Ex-staffer seeks to blow ‘cover’ off Pfizer’s Pharmacia biz

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Sept 11: Pharmacia artificially inflated revenue before it was acquired by Pfizer Inc by offering incentives to wholesalers to buy more drugs than necessary, a new book by an ex-Pfizer employee alleges.

Pharmacia may have boosted revenue by $500 million by selling excess inventory to wholesalers before it was bought for $60 billion in 2003 by Pfizer, the world’s biggest drugmaker, wrote Peter Rost, an ex-vice president at Pfizer, in his book “The Whistle-blower,” released on Monday by Soft Scull Press.

Rost, who is unemployed, is suing Pfizer for wrongful termination and illegal marketing practices. He has accused the drug industry of deceiving the American public about the risks of buying drugs from Canada, and illegally marketing Genetropin.

“Everyone else has written about me in short snippets,” said Rost in a Sept. 8 telephone interview. “I’m the only one who hasn’t written about me and told the whole story. It’s a great relief.”

Before 2004, drugmakers commonly let wholesalers buy more products than the retail demand in advance of a price increase, said Adam J Fein, president of Pembroke Consulting.

In 2005, Bristol-Myers Squibb & Co. was levied $300 million in fines by the US government and forced to restate earnings for similar wholesaler activities. Since then, the practice has changed, prompting revenue losses for many companies, including Merck & Co. and AstraZeneca.

Pfizer disclosed in a 2004 filing with the US Securities and Exchange Commission that Pharmacia’s inventory levels were more than a month higher than that of Pfizer’s. To account for the difference, Pfizer subtracted $500 million from its 2003 revenue of the combined companies.

Rost writes in his book that this is proof Pharmacia was overselling wholesalers. Pfizer spokesman Paul Fitzhenry said Pharmacia’s wholesaler practices were different than Pfizer’s and that there was nothing illegal about what they did at the time. He said Pfizer was aware when it bought Pharmacia that inventory levels were higher and factored that into the amount it paid for the company, Fitzhenry said.

In response to a 2004 complaint by Rost, the SEC investigated Pharmacia’s inventory for the human growth hormone Genetropin in Japan, Fitzhenry said. The allegations were determined to be baseless and Pfizer hasn’t had contact with the SEC on the issue since mid-2004, Fitzhenry said.