Bristol-Myers Issued Subpoenas in Probe of Its Pricing Practices

Bristol-Myers Squibb said Tuesday that it received federal grand-jury subpoenas regarding its pricing practices, in a probe that some industry analysts said may lead to an expensive settlement by the world’s largest supplier of cancer treatment products.

The subpoenas also left Wall Street concerned that other major pharmaceutical firms that produce cancer treatments, such as Eli Lilly & Co., AstraZeneca and Pharmacia Corp., could fall under the same broad federal investigation of marketing and pricing practices.

“We are aware of the subpoenas, and are cooperating fully with the investigation,” Bristol-Myers spokesman Patrick Donohue told Reuters.

A person familiar with the case told Reuters that government investigators are looking at whether Bristol-Myers provided oncologists with inducements such as free drugs and devices in exchange for purchases of other drugs from the company.

Another focus, the source said, is whether Bristol-Myers encouraged doctors to improperly bill Medicare, the federal health program for the elderly, and Medicaid, a federal-state program serving the low-income and the disabled.

“We believe our pricing practices are in full compliance with all state and federal regulations, including Medicare and Medicaid requirements,” Donohue said.

The Bristol-Myers legal team is reviewing the subpoenas, he said, declining to comment further.

Shares of the New York pharmaceutical company closed down $1.54, or 2%, at $62.06 on the New York Stock Exchange after falling nearly 4% earlier in the session.

The probe, which marks the second time a drug firm has come under review by U.S. officials in the broad investigation into how major pharmaceutical companies get their drugs to market, could be a major blow to Bristol-Myers, some analysts said.

Last week, Chicago-based Abbott Laboratories Inc. revealed that the U.S. Department of Justice and the Texas attorney general are investigating the marketing and pricing practices of its TAP Pharmaceuticals Inc. joint venture with Japan’s Takeda Chemical Industries Ltd.

According to Abbott’s filing, the investigations seek to determine whether TAP’s marketing and pricing practices resulted in violations of civil and/or criminal laws, including the Federal False Claims Act, the Anti-Kickback Act and the Prescription Drug Marketing Act, or fraud in connection with the Medicare and/or Medicaid reimbursement paid to third parties.

Federal prosecutors in Boston also have looked into the promotion of Neurontin, an epilepsy drug that Pfizer Inc. acquired in its 2000 acquisition of Warner-Lambert Co. Warner-Lambert employees were served with subpoenas in January 2000 telling them to provide testimony before a federal grand jury in Boston, Pfizer said in a regulatory filing.

What remains to be seen is what companies may be next in line under the government microscope. Analysts have named Lilly, with its pancreatic cancer treatment Gemzar, AstraZeneca and its drug Zoladex for breast cancer and Pharmacia with its colon cancer drug Camptosar as potential subjects for the government investigation.

Officials at the three companies were not immediately available for comment.

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Reuters and Bloomberg News were used in compiling this report.