A New York federal judge has granted final approval of a $400 million settlement that ends a class action accusing Pfizer Inc. of misleading investors about illegal off-label drug marketing. However, some investors may not get very much, with a recovery rate of 15 cents per share. U.S. District Judge Alvin K. Hellerstein had granted early approval of the settlement in mid-March after lawyers revised notices to class members clarifying details about the litigation.
The case, because of the settlement, has now been dismissed with prejudice. The recovery rate of 15 cents per share is far less than the $1.26 per share a damages expert for the Plaintiffs had estimated. Judge Hellerstein had said in late February that this discrepancy was disappointing. Small investors would be especially unlikely to collect their money because their share of the settlement “isn’t worth doing anything” for, the judge said.
Pfizer put the damage per share at nothing because, among other reasons, the company disclosed a dividend cut to fund its purchase of Wyeth on the day of the January 2009 stock drop that was central to the lawsuit. Historically, dividend cuts tend to trigger intense sell-offs. Both sides noted in February that if fewer people claim, the recovery for claimants will grow, and institutional investors will be active, claiming most of the potential recovery.
The Plaintiffs filed their claims in 2010 after Pfizer pled guilty to illegally marketing the anti-inflammatory drug Bextra and reaching a $2.3 billion settlement with the federal government in 2009. Investors alleged that the company misled them about marketing that drug, as well as Godon, Lyrica and Zyvox, and that Pfizer concealed a kickback scheme involving payments to doctors in exchange for promotion of those drugs.