
that are not material to the Company.
In
October 2007 and January 2008, respectively, Teva USA and Impax
Laboratories, Inc. (Impax) notified us that they had filed
abbreviated new drug applications with the FDA seeking approval to
market generic versions of Detrol LA. They are challenging on
various grounds the basic patent, which (including the six-month
pediatric exclusivity period) expires in 2012, and three
formulation patents, which (including the six-month pediatric
exclusivity period) expire in 2020. We filed actions against them
in the U.S. District Court for the Southern District of New York
asserting the infringement of the basic patent and two of the
formulation patents. These actions subsequently were transferred to
the U.S. District Court for the District of New
Jersey.
In
March 2008 and May 2010, respectively, Sandoz and Mylan
Pharmaceuticals Inc. notified us that they had filed abbreviated
new drug applications with the FDA seeking approval to market
generic versions of Detrol LA. They assert the invalidity and/or
non-infringement of three formulation patents for Detrol LA. They
have not challenged the basic patent. In June 2010, we filed
actions against Sandoz and Mylan Pharmaceuticals Inc. in the U.S.
District Court for the District of New Jersey asserting the
infringement of two of the formulation patents.
In
April 2011, Impax notified us that it had filed an
abbreviated new drug application with the FDA seeking approval to
market a generic version of Detrol. Impax asserts the
non-infringement of the basic patent, which (including the
six-month pediatric exclusivity period) expires in
2012. In June 2011, we filed an action against Impax in
the U.S. District Court for the District of New Jersey asserting
infringement of the basic patent.
In
June 2011, Torrent Pharmaceuticals Ltd. (Torrent) notified us that
it had filed an abbreviated new drug application with the FDA
seeking approval to market a generic version of Detrol LA. Torrent
asserts the invalidity and non-infringement of three formulation
patents. Torrent has not challenged the basic patent. In
July 2011, we filed an action against Torrent in the U.S. District
Court for the District of New Jersey asserting the validity and
infringement of the challenged patents.
Lyrica (pregabalin)
Beginning
in March 2009, several generic manufacturers notified us that they
had filed abbreviated new drug applications with the FDA seeking
approval to market generic versions of Lyrica capsules. Each of the
generic manufacturers is challenging one or more of three patents
for Lyrica: the basic patent, which expires in 2018, and two other
patents, which expire in 2013 and 2018. Each of the generic
manufacturers asserts the invalidity and/or the non-infringement of
the patents subject to challenge. Beginning in April 2009, we filed
actions against these generic manufacturers in the U.S. District
Court for the District of Delaware asserting the infringement and
validity of our patents for Lyrica. All of these cases have been
consolidated in the District of Delaware.
In
August and November 2010, respectively, Lupin Limited (Lupin) and
Novel Laboratories, Inc. (Novel) notified us that they had filed
abbreviated new drug applications with the FDA seeking approval to
market generic versions of Lyrica oral solution and asserting the
invalidity and/or infringement of our three patents for Lyrica
referred to above. In October 2010 and January 2011, respectively,
we filed actions against Lupin and Novel in the U.S. District Court
for the District of Delaware asserting the validity and
infringement of all three patents.
Apotex
Inc. notified us, in May and June 2011, respectively, that it had
filed abbreviated new drug applications with the FDA seeking
approval to market generic versions of Lyrica oral solution and
Lyrica capsules. Apotex Inc. asserts the invalidity and
non-infringement of the basic patent, as well as the seizure patent
that expires in 2013. In July 2011, we filed an action
against Apotex Inc. in the U.S. District Court for the District of
Delaware asserting the validity and infringement of the challenged
patents in connection with both of the abbreviated new drug
applications.
We
also have filed patent-infringement actions in Canada against
certain generic manufacturers who are seeking approval to market
generic versions of Lyrica capsules in that country.
Zyvox (linezolid)
In
December 2009, Teva Parenteral Medicines Inc. (Teva Parenteral)
notified us that it had filed an abbreviated new drug application
with the FDA seeking approval to market a generic version of Zyvox.
Teva Parenteral asserts the invalidity and non-infringement of the
basic Zyvox patent, which (including the six-month pediatric
exclusivity period) expires in 2015, and another patent that
expires in 2021. In January 2010, we filed suit against Teva
Parenteral in the U.S. District Court for the District of Delaware
asserting the infringement of the basic patent.
Neurontin (gabapentin)
As
previously reported, several years ago the Company filed
patent-infringement actions against Teva Pharmaceutical Industries
and Actavis, Inc. in the U.S. District Court for the District of
New Jersey following their at-risk launches of generic gabapentin.
The parties settled these actions in May 2011. Under the settlement
agreements, Teva Pharmaceutical Industries and Actavis, Inc.
were granted licenses to continue to sell generic gabapentin. The
other terms of the settlement agreements, including certain cash
payments to us, are not material to the Company.
Relpax (eletriptan)
In
June 2010, we received notices from Apotex Inc. and Apotex Corp.
and from Teva USA that they had filed abbreviated new drug
applications with the FDA seeking approval to market generic
versions of Relpax. They assert the non-infringement of our patent
covering the crystalline form of eletriptan, which expires in 2017.
They have not challenged the basic patent, which expires in 2016.
In July 2010, we filed actions against Apotex Inc. and Apotex Corp.
and against Teva USA in the U.S. District Court for the Southern
District of New York asserting the infringement of the crystalline
patent.
Protonix (pantoprazole sodium)
Wyeth
has a license to market Protonix in the U.S. from Nycomed GmbH
(Nycomed), which owns the patents relating to Protonix. The basic
patent (including the six-month pediatric exclusivity period) for
Protonix expired in January 2011.
Following
their respective filings of abbreviated new drug applications with
the FDA, Teva USA and Teva Pharmaceutical Industries, Sun
Pharmaceutical Advanced Research Centre Ltd. and Sun Pharmaceutical
Industries Ltd. (collectively, Sun) and KUDCO Ireland, Ltd. (KUDCO
Ireland) received final FDA approval to market their generic
versions of Protonix 20 mg and 40 mg delayed- release tablets.
Wyeth and Nycomed filed actions against those generic manufacturers
in the U.S. District Court for the District of New Jersey, which
subsequently were consolidated into a single proceeding, alleging
infringement of the basic patent and seeking declaratory and
injunctive relief. Following the court's denial of a preliminary
injunction sought by Wyeth and Nycomed, Teva USA and Teva
Pharmaceutical Industries and Sun launched their generic versions
of Protonix tablets at risk in December 2007 and January 2008,
respectively. Wyeth launched its own generic version of Protonix
tablets in January 2008, and Wyeth and Nycomed filed amended
complaints in the pending patent-infringement action seeking
compensation for damages resulting from Teva USA’s, Teva
Pharmaceutical Industries’ and Sun's at-risk
launches.
In
April 2010, the jury in the pending patent-infringement action
upheld the validity of the basic patent for Protonix. In July 2010,
the court upheld the jury verdict, but it did not issue a judgment
against Teva USA, Teva Pharmaceutical Industries or Sun because of
their other claims relating to the patent that still are pending.
Wyeth and Nycomed will continue to pursue all available legal
remedies against those generic manufacturers, including
compensation for damages resulting from their at-risk
launches.
Separately,
Wyeth and Nycomed are defendants in purported class actions brought
by direct and indirect purchasers of Protonix in the U.S. District
Court for the District of New Jersey. Plaintiffs seek damages, on
behalf of the respective putative classes, for the alleged
violation of antitrust laws in connection with the procurement and
enforcement of the patents for Protonix. These purported class
actions have been stayed pending resolution of the underlying
patent litigation in the U.S. District Court for the District of
New Jersey.
Rapamune (sirolimus)
In
March 2010, Watson and Ranbaxy Laboratories Limited (Ranbaxy)
notified us that they had filed abbreviated new drug applications
with the FDA seeking approval to market generic versions of
Rapamune. Watson and Ranbaxy assert the invalidity and
non-infringement of a method-of-use patent which (including the
six-month pediatric exclusivity period) expires in 2014 and a
solid-dosage formulation patent which (including the six-month
pediatric exclusivity period) expires in 2018. In April 2010, we
filed actions against Watson and Ranbaxy in the U.S. District Court
for the District of Delaware and against Watson in the U.S.
District Court for the Southern District of Florida asserting the
infringement of the method-of-use patent. In June 2010, our action
in the Southern District of Florida was transferred to the District
of Delaware and consolidated with our pending action
there.
ReFacto and Xyntha
In
February 2008, Novartis Vaccines and Diagnostics, Inc. (Novartis)
filed suit against Wyeth and a subsidiary of Wyeth in the U.S.
District Court for the Eastern District of Texas alleging that
Wyeth’s ReFacto and Xyntha products infringe two Novartis
patents. Novartis’s complaint seeks damages,
including treble damages, for alleged willful
infringement. Wyeth and its subsidiary assert, among
other things, the invalidity and non-infringement of the Novartis
patents. In November 2009, Novartis added a third patent to its
infringement claim against Wyeth and its subsidiary. In August
2010, Novartis granted Wyeth and its subsidiary a covenant not to
sue on the third patent and withdrew that patent from its pending
action.
In
May 2008, a subsidiary of Wyeth filed suit in the U.S. District
Court for the District of Delaware against Novartis seeking
a declaration that the two Novartis patents initially asserted
against Wyeth and its subsidiary in the action referred to in the
preceding paragraph are invalid on the ground that the Wyeth
subsidiary was the first to invent the subject matter. In February
2010, the District of Delaware declined to invalidate those two
Novartis patents. In March 2010, the Wyeth subsidiary appealed the
decision to the U.S Court of Appeals for the Federal
Circuit.
Tygacil (tigecycline)
In
October 2009, Sandoz notified Wyeth that it had filed an
abbreviated new drug application with the FDA seeking approval to
market a generic version of Tygacil. Sandoz asserts the invalidity
and non-infringement of two of Wyeth’s patents relating to
Tygacil, including the basic patent, which expires in 2016. In
December 2009, Wyeth filed suit against Sandoz in the U.S. District
Court for the District of Delaware asserting infringement of the
basic patent.
Avinza (morphine sulfate)
King
Pharmaceuticals, Inc. (King) and Elan Pharma International LTD
(EPI) brought patent-infringement actions in the U.S. District
Court for the District of New Jersey against Actavis, Inc. in 2007
and 2009 (these actions against Actavis, Inc. subsequently were
consolidated) and against Sandoz in 2009 as the result of their
abbreviated new drug applications with the FDA seeking approval to
market generic versions of Avinza. Actavis, Inc. challenged and
Sandoz is challenging a formulation patent for Avinza, which is
owned by EPI, that expires in 2017.
The
trial in the action against Actavis, Inc. was held in March 2011.
In July 2011, the parties settled that action on terms that are not
material to the Company.
EpiPen
King
brought patent-infringement actions against Sandoz in the U.S
District Court for the District of New Jersey in 2010 and against
Teva Pharmaceutical Industries and Intelliject, Inc.
(Intelliject) in the U.S. District Court for the District of
Delaware in 2009 and 2011, respectively, as the result of their
abbreviated new drug applications with the FDA seeking approval to
market epinephrine injectable products. The two actions in Delaware
subsequently were consolidated. Sandoz, Teva
Pharmaceutical Industries and Intelliject are challenging two
patents, which expire in 2025, covering the next generation
autoinjector for use with epinephrine that is sold under the EpiPen
brand name.
B.
Product Litigation
Like
other pharmaceutical companies, we are defendants in numerous
cases, including but not limited to those discussed below, related
to our pharmaceutical and other products. Plaintiffs in these cases
seek damages and other relief on various grounds for alleged
personal injury and economic loss.
Asbestos
Quigley
Company, Inc. (Quigley), a wholly owned subsidiary, was acquired by
Pfizer in 1968 and sold small amounts of products containing
asbestos until the early 1970s. In September 2004, Pfizer and
Quigley took steps that were intended to resolve all pending and
future claims against Pfizer and Quigley in which the claimants
allege personal injury from exposure to Quigley products containing
asbestos, silica or mixed dust. We recorded a charge of $369
million pre-tax ($229 million after-tax) in the third quarter of
2004 in connection with these matters.
In
September 2004, Quigley filed a petition in the U.S. Bankruptcy
Court for the Southern District of New York seeking reorganization
under Chapter 11 of the U.S. Bankruptcy Code. In March 2005,
Quigley filed a reorganization plan in the Bankruptcy Court that
needed the approval of both the Bankruptcy Court and the U.S.
District Court for the Southern District of New York after receipt
of the vote of 75% of the claimants. In connection with that
filing, Pfizer entered into settlement agreements with lawyers
representing more than 80% of the individuals with claims related
to Quigley products against Quigley and Pfizer. The agreements
provide for a total of $430 million in payments, of which $215
million became due in December 2005 and is being paid to claimants
upon receipt by the Company of certain required documentation from
each of the claimants. The reorganization plan provided for the
establishment of a Trust (the Trust) for the payment of all
remaining pending claims as well as any future claims alleging
injury from exposure to Quigley products.
In
February 2008, the Bankruptcy Court authorized Quigley to solicit
an amended reorganization plan for acceptance by claimants.
According to the official report filed with the court by the
balloting agent in July 2008, the requisite votes were cast in
favor of the amended plan of reorganization.
The
Bankruptcy Court held a confirmation hearing with respect to
Quigley’s amended plan of reorganization that concluded in
December 2009. In September 2010, the Bankruptcy Court declined to
confirm the amended reorganization plan. As a result of the
foregoing, Pfizer recorded additional charges for this matter of
approximately $1.3 billion pre-tax (approximately $800 million
after-tax) in 2010. Further, in order to preserve its right to
address certain legal issues raised in the court’s opinion,
in October 2010, Pfizer filed a notice of appeal and motion for
leave to appeal the Bankruptcy Court’s decision denying
confirmation.
In
March 2011, Pfizer entered into a settlement agreement with a
committee (the Ad Hoc Committee) representing approximately 40,000
claimants in the Quigley bankruptcy proceeding (the Ad Hoc
Committee claimants). The principal provisions of the settlement
agreement provide for a settlement payment in two installments and
other consideration, as follows:
Quigley
filed a revised plan of reorganization and accompanying disclosure
statement with the Bankruptcy Court in April 2011. Under the
revised plan, we expect to contribute an additional amount to the
Trust, if and when the Bankruptcy Court confirms the plan, of cash
and non-cash assets with a value in excess of $550 million. The
Bankruptcy Court must find that the revised plan meets the
requisite standards of the U.S. Bankruptcy Code before it confirms
the plan. There is no assurance that the plan will be confirmed by
the court.
If
approved by claimants, confirmed by the Bankruptcy Court and upheld
upon any appeal, the revised reorganization plan will result in a
permanent injunction directing all remaining pending claims as well
as any future claims alleging personal injury from exposure to
Quigley products to the Trust.
In
a separately negotiated transaction with an insurance company in
August 2004, we agreed to a settlement related to certain insurance
coverage which provides for payments to us over a ten-year period
of amounts totaling $405 million.
Between
1967 and 1982, Warner-Lambert owned American Optical Corporation,
which manufactured and sold respiratory protective devices and
asbestos safety clothing. In connection with the sale of American
Optical in 1982, Warner-Lambert agreed to indemnify the purchaser
for certain liabilities, including certain asbestos-related and
other claims. As of December 31, 2010, approximately 88,000 claims
naming American Optical and numerous other defendants were pending
in various federal and state courts seeking damages for alleged
personal injury from exposure to asbestos and other allegedly
hazardous materials. Warner-Lambert is actively engaged in the
defense of, and will continue to explore various means to resolve,
these claims.
Warner-Lambert
and American Optical brought suit in state court in New Jersey
against the insurance carriers that provided coverage for the
asbestos and other allegedly hazardous materials claims related to
American Optical. A majority of the carriers subsequently agreed to
pay for a portion of the costs of defending and resolving those
claims. The litigation continues against the carriers who have
disputed coverage or how costs should be allocated to their
policies, and the court held that Warner-Lambert and American
Optical are entitled to coverage by those carriers of a portion of
the costs associated with those claims. The case is now in the
allocation phase, in which the court will determine the amounts
currently due from the carriers who have disputed coverage or
allocation as well as their respective coverage obligations going
forward.
Numerous
lawsuits are pending against Pfizer in various federal and state
courts seeking damages for alleged personal injury from exposure to
products containing asbestos and other allegedly hazardous
materials sold by Gibsonburg Lime Products Company (Gibsonburg).
Gibsonburg was acquired by Pfizer in the 1960s and sold small
amounts of products containing asbestos until the early
1970s.
There
also is a small number of lawsuits pending in various federal and
state courts seeking damages for alleged exposure to asbestos in
facilities owned or formerly owned by Pfizer or its
subsidiaries.
Celebrex and Bextra
Beginning
in late 2004, actions, including purported class actions, were
filed in various federal and state courts against Pfizer, Pharmacia
Corporation (Pharmacia) and certain current and former officers,
directors and employees of Pfizer and Pharmacia. These actions
include (i) purported class actions alleging that Pfizer and
certain current and former officers of Pfizer violated federal
securities laws by misrepresenting the safety of Celebrex and
Bextra, and (ii) purported class actions filed by persons who claim
to be participants in the Pfizer or Pharmacia Savings Plan alleging
that Pfizer and certain current and former officers, directors and
employees of Pfizer or, where applicable, Pharmacia and certain
former officers, directors and employees of Pharmacia, violated
certain provisions of the Employee Retirement Income Security Act
of 1974 (ERISA) by selecting and maintaining Pfizer stock as an
investment alternative when it allegedly no longer was a suitable
or prudent investment option. In June 2005, the federal securities
and ERISA actions were transferred for consolidated pre-trial
proceedings to a Multi-District Litigation (In re Pfizer Inc.
Securities, Derivative and "ERISA" Litigation MDL-1688) in
the U.S. District Court for the Southern District of New
York.
In
2003, several purported class action complaints were filed in the
U.S. District Court for the District of New Jersey against
Pharmacia, Pfizer and certain former officers of Pharmacia. The
complaints allege that the defendants violated federal securities
laws by misrepresenting the data from a study concerning the
gastrointestinal effects of Celebrex. These cases were consolidated
for pre-trial proceedings in the District of New Jersey (Alaska
Electrical Pension Fund et al. v. Pharmacia Corporation et al.). In
January 2007, the court certified a class consisting of all persons
who purchased Pharmacia securities from April 17, 2000 through
February 6, 2001 and were damaged as a result of the decline in the
price of Pharmacia's securities allegedly attributable to the
misrepresentations. Plaintiffs seek damages in an unspecified
amount.
In
October 2007, the court granted defendants’ motion for
summary judgment and dismissed the plaintiffs’ claims. In
November 2007, the plaintiffs appealed the decision to the U.S.
Court of Appeals for the Third Circuit. In January 2009, the Third
Circuit vacated the District Court’s grant of summary
judgment in favor of defendants and remanded the case to the
District Court for further proceedings. The Third Circuit also held
that the District Court erred in determining that the class period
ended on February 6, 2001, and directed that the class period end
on August 5, 2001. In June 2009, the District Court stayed
proceedings in the case pending a determination by the U.S. Supreme
Court with regard to defendants’ petition for certiorari
seeking reversal of the Third Circuit’s decision. In May
2010, the U.S. Supreme Court denied defendants’ petition for
certiorari, and the case has been remanded to the District Court
for further proceedings.
Pfizer
and several predecessor and affiliated companies, including
Monsanto Company (Monsanto), are defendants in an action brought by
Brigham Young University (BYU) and a BYU professor in the U.S.
District Court for the District of Utah alleging, among other
things, breach by Monsanto of a 1991 research agreement with BYU.
Plaintiffs claim that research under that agreement led to the
discovery of Celebrex and that, as a result, they are entitled to a
share of the profits from Celebrex sales. Plaintiffs seek, among
other things, compensatory and punitive damages.
Various Drugs: Off-Label Promotion Actions
As
previously reported, beginning in 2009, a number of shareholder
derivative actions were filed in state court in New York and in
Delaware against certain of our current and former officers and
directors in connection with the promotion of certain drugs. In
May, June and July 2011, all of these actions were
dismissed.
In
May 2010, a purported class action was filed in the U.S. District
Court for the Southern District of New York against Pfizer and
several of our current and former officers. The complaint alleges
that the defendants violated federal securities laws by failing to
disclose that Pfizer was engaged in off-label marketing of certain
drugs. Plaintiffs seek damages in an unspecified
amount.
In
June 2010, Health Care Service Corporation (HCSC), for itself and
its affiliates, Blue Cross and Blue Shield plans in Illinois, New
Mexico, Oklahoma and Texas, filed an action against us in the U.S.
District Court for the Eastern District of Texas. In July 2010,
HCSC amended its complaint. The complaint, as amended, alleges that
we engaged in deceptive marketing activities, including off-label
promotion, and the payment of improper remuneration to health care
professionals with respect to Bextra and Celebrex in violation of,
among other things, the federal Racketeer Influenced and Corrupt
Organizations (RICO) Act and the Illinois Consumer Fraud Act. In
December 2010, this action was transferred to a Multi-District
Litigation (In re Celebrex and Bextra Marketing, Sales Practices
and Product Liability Litigation MDL-1699) in the U.S. District
Court for the Northern District of California. In July 2010, HCSC
also filed a separate lawsuit against us in the U.S. District Court
for the Eastern District of Texas including substantially similar
allegations regarding Geodon, Lyrica and Zyvox. In both actions,
HCSC seeks to recover the amounts that it paid for the specified
drugs on behalf of its members in Illinois, New Mexico, Oklahoma,
and Texas, as well as treble damages and punitive
damages.
Hormone-Replacement Therapy
Pfizer
and certain wholly owned subsidiaries and limited liability
companies, including Wyeth and King, along with several other
pharmaceutical manufacturers, have been named as defendants in
numerous lawsuits in various federal and state courts alleging
personal injury or economic loss related the use or purchase of
certain estrogen and progestin medications prescribed for women to
treat the symptoms of menopause. Plaintiffs in these suits allege a
variety of personal injuries, including breast cancer, ovarian
cancer, stroke and heart disease. Certain co-defendants in some of
these actions have asserted indemnification rights against Pfizer
and its affiliated companies. The cases against Pfizer and its
affiliated companies involve one or more of the following products,
all of which remain approved by the FDA: femhrt (which Pfizer
divested in 2003); Activella and Vagifem (which are Novo Nordisk
products that were marketed by a Pfizer affiliate from 2000 to
2004); Premarin, Prempro, Aygestin, Cycrin and Premphase (which are
legacy Wyeth products); and Provera, Ogen, Depo-Estradiol, Estring
and generic MPA (which are legacy Pharmacia & Upjohn
products). The federal cases have been transferred for
consolidated pre-trial proceedings to a Multi-District
Litigation (In re Prempro Products Liability Litigation MDL-1507)
in the U.S. District Court for the Eastern District of Arkansas.
Certain of the federal cases have been remanded to their respective
District Courts for further proceedings including, if necessary,
trial.
This
litigation consists of individual actions, a few purported
statewide class actions, a statewide class action in
California and a nationwide class action in Canada. In
March 2011, in an action against Wyeth seeking the refund of the
purchase price paid for Wyeth’s hormone-replacement therapy
products by individuals in the State of California during the
period from January 1995 to January 2003, the U.S. District Court
for the Southern District of California certified a class
consisting of all individual purchasers of such products in
California who actually heard or read Wyeth’s alleged
misrepresentations regarding such products. This is the only
hormone-replacement therapy action to date against Pfizer and its
affiliated companies in the U.S. in which a class has been
certified. In addition, in August 2011, in an action against Wyeth
seeking damages for personal injury, the Supreme Court of British
Columbia certified a class consisting of all women who were
prescribed Premplus and/or Premarin in combination with
progestin in Canada between January 1, 1997 and December 1, 2003
and who thereafter were diagnosed with breast cancer.
Pfizer
and its affiliated companies have prevailed in many of the
hormone-replacement therapy actions that have been resolved to
date, whether by voluntary dismissal by the plaintiffs, summary
judgment, defense verdict or judgment notwithstanding the verdict;
a number of these cases have been appealed by the plaintiffs.
Certain other hormone-replacement therapy actions have resulted in
verdicts for the plaintiffs and have included the award of
compensatory and, in some instances, punitive damages; each of
these cases has been appealed by Pfizer and/or its affiliated
companies. The decisions in a few of the cases that had been
appealed by Pfizer and/or its affiliated companies or by the
plaintiffs have been upheld by the appellate courts, while several
other cases that had been appealed by Pfizer and/or its affiliated
companies or by the plaintiffs have been remanded by the appellate
courts to their respective trial courts for further proceedings.
Trials of additional hormone-replacement therapy actions are
scheduled for 2011.
As
of July 3, 2011, Pfizer and its affiliated companies had settled,
or entered into definitive agreements or agreements-in-principle to
settle, approximately 41% of the hormone-replacement therapy
actions pending against us and our affiliated companies. We have
recorded aggregate charges with respect to those actions, as well
as with respect to the actions that have resulted in verdicts
against us or our affiliated companies, of approximately $250
million in the first six months of 2011 and $300 million in prior
years. In addition, we have recorded a charge of approximately $280
million in the first six months of 2011 that provides for the
minimum expected costs to resolve all of the other outstanding
hormone-replacement therapy actions against Pfizer and its
affiliated companies, consistent with our current ability to
quantify such future costs. The foregoing charges are estimates
and, while we cannot reasonably estimate the maximum potential
exposure or the range of possible loss in excess of amounts accrued
for these contingencies given the uncertainties inherent in product
liability litigation, additional charges may be required in the
future.
Pfizer
and/or its affiliated companies also have received inquiries from
various federal and state agencies and officials relating to the
marketing of their hormone-replacement products. In November 2008,
the State of Nevada filed an action against Pfizer, Pharmacia &
Upjohn Company and Wyeth in state court in Nevada alleging that
they had engaged in deceptive marketing of their respective
hormone-replacement therapy medications in Nevada in violation of
the Nevada Deceptive Trade Practices Act. The action seeks monetary
relief, including civil penalties and treble damages. In February
2010, the action was dismissed by the court on the grounds that the
statute of limitations had expired. In July 2011, the Nevada
Supreme Court reversed the dismissal and remanded the case to the
district court for further proceedings.
Zoloft and Effexor
A
number of individual lawsuits, as well as a multi-plaintiff lawsuit
with respect to Effexor, have been filed against us and/or our
subsidiaries in various federal and state courts alleging personal
injury as a result of the purported ingesting of Zoloft or
Effexor.
Neurontin
A
number of lawsuits, including purported class actions, have been
filed against us in various federal and state courts alleging
claims arising from the promotion and sale of Neurontin. The
plaintiffs in the purported class actions seek to represent
nationwide and certain statewide classes consisting of persons,
including individuals, health insurers, employee benefit plans and
other third-party payers, who purchased or reimbursed patients for
the purchase of Neurontin that allegedly was used for indications
other than those included in the product labeling approved by the
FDA. In 2004, many of the suits pending in federal courts,
including individual actions as well as purported class actions,
were transferred for consolidated pre-trial proceedings to a
Multi-District Litigation (In re Neurontin Marketing, Sales
Practices and Product Liability Litigation MDL-1629) in the U.S.
District Court for the District of Massachusetts. Purported class
actions also have been filed against us in various Canadian
provincial courts alleging claims arising from the promotion and
sale of Neurontin and generic gabapentin.
In
the Multi-District Litigation, in 2009, the court denied the
plaintiffs’ renewed motion for certification of a nationwide
class of all consumers and third-party payers who allegedly
purchased or reimbursed patients for the purchase of Neurontin for
off-label uses from 1994 through 2004. The plaintiffs have filed a
motion for reconsideration. Although the court has not yet ruled on
the motion for reconsideration, in December 2010, the court
partially granted the Company’s motion for summary judgment,
dismissing the claims of all of the proposed class representatives
for third-party payers and two of the six proposed class
representatives for individual consumers. One of the proposed class
representatives for third-party payers has filed a motion for
reconsideration.
Plaintiffs
are seeking certification of statewide classes of Neurontin
purchasers in actions pending in California, Illinois and Oklahoma.
State courts in New York, Pennsylvania, Missouri and New Mexico
have declined to certify statewide classes of Neurontin
purchasers.
In
January 2011, the U.S. District Court for the District of
Massachusetts entered an order affirming a jury verdict against us
in an action by a third-party payer seeking damages for the alleged
off-label promotion of Neurontin in violation of the RICO Act and
California’s Unfair Trade Practices law. The verdict was for
$47.4 million, which is subject to automatic trebling to $142.2
million under the RICO Act. In November 2010, the court had entered
a separate verdict against us in the amount of $65.4 million under
California’s Unfair Trade Practices law relating to the same
alleged conduct, which amount is included within and is not
additional to the $142.2 million trebled amount of the jury
verdict. In August 2011, we appealed the District Court's judgment
to the U.S. Court of Appeals for the First
Circuit.
A
number of individual lawsuits have been filed against us in various
U.S. federal and state courts and in certain other countries
alleging suicide, attempted suicide and other personal injuries as
a result of the purported ingesting of Neurontin. Certain of the
U.S. federal actions have been transferred for consolidated
pre-trial proceedings to the same Multi-District Litigation
referred to in the first paragraph of this section. In addition, in
February 2010 in a proceeding pending in Ontario, Canada, the court
certified a class consisting of all persons in Canada, except in
Quebec, who purchased and ingested Neurontin prior to August 2004.
The plaintiffs claim that Pfizer failed to provide adequate warning
of the alleged risks of personal injury associated with
Neurontin. The parties have jointly sought court
approval to include in this proceeding two purported province-wide
class actions pending in Quebec that include substantially similar
allegations.
In
January 2011, in a Multi-District Litigation (In re Neurontin
Antitrust Litigation MDL-1479) that consolidates three actions, the
U.S. District Court for the District of New Jersey certified a
nationwide class consisting of wholesalers and other entities
who purchased Neurontin directly from Pfizer and
Warner-Lambert during the period from December 11, 2002
to August 31, 2008 and who also purchased generic gabapentin
after it became available. The complaints allege that Pfizer
and Warner-Lambert engaged in anticompetitive conduct in violation
of the Sherman Act that included, among other things, submitting
applications for listing in the Orange Book and prosecuting
and enforcing certain patents relating to Neurontin,
as well as engaging in off-label marketing of Neurontin.
Plaintiffs seek compensatory damages, which may be subject to
trebling.
Lipitor
In
2004, a former employee filed a “whistleblower” action
against us in the U.S. District Court for the Eastern District of
New York. The complaint remained under seal until September 2007,
at which time the U.S. Attorney for the Eastern District of New
York declined to intervene in the case. We were served with the
complaint in December 2007. Plaintiff alleges that, through patient
and medical education programs, written materials and other actions
aimed at doctors, consumers, payers and investors, the Company
promoted Lipitor for use by certain patients contrary to national
cholesterol guidelines that plaintiff claims are a part of the
labeled indications for the product. Plaintiff alleges
violations of the Federal Civil False Claims Act and the false
claims acts of certain states and seeks treble damages and civil
penalties on behalf of the federal government and the specified
states as the result their purchase, or reimbursement of patients
for the purchase, of Lipitor allegedly for such off-label uses.
Plaintiff also seeks compensation as a whistleblower under those
federal and state statutes. In addition, plaintiff alleges that he
was wrongfully terminated, in violation of the anti-retaliation
provisions of the Federal Civil False Claims Act, the Civil Rights
Act of 1964 and applicable New York law, for raising concerns about
the alleged off-label promotion of Lipitor and about alleged
instances of sexual harassment in the workplace, and he seeks
damages and the reinstatement of his employment. In 2009, the court
dismissed without prejudice the claims alleging violations of the
Federal Civil False Claims Act and the false claims acts of certain
states. In 2010, plaintiff filed an amended complaint containing
allegations concerning violations of the Federal Civil False Claims
Act and the false claims acts of certain states that are
substantially similar to the allegations in the original
complaint.
Chantix/Champix
A
number of individual lawsuits have been filed against us in various
federal and state courts alleging suicide, attempted suicide and
other personal injuries as a result of the purported ingesting of
Chantix, as well as economic loss. Plaintiffs in these actions seek
compensatory and punitive damages and the disgorgement of profits
resulting from the sale of Chantix. In October 2009, the federal
cases were transferred for consolidated pre-trial proceedings to a
Multi-District Litigation (In re Chantix (Varenicline) Products
Liability Litigation MDL-2092) in the U.S. District Court for the
Northern District of Alabama.
Beginning
in December 2008, purported class actions were filed against us in
the Ontario Superior Court of Justice (Toronto Region), the
Superior Court of Quebec (District of Montreal), the Court of
Queen’s Bench of Alberta, Judicial District of Calgary, and
the Superior Court of British Columbia (Vancouver Registry) on
behalf of all individuals and third-party payers in Canada who have
purchased and ingested Champix or reimbursed patients for the
purchase of Champix. Each of these actions asserts claims under
Canadian product liability law, including with respect to the
safety and efficacy of Champix, and, on behalf of the putative
class, seeks monetary relief, including punitive damages. The
actions in Quebec, Alberta and British Columbia have been stayed
pending the decision regarding class certification in the Ontario
action.
Bapineuzumab
In
June 2010, a purported class action was filed in the U.S. District
Court for the District of New Jersey against Pfizer, as successor
to Wyeth, and several former officers of Wyeth. The complaint
alleges that Wyeth and the individual defendants violated federal
securities laws by making or causing Wyeth to make false and
misleading statements, and by failing to disclose or causing Wyeth
to fail to disclose material information, concerning the results of
a clinical trial involving bapineuzumab, a product in development
for the treatment of Alzheimer’s disease. The plaintiff seeks
to represent a class consisting of all persons who purchased Wyeth
securities from May 21, 2007 through July 2008 and seeks damages in
an unspecified amount on behalf of the purported
class.
In
July 2010, a related action was filed in the U.S. District Court
for the Southern District of New York against Elan Corporation
(Elan), certain directors and officers of Elan, and Pfizer, as
successor to Wyeth. Elan participated in the development of
bapineuzumab until September 2009. The complaint alleges that Elan,
Wyeth and the individual defendants violated federal
securities laws by making or causing Elan to make false and
misleading statements, and by failing to disclose or
causing Elan to fail to disclose material information,
concerning the results of a clinical trial involving bapineuzumab.
The plaintiff seeks to represent a class consisting of all persons
who purchased Elan call options from June 17, 2008
through July 29, 2008 and seeks damages in an unspecified amount on
behalf of the purported class. In June 2011, the court granted
Pfizer’s and Elan’s motions to dismiss the complaint.
In July 2011, the plaintiffs filed a supplemental memorandum
setting forth the bases that they believed supported amendment of
the complaint. In August 2011, the court dismissed the complaint
with prejudice.
Thimerosal
Wyeth
is a defendant in a number of suits by or on behalf of vaccine
recipients alleging that exposure through vaccines to cumulative
doses of thimerosal, a preservative used in certain childhood
vaccines formerly manufactured and distributed by Wyeth and other
vaccine manufacturers, caused severe neurological damage and/or
autism in children. While several suits were filed as
purported nationwide or statewide class actions, all of the
purported class actions have been dismissed, either by the courts
or voluntarily by the plaintiffs. In addition to the suits alleging
injury from exposure to thimerosal, certain of the cases were
brought by parents in their individual capacities for, among other
things, loss of services and loss of consortium of the injured
child.
The
National Childhood Vaccine Injury Act (the Vaccine Act) requires
that persons alleging injury from childhood vaccines first file a
petition in the U.S. Court of Federal Claims asserting a
vaccine-related injury. At the conclusion of that
proceeding, petitioners may bring a lawsuit against the
manufacturer in federal or state court, provided that they have
satisfied certain procedural requirements. Also under
the terms of the Vaccine Act, if a petition has not been
adjudicated by the U.S. Court of Federal Claims within a specified
time period after filing, the petitioner may opt out of the
proceeding and pursue a lawsuit against the manufacturer by
following certain procedures. Some of the vaccine
recipients who have sued Wyeth to date may not have satisfied the
conditions to filing a lawsuit that are mandated by the Vaccine
Act. The claims brought by parents for, among other things, loss of
services and loss of consortium of the injured child are not
covered by the Vaccine Act.
In
2002, the Office of Special Masters of the U.S. Court of Federal
Claims established an Omnibus Autism Proceeding with jurisdiction
over petitions in which vaccine recipients claim to suffer from
autism or autism spectrum disorder as a result of receiving
thimerosal-containing childhood vaccines and/or the measles, mumps
and rubella (MMR) vaccine. There currently are several
thousand petitions pending in the Omnibus Autism
Proceeding. Special masters of the court have heard six
test cases on petitioners’ theories that either
thimerosal-containing vaccines in combination with the MMR vaccine
or thimerosal-containing vaccines alone can cause autism or autism
spectrum disorder.
Pristiq
In
late 2007 and early 2008, the following actions were filed in
various federal courts: (i) a purported class action alleging that
Wyeth and certain former officers of Wyeth violated federal
securities laws by misrepresenting the safety of Pristiq during the
period before the FDA’s issuance in July 2007 of an
“approvable letter” for Pristiq for the treatment of
vasomotor symptoms, which allegedly caused a decline in the price
of Wyeth stock; (ii) a shareholder derivative action alleging that
certain former officers of Wyeth and certain former directors of
Wyeth, two of whom are now directors of Pfizer, breached fiduciary
duties and violated federal securities laws by virtue of the
aforementioned alleged misrepresentation; and (iii) a purported
class action against Wyeth, the Wyeth Savings Plan Committee, the
Wyeth Savings Plan-Puerto Rico Committee, the Wyeth Retirement
Committee and certain former Wyeth officers and committee members
alleging that they violated certain provisions of ERISA by
maintaining Wyeth stock as an investment alternative under certain
Wyeth plans notwithstanding their alleged knowledge of the
aforementioned alleged misrepresentation.
The
U.S. District Court for the Southern District of New York dismissed
the ERISA action and denied the plaintiff’s motion to amend
the complaint in March and August 2010, respectively. In September
2010, the plaintiff appealed both of those rulings to the U.S.
Court of Appeals for the Second Circuit. In November 2010, the
plaintiff withdrew the appeal, but reserved the right to reinstate
the appeal by September 2011. In addition, in January 2011, the
shareholder derivative action was voluntarily dismissed by the
plaintiff. The purported securities class action remains
pending.
Rebif
We
have an exclusive collaboration agreement with EMD Serono, Inc.
(Serono) to co-promote Rebif, a treatment for multiple sclerosis,
in the U.S. In August 2011, Serono filed a complaint in the
Philadelphia Court of Common Pleas seeking a declaratory judgment
that we are not entitled to a 24-month extension of the Rebif
co-promotion agreement, which otherwise would terminate at the end
of 2013. We disagree with Serono's interpretation of the agreement
and believe that we have the right to extend the agreement to the
end of 2015.
C.
Commercial and Other Matters
Acquisition of Wyeth
In
2009, a number of retail pharmacies in California brought an action
against Pfizer and Wyeth in the U.S. District Court for the
Northern District of California. The plaintiffs allege, among other
things, that our acquisition of Wyeth violated various federal
antitrust laws by creating a monopoly in the manufacture,
distribution and sale of prescription drugs in the U.S. In April
2010, the District Court granted our motion to dismiss the second
amended complaint. In May 2011, the U.S. Court of Appeals for the
Ninth Circuit affirmed the dismissal by the District Court and, in
June 2011, it denied plaintiffs’ petition for a
rehearing.
Acquisition of King Pharmaceuticals, Inc.
In
October 2010, several purported class action complaints were filed
in federal and state court in Tennessee by shareholders of King
challenging Pfizer’s acquisition of King. King and the
individuals who served as the members of King’s Board of
Directors at the time of the execution of the merger
agreement are named as defendants in all of these
actions. Pfizer and Parker Tennessee Corp., a subsidiary of Pfizer,
also are named as defendants in most of these actions.
In
November 2010, all of the actions filed in state court were
consolidated in the Chancery Court for Sullivan County, Tennessee
Second Judicial District, at Bristol. The parties to the
consolidated state court action have reached an agreement in
principle to resolve that action as a result of certain disclosures
regarding the transaction made by King in its amended Schedule
14D-9 recommendation statement for the tender offer dated January
21, 2011. The proposed settlement is subject to, among other
things, court approval.
In
April 2011, the plaintiff in the federal action filed a motion to
dismiss that action as moot.
Average Wholesale Price Litigation
A
number of states as well as most counties in New York have sued
Pharmacia, Pfizer and other pharmaceutical manufacturers alleging
that they provided average wholesale price (AWP) information for
certain of their products that was higher than the actual 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. The plaintiffs
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, many of the plaintiff
states seek to recover on behalf of individual Medicare Part B
co-payers and private-sector insurance companies and medical plans
in their states. These various actions generally assert fraud
claims as well as claims under state deceptive trade practice laws,
and seek monetary and other relief, including civil penalties and
treble damages. Several of the suits also allege that
Pharmacia and/or Pfizer did not report to the states their best
price for certain products under the Medicaid program.
In
addition, Pharmacia, Pfizer and other pharmaceutical manufacturers
are defendants in a number of purported class action suits in
various federal and state courts brought by employee benefit plans
and other third-party payers that assert claims similar to those in
the state and county actions. These suits allege, among other
things, fraud, unfair competition and unfair trade practices and
seek monetary and other relief, including civil penalties and
treble damages.
All
of these state, county and purported class action suits were
transferred for consolidated pre-trial proceedings to a
Multi-District Litigation (In re Pharmaceutical Industry Average
Wholesale Price Litigation MDL-1456) in the U.S. District Court for
the District of Massachusetts. Certain of the state and private
suits have been remanded to their respective state courts. In 2006,
the claims against Pfizer in the Multi-District Litigation were
dismissed with prejudice; the claims against Pharmacia are still
pending.
In
2008, the court in the Multi-District Litigation granted
preliminary approval with respect to the fairness of a proposed
settlement of the claims against 11 defendants, including
Pharmacia, for a total of $125 million. It is expected that the
court will consider final approval of the settlement later this
year. If the settlement is approved, Pharmacia’s contribution
would not be material.
In
addition, Wyeth is a defendant in AWP actions brought by certain
states, which are not included in the Multi-District Litigation, as
well as AWP actions brought by most counties in New York, almost
all of which are included in the Multi-District Litigation. Wyeth
also is a defendant in a purported class action in state court in
New Jersey brought by two union health and welfare plans on behalf
of a putative class consisting of third-party payers, certain
consumers and Medicare beneficiaries. These actions against Wyeth
would not be included in the proposed settlement referred to in the
previous paragraph.
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 for
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.
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.
Trimegestone
Aventis
filed a breach of contract action against Wyeth in the Commercial
Court of Nanterre in France arising out of the December 2003
termination by Wyeth of an October 2000 agreement between
Wyeth and Aventis relating to the development of hormone-therapy
drugs utilizing Aventis’s trimegestone (TMG)
progestin. Aventis alleges that the termination was
improper and seeks monetary damages. In 2009, a
three-judge tribunal rendered its decision in favor of Wyeth. In
May 2010, the Versailles Court of Appeals reversed the Commercial
Court’s decision and appointed experts to hear evidence and
make a recommendation to the Court of Appeals concerning damages.
In August 2010, Wyeth filed a notice of appeal of the Court of
Appeals’ decision with the Supreme Court of France.
Notwithstanding the appeal, the damage proceeding by the experts
appointed by the Court of Appeals is continuing.
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’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.
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
February 2011, King received notice from the U.S. Department of
Justice (DOJ) advising that the U.S. Environmental Protection
Agency has requested that DOJ initiate enforcement action seeking
injunctive relief and penalties against King for alleged
non-compliance with certain provisions of the federal Clean Air Act
at its Bristol, Tennessee manufacturing facility. King has
executed a tolling agreement with the DOJ in order to facilitate
the possible resolution of this matter.
D.
Government Investigations
Like
other pharmaceutical companies, we are subject to extensive
regulation by national, state and local government agencies in the
U.S. and in the other countries in which we operate. As a result,
we have interactions with government agencies on an ongoing basis.
Among the investigations by government agencies are those discussed
below. It is possible that criminal charges and substantial fines
and/or civil penalties could result from government investigations,
including but not limited to those discussed below.
The
Company has voluntarily provided the DOJ and the U.S. Securities
and Exchange Commission (SEC) with information concerning
potentially improper payments made by Pfizer and by Wyeth in
connection with certain sales activities outside the U.S. We are in
discussions with the DOJ and SEC regarding a resolution of these
matters. In addition, certain potentially improper payments and
other matters are the subject of investigations by government
authorities in certain foreign countries, including a civil and
criminal investigation in Germany with respect to certain tax
matters relating to a wholly owned subsidiary of
Pfizer.
The
DOJ is conducting civil and criminal investigations regarding
Wyeth’s promotional practices with respect to Protonix and
its practices relating to the pricing for Protonix for Medicaid
rebate purposes. In connection with the pricing investigation, in
2009, the DOJ filed a civil complaint in intervention in two qui
tam actions that had been filed under seal in the U.S. District
Court for the District of Massachusetts. The complaint alleges that
Wyeth’s practices relating to the pricing for Protonix for
Medicaid rebate purposes between 2001 and 2006 violated the Federal
Civil False Claims Act and federal common law. The two qui tam
actions have been unsealed and the complaints include substantially
similar allegations. In addition, in 2009, several states and the
District of Columbia filed a complaint under the same docket number
asserting violations of various state laws based on allegations
substantially similar to those set forth in the civil complaint
filed by the DOJ. We are exploring with the DOJ various ways to
resolve its civil and criminal investigations relating to
Protonix.
The
U.S. Attorney’s Office for the Western District of Oklahoma
is conducting a civil and criminal investigation with respect to
Wyeth’s promotional practices relating to Rapamune. In
addition, in October 2010, the federal government was permitted to
intervene in a qui tam action, which alleges off-label promotion of
Rapamune, that was pending in the U.S. District Court for the
Eastern District of Pennsylvania. In December 2010, the qui tam
action was transferred to the Western District of Oklahoma, where
it was consolidated with the proceedings underway there. We are
exploring with the U.S. Attorney’s Office various ways to
resolve this matter.
We
have received civil investigative demands and informal inquiries
from the consumer protection divisions of several states seeking
information and documents concerning the promotion of Lyrica and
Zyvox. These requests appear to relate to the same past promotional
practices concerning these products that were the subject of
previously reported settlements in September 2009 with the DOJ and
the Medicaid fraud control units of various states. We are
exploring with the coalition of states various ways to resolve this
matter.
E.
Guarantees and Indemnifications
In
the ordinary course of business and in connection with the sale of
assets and businesses, we often indemnify our counterparties
against certain liabilities that may arise in connection with the
transaction or related to activities prior to the transaction.
These indemnifications typically pertain to environmental, tax,
employee and/or product-related matters and patent-infringement
claims. If the indemnified party were to make a successful claim
pursuant to the terms of the indemnification, we would be required
to reimburse the loss. These indemnifications are generally subject
to threshold amounts, specified claim periods and other
restrictions and limitations. Historically, we have not paid
significant amounts under these provisions and, as of July 3, 2011,
recorded amounts for the estimated fair value of these
indemnifications were not significant.
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