By Robert C. Bordone & Matthew J. Smith
Recently the Justice Department announced that it had entered into a $2.3 billion settlement agreement with pharmaceutical colossus Pfizer, bringing to a close a four year investigation alleging that Pfizer had illegally marketed and promoted the painkiller Bextra as a remedy for conditions that had not been approved by the FDA. As the federal and state prosecutors involved in the case celebrated the largest health care fraud settlement in U.S. history, a small but vocal contingent of legal academics, prosecutors, and citizen groups lambasted the outcome, insisting that only a proper trial and jury verdict could do justice in such an important and high profile case.
We disagree. The Pfizer case underscores how negotiated settlement – when executed wisely and in good faith – can serve the public interest, produce just outcomes, and save millions of taxpayer dollars by avoiding lengthy courtroom battles.
In decrying the increasing use of settlement over full-blown trial, many opponents of negotiation worry that fewer trials mean fewer legal precedents and a lack of transparency. They argue that large public jury verdicts fulfill an important deterrent role and that allowing big companies to simply settle out-of-court gives them a chance to buy their way out of justice.
While poorly conceived out-of-court settlements do pose dangers of sweet back-door deals for corporate heavyweights, anti-settlement grumblers should take a close look at their position in light of the Pfizer deal, which demonstrates that well-crafted negotiated settlements can preserve the merits of trial while also creating value and saving money. Indeed, when well executed, settlement rivals the courtroom for delivering high quality and efficient justice and serving the public interest.
The deterrent effect of the Pfizer settlement is powerful. Both the Justice Department and Pfizer actively disseminated details of the settlement via press releases. Within moments of these announcements, virtually every major print, internet, and broadcast news outline reported the details. The news quickly found its way into water cooler conversations across the nation. It is hard to imagine that there is a single pharmaceutical executive in the country who is unaware of the facts of the case and the nearly-crippling record-breaking settlement figure. Given the widespread publicity, we can be assured that corporate titans have received a powerful message about the costs of unethical behavior when it comes to hawking their products.
By entering into a deal with Pfizer, the Justice Department was also able to conclude a case that would have absorbed the Department for years to come, costing taxpayers millions of dollars while consuming the precious resources of an already taxed federal courts system with countless motions, hearings, and mountains of testimonial and documentary evidence. Perhaps justice would have been vindicated, but in an all-out trial, Pfizer would have enlisted a daunting army of high-powered attorneys to curtail liability and delay the process. And, as we all know, justice delayed is often no justice at all. Government resources that would have been spent waging this legal battle can now be diverted to other prosecutorial endeavors. And the money garnered from the settlement will be used to help fund severely depleted state Medicare coffers instead of lining the wallets of white-shoe big city lawyers.
More than honoring principles a court might champion, the negotiated settlement with Pfizer allows the Justice Department to secure commitments from Pfizer that would have been unlikely in a court verdict. In addition to the enormous cash payment, the settlement agreement allows for closer monitoring of Pfizer by Justice Department officials in the years ahead, ensuring corporate accountability and providing an extra measure of protection for consumers. As part of the deal, Pfizer entered into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services and will be required to maintain a corporate compliance program for the next five years. While a judge might choose to retain judicial oversight in a particular case, federal courts typically lack the expertise or resources to provide the kind of enforcement needed to ensure a systemic and long-term remedy in a technical or highly specialized case such as this.
The Pfizer settlement represents the best kind of transparent, efficient, and wise government law enforcement. It holds Pfizer wholly accountable for its actions, sends a strong and clear message to the public that corporate malfeasance will not be tolerated, provides for ongoing enforcement, and it does it all at a fraction of the cost of trial. While many cases should proceed to trial for reasons of precedent and public policy, negotiated settlement – when approached with wisdom and aplomb – can be a most efficient and effective means of law enforcement.
Robert C. Bordone is the Thaddeus R. Beal Clinical Professor of Law at Harvard Law School and Director of the Harvard Negotiation and Mediation Clinical Program. Matthew J. Smith is a Lecturer on Law at Harvard Law School and a Clinical Fellow at the Harvard Negotiation and Mediation Clinical Program.
Originally published to HNLR Online on Sep. 25, 2009.