Pharmacia pleads guilty to kickback charges

Pharmacia and Upjohn, a subsidiary of US drug giant Pfizer, has pleaded guilty in federal court to one count of offering a kickback to a pharmacy benefit manager in the expectation of obtaining improved formulary status for its drugs from the PBM. The firm was sentenced by US District Judge Richard Stearns to pay a criminal fine of $19.68 million and, as a result of its criminal conviction, will be permanently excluded from participation in all federal health care programs.

PBMs act as middlemen between drugmakers and health insurers, often recommending drugs to health plans. Pharmacia's offer of a kickback was designed to undermine the independent nature of PBM recommendations, which should be based purely on drug efficacy, safety and cost.

At the plea hearing, the prosecutor told the Court that, had the case proceeded to trial, the government's evidence would have proven that Pharmacia offered inflated payments to a subsidiary of a PBM to administer a distribution contract in the expectation of improved formulary positioning and benefits for its products. The inflated payment offered by Pharmacia to the PBM was in the amount of $12.3 million and the company's financial analyses showed that it expected to earn that much or more if the PBM had made the expected improvements.