Pfizer - how to police a recidivist offender

Pfizer general counsel will no longer oversee its compliance programme under the terms of the $2.3bn (£1.4bn) settlement resolving allegations of illegal marketing of painkiller Bextra and several other drugs, writes Corporate Counsel.

Instead, the chief compliance officer at the world's largest drug maker will report directly to the chief executive. The move is required by Pfizer's corporate integrity agreement with the office of the inspector general of the US Department of Health and Human Services (HHS), part of the company's civil and criminal settlement with the Department of Justice.

The agreement will be watched closely as compliance functions at US and UK companies are commonly overseen by legal teams.

The change is intended to eliminate conflicts of interest, and prevent Pfizer's in-house lawyers from reviewing or editing reports required by the agreement, said Lewis Morris, chief counsel for the inspector general's office. Officials at Pfizer did not respond to requests for comment.

"The lawyers tell you whether you can do something, and compliance tells you whether you should," Morris added. "We think upper management should hear both arguments."

Pfizer's historic settlement, the largest in the US for claims of off-label marketing practices, has fueled calls for changing how drug companies do business.

A "corporate integrity agreement" is an administrative alternative to excluding Pfizer from participating in US federal health care programmes, such as Medicare and Medicaid, Morris said. Many large drug companies have also entered into corporate integrity agreements, such as Schering-Plough, Eli Lilly, and Bristol-Myers Squibb.

Excluding a drug giant like Pfizer from such programmes would not just be a death knell for the company, said Morris. It would also have a profound adverse impact on the health and welfare of the people who need Pfizer's drugs.

This is Pfizer's fourth settlement with the Justice Department over illegal marketing activities since 2002, and its third corporate integrity agreement. The other agreements were similar in most respects, Morris said. But this is the first one that compels Pfizer's chief compliance officer to report to the company's chief executive, instead of the general counsel.

Pfizer will have to hire an independent review organisation, such as an accounting auditing, consulting firm, to perform reviews required by the agreement. The inspector general's office has the right to reject the organization's work if it's found to be inadequate.

Corporate Counsel is a US sister title of Legal Week.