NEW YORK — Pfizer Inc. said it’s taking extra steps to foster greater transparency in its promotional practices after the pharmaceutical giant this week agreed to a $2.3 billion settlement with the U.S. Department of Justice over allegations of fraudulent marketing.

The Justice Department said Wednesday the agreement — the biggest health care fraud settlement in the department’s history — resolves criminal and civil liability arising from the illegal promotion of certain drug products.

Specifically, Pfizer subsidiary Pharmacia & Upjohn Company Inc. agreed to plead guilty to a felony violation of the Food, Drug and Cosmetic Act for misbranding Bextra (an anti-inflammatory drug pulled from the market in 2005) with the intent to defraud or mislead, the Justice Department said.

Under the act, a company must specify the intended uses of a product in its new drug application to the Food and Drug Administration and, once approved, that drug can’t be marketed or promoted for "off-label" uses — that is, any use not specified in an application and approved by FDA. According to the Justice Department, Pfizer promoted the sale of Bextra for several uses and dosages that the FDA declined to approve because of safety concerns.

The company will pay a criminal fine of $1.195 billion, the largest criminal fine ever imposed in the United States for any matter, and Pharmacia & Upjohn will also forfeit $105 million, the department said.

Pfizer also has agreed to pay $1 billion to resolve allegations under the civil False Claims Act that it illegally promoted four drugs — Bextra, Geodon (an anti-psychotic drug), Zyvox (an antibiotic) and Lyrica (an anti-epileptic drug) — and caused false claims to be submitted to government health care programs for uses that weren’t medically accepted indications and thus not covered by those programs, the Justice Department reported. The civil settlement also resolves allegations that Pfizer paid kickbacks to health care providers to induce them to prescribe these and other drugs.

A portion of the civil payments will be distributed to 49 states and the District of Columbia pursuant to agreements with each state’s Medicaid division, according to Pfizer.

Pfizer Comments On Settlement

Pfizer said Wednesday it "expressly denies" all of the civil allegations but acknowledged certain improper actions related to the promotion of Zyvox.

In addition, Pfizer said it has reached agreements with the attorney generals of 42 states and the District of Columbia to settle state civil consumer protection allegations related to its past promotional practices with Geodon. The company will pay a total of $33 million to those states and take a charge in that amount to third-quarter 2009 earnings. Pfizer previously reported a $2.3 billion charge to its fourth-quarter and full-year 2008 earnings in connection with the Justice Department agreement in principle on January 26.

"These agreements bring final closure to significant legal matters and help to enhance our focus on what we do best — discovering, developing and delivering innovative medicines to treat patients dealing with some of the world’s most debilitating diseases," Amy Schulman, senior vice president and general counsel at Pfizer, said in a statement.

“We regret certain actions taken in the past but are proud of the action we’ve taken to strengthen our internal controls and pioneer new procedures so that we not only comply with state and federal laws, but also meet the high standards that patients, physicians and the public expect from a leading worldwide company dedicated to healing and better health," Schulman stated. "Corporate integrity is an absolute priority for Pfizer, and we will continue to take appropriate actions to further enhance our compliance practices and strengthen public trust in our company."

Drug Maker Steps Up Compliance, Transparency

Pfizer said that as part of the Justice Department settlement, it has entered into a corporate integrity agreement (CIA) with the Office of Inspector General of the U.S. Department of Health and Human Services. The CIA institutes certain new measures and requires Pfizer to continue maintenance of a corporate compliance program for five years, the company explained.

Pfizer said its existing compliance program includes a dedicated chief compliance officer, corporate compliance committee, code of conduct, extensive compliance training, policies and procedures regarding the appropriate promotion of Pfizer products, auditing and monitoring, and a compliance hot line. Under the CIA, Pfizer will engage an independent review organization that will help the company evaluate its promotional and product-related business functions.

The drug maker also pointed out voluntary initiatives to promote more transparency, such as a plan unveiled in February to disclose financial relationships with doctors, medical organizations and patient advocacy groups, including investigators who conduct clinical research. Pfizer noted that it’s the first biopharmaceutical company to commit to reporting payments for conducting Phase I-IV clinical trials in addition to disclosing payments for speaking and consulting.

Pfizer added that it also has voluntarily bolstered its compliance program beyond those requirements, including enhancements to the company’s product risk assessment and mitigation process and compliance monitoring operations.