Pfizer Sued By Employees Over Retirement Plans

Pfizer Sued By Employees Over Retirement Plans

January 30th, 2012 // 1:51 pm @

Between 2000 and 2009, Pfizer stock did not fare so well. As this chart indicates, the shares began the decade hovering around $45, but then dipped to below $14. And so a group of Pfizer employees have filed a lawsuit against the drugmaker, claiming their retirements plans took a beating because these held a disproportionate amount of Pfizer stock.

During that stretch, you may recall, Pfizer paid big bucks to swallow up some of its biggest rivals – Warner-Lambert and Pharmacia – in order to gain some key medicines. But the Pharmacia deal, in particular, was followed by controversy over the safety of the Celebrex and Bextra painkillers, which were similar to Vioxx. Bextra, in fact, was eventually withdrawn from the market.

The employees also argue that Pfizer stock was hurt by sales and marketing practices that eventually resulted in a $1.2 billion fine paid and a felony plea to settle an investigation into what the US Department of Justice called fraudulent marketing of several drugs. And so, the employees say Pfizer officials breached their fiduciary by not recognizing the extent to which these developments, among others, were significantly contributing to a significant loss in value of Pfizer stock and their plans.

The “defendants knew or should have known that Pfizer stock was an imprudent investment at all times during the… class period, because the company was engaging in undisclosed risky and improper activities in relation to its prescription drugs, including Celebrex and Bextra, which artificially inflated the value of company stock,” according to the lawsuit, which was filed in federal court in Puerto Rico.

More specifically, the employees say that there was an “over concentration” of Pfizer securities held in various retirement plans managed by the drugmaker and its proxies. As an example, as of December 31, 2006, the Pfizer Stockholder Plan for employees in Puerto Rico had total assets of approximately $83.6 million, of which approximately $48 million was invested in Pfizer common stock. That works out to roughly 57 percent. This plan, by the way, was just one of several employee retirement plans that were cited in the lawsuit as holding similar proportions of Pfizer stock and suffering subsequent losses.

“This investment strategy proved to be disastrous. When information emerged publicly in 2004 concerning safety concerns associated with Pfizer’s blockbuster drugs Bextra and Celebrex, Pfizer stock fell by approximately 24 percent, causing hundreds of millions of dollars in losses to the plans,” according to the (the lawsuit).

A Pfizer spokesman send us this statement: “We have not yet been served with this complaint. Based on our preliminary understanding, this case appears to be a reassertion of claims that were previously dismissed in a different court. We intend to defend vigorously any new assertion of these claims.”

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