[Ip-health] Pfizer litigation, 2012

Jamie Love james.love at keionline.org
Tue Jan 7 11:37:00 PST 2014


Sometimes it is useful to take stock of the extensive litigation involving
big pharma companies.  This 11,805 word disclosure by Pfizer is from Note
17, of Pfizer's 2012 financial statements, on Commitments and
Contingencies.


PFIZER INC (Filer) CIK: 0000078003

http://www.sec.gov/cgi-bin/viewer?action=view&cik=78003&accession_number=0000078003-13-000006&xbrl_type=v#

12 Months Ended
Dec. 31, 2012

Commitments and Contingencies

We and certain of our subsidiaries are subject to numerous contingencies
arising in the ordinary course of business. For a discussion of our tax
contingencies, see Notes to Consolidated Financial Statements––

A. Legal Proceedings

Our non-tax contingencies include, among others, the following:

*  Patent litigation, which typically involves challenges to the coverage
and/or validity of our patents on various products, processes or dosage
forms. We are the plaintiff in the vast majority of these actions. An
adverse outcome in actions in which we are the plaintiff could result in a
loss of patent protection for the drug at issue, a significant loss of
revenues from that drug and impairments of any associated assets.

*  Product liability and other product-related litigation, which can
include personal injury, consumer, off-label promotion, securities-law,
antitrust and breach of contract claims, among others, often involves
highly complex issues relating to medical causation, label warnings and
reliance on those warnings, scientific evidence and findings, actual,
provable injury and other matters.

*  Commercial and other matters, which can include merger-related and
product-pricing claims and environmental claims and proceedings, can
involve complexities that will vary from matter to matter.

*  Government investigations, which often are related to the extensive
regulation of pharmaceutical companies by national, state and local
government agencies in the U.S. and in other countries.

Certain of these contingencies could result in losses, including damages,
fines and/or civil penalties, and/or criminal charges, which could be
substantial.

We believe that our claims and defenses in these matters are substantial,
but litigation is inherently unpredictable and excessive verdicts do occur.
We do not believe that any of these matters will have a material adverse
effect on our financial position. However, we could incur judgments, enter
into settlements or revise our expectations regarding the outcome of
certain matters, and such developments could have a material adverse effect
on our results of operations in the period in which the amounts are accrued
and/or our cash flows in the period in which the amounts are paid.

We have accrued for losses that are both probable and reasonably estimable.
Substantially all of these contingencies are subject to significant
uncertainties and, therefore, determining the likelihood of a loss and/or
the measurement of any loss can be complex. Consequently, we are unable to
estimate the range of reasonably possible loss in excess of amounts
accrued. Our assessments are based on estimates and assumptions that have
been deemed reasonable by management, but the assessment process relies
heavily on estimates and assumptions that may prove to be incomplete or
inaccurate, and unanticipated events and circumstances may occur that might
cause us to change those estimates and assumptions.

Amounts recorded for legal and environmental contingencies can result from
a complex series of judgments about future events and uncertainties and can
rely heavily on estimates and assumptions.

The principal pending matters to which we are a party are discussed below.
In determining whether a pending matter is a principal matter, we consider
both quantitative and qualitative factors in order to assess materiality,
such as, among other things, the amount of damages and the nature of any
other relief sought in the proceeding, if such damages and other relief are
specified; our view of the merits of the claims and of the strength of our
defenses; whether the action purports to be a class action and our view of
the likelihood that a class will be certified by the court; the
jurisdiction in which the proceeding is pending; any experience that we or,
to our knowledge, other companies have had in similar proceedings; whether
disclosure of the action would be important to a reader of our financial
statements, including whether disclosure might change a reader’s judgment
about our financial statements in light of all of the information about the
Company that is available to the reader; the potential impact of the
proceeding on our reputation; and the extent of public interest in the
matter. In addition, with respect to patent matters, we consider, among
other things, the financial significance of the product protected by the
patent. As a result of considering qualitative factors in our determination
of principal matters, there are some matters discussed below with respect
to which management believes that the likelihood of possible loss in excess
of amounts accrued is remote.

A1. Legal Proceedings––Patent Litigation

Like other pharmaceutical companies, we are involved in numerous suits
relating to our patents, including but not limited to those discussed
below. Most of the suits involve claims by generic drug manufacturers that
patents covering our products, processes or dosage forms are invalid and/or
do not cover the product of the generic manufacturer. Also, counterclaims,
as well as various independent actions, have been filed claiming that our
assertions of, or attempts to enforce, our patent rights with respect to
certain products constitute unfair competition and/or violations of
antitrust laws. In addition to the challenges to the U.S. patents on a
number of our products that are discussed below, we note that the patent
rights to certain of our products are being challenged in various other
countries.

ACTIONS IN WHICH WE ARE THE PLAINTIFF AND CERTAIN RELATED ACTIONS

Viagra (sildenafil)
In March 2010, we brought a patent-infringement action in the U.S. District
Court for the Eastern District of Virginia against Teva Pharmaceuticals
USA, Inc. (Teva USA) and Teva Pharmaceutical Industries Ltd. (Teva
Pharmaceutical Industries), which had filed an abbreviated new drug
application with the U.S. Food and Drug Administration (FDA) seeking
approval to market a generic version of Viagra. Teva USA and Teva
Pharmaceutical Industries assert the invalidity and non-infringement of the
Viagra use patent, which (including the six-month pediatric exclusivity
period resulting from the Company’s conduct of clinical studies to evaluate
Revatio in the treatment of pediatric patients with pulmonary arterial
hypertension; Viagra and Revatio have the same active ingredient,
sildenafil) expires in 2020. In August 2011, the court ruled that our
Viagra use patent is valid and infringed, thereby preventing Teva USA and
Teva Pharmaceutical Industries from receiving FDA approval for a generic
version of Viagra and from marketing its generic product in the U.S. before
2020. In September 2011, Teva USA and Teva Pharmaceutical Industries
appealed the decision to the U.S. Court of Appeals for the Federal Circuit.

In October 2010, we filed a patent-infringement action with respect to
Viagra in the U.S. District Court for the Southern District of New York
against Apotex Inc. and Apotex Corp., Mylan Pharmaceuticals Inc. and Mylan
Inc., Actavis, Inc. and Amneal Pharmaceuticals LLC. These generic
manufacturers have filed abbreviated new drug applications with the FDA
seeking approval to market their generic versions of Viagra. They assert
the invalidity and non-infringement of the Viagra use patent.

In May and June 2011, respectively, Watson Laboratories Inc. (Watson) and
Hetero Labs Limited (Hetero) notified us that they had filed abbreviated
new drug applications with the FDA seeking approval to market their generic
versions of Viagra. Each asserts the invalidity and non-infringement of the
Viagra use patent. In June and July 2011, respectively, we filed actions
against Watson and Hetero in the U.S. District Court for the Southern
District of New York asserting the validity and infringement of the use
patent.

Sutent (sunitinib malate)
In May 2010, Mylan Pharmaceuticals Inc. notified us that it had filed an
abbreviated new drug application with the FDA seeking approval to market a
generic version of Sutent and challenging on various grounds the Sutent
basic patent, which expires in 2021, and two other patents, which expire in
2020 and 2021. In June 2010, we filed suit against Mylan Pharmaceuticals
Inc. in the U.S. District Court for the District of Delaware asserting the
infringement of those three patents.

Lyrica (pregabalin)
Beginning in March 2009, several generic manufacturers notified us that
they had filed abbreviated new drug applications with the FDA seeking
approval to market generic versions of Lyrica capsules and, in the case of
one generic manufacturer, Lyrica oral solution. Each of the generic
manufacturers is challenging one or more of three patents for Lyrica: the
basic patent, which expires in 2018, and two other patents, which expire in
2013 and 2018. Each of the generic manufacturers asserts the invalidity
and/or the non-infringement of the patents subject to challenge. Beginning
in April 2009, we filed actions against these generic manufacturers in the
U.S. District Court for the District of Delaware asserting the infringement
and validity of our patents for Lyrica. All of these cases were
consolidated in the District of Delaware. In July 2012, the court held that
all three patents are valid and infringed, thereby preventing the generic
manufacturers from obtaining final FDA approval for their generic versions
of Lyrica and from marketing those products in the U.S. prior to the
expiration of the three patents. In August 2012, the generic manufacturers
appealed the decision to the U.S. Court of Appeals for the Federal Circuit.

In November 2010, Novel Laboratories, Inc. (Novel) notified us that it had
filed an abbreviated new drug application with the FDA seeking approval to
market a generic version of Lyrica oral solution and asserting the
invalidity and/or non-infringement of our three patents for Lyrica referred
to above. In January 2011, we filed an action against Novel in the U.S.
District Court for the District of Delaware asserting the validity and
infringement of all three patents.

Apotex Inc. notified us, in May and June 2011, respectively, that it had
filed abbreviated new drug applications with the FDA seeking approval to
market generic versions of Lyrica oral solution and Lyrica capsules. Apotex
Inc. asserts the invalidity and non-infringement of the basic patent, as
well as the seizure patent that expires in 2013. In July 2011, we filed an
action against Apotex Inc. in the U.S. District Court for the District of
Delaware asserting the validity and infringement of the challenged patents
in connection with both of the abbreviated new drug applications.

In October 2011, Alembic Pharmaceuticals Limited (Alembic) notified us that
it had filed an abbreviated new drug application with the FDA seeking
approval to market a generic version of Lyrica capsules and asserting the
invalidity of the basic patent. In December 2011, we filed an action
against Alembic in the U.S. District Court for the District of Delaware
asserting the validity and infringement of the basic patent.

In December 2012, Wockhardt Limited (Wockhardt) notified us that it had
filed an abbreviated new drug application with the FDA seeking approval to
market a generic version of Lyrica oral solution and asserting the
invalidity and non-infringement of the basic patent. In January 2013, we
filed an action against Wockhardt in the U.S. District Court for the
District of Delaware asserting the validity and infringement of the basic
patent.

In February 2013, the Canadian Federal Court denied our application to
prevent approval of a generic version of Lyrica in Canada, a decision that
is not subject to appeal, and shortly thereafter generic versions of Lyrica
became available in Canada.

Protonix (pantoprazole sodium)
Wyeth has a license to market Protonix in the U.S. from Nycomed GmbH
(Nycomed), which owns the patents relating to Protonix. The basic patent
(including the six-month pediatric exclusivity period) for Protonix expired
in January 2011.

Following their respective filings of abbreviated new drug applications
with the FDA, Teva USA and Teva Pharmaceutical Industries, Sun
Pharmaceutical Advanced Research Centre Ltd. and Sun Pharmaceutical
Industries Ltd. (collectively, Sun) and KUDCO Ireland, Ltd. (KUDCO Ireland)
received final FDA approval to market their generic versions of Protonix
20mg and 40mg delayed-release tablets. Wyeth and Nycomed filed actions
against those generic manufacturers in the U.S. District Court for the
District of New Jersey, which subsequently were consolidated into a single
proceeding, alleging infringement of the basic patent and seeking
declaratory and injunctive relief. Following the court's denial of a
preliminary injunction sought by Wyeth and Nycomed, Teva USA and Teva
Pharmaceutical Industries and Sun launched their generic versions of
Protonix tablets at risk in December 2007 and January 2008, respectively.
Wyeth launched its own generic version of Protonix tablets in January 2008,
and Wyeth and Nycomed filed amended complaints in the pending
patent-infringement action seeking compensation for damages resulting from
Teva USA’s, Teva Pharmaceutical Industries’ and Sun's at-risk launches.

In April 2010, the jury in the pending patent-infringement action upheld
the validity of the basic patent for Protonix. In July 2010, the court
upheld the jury verdict, but it did not issue a judgment against Teva USA,
Teva Pharmaceutical Industries or Sun because of their other claims
relating to the patent that still are pending. Wyeth and Nycomed will
continue to pursue all available legal remedies against those generic
manufacturers, including compensation for damages resulting from their
at-risk launches.

Separately, Wyeth and Nycomed are defendants in purported class actions
brought by direct and indirect purchasers of Protonix in the U.S. District
Court for the District of New Jersey. Plaintiffs seek damages, on behalf of
the respective putative classes, for the alleged violation of antitrust
laws in connection with the procurement and enforcement of the patents for
Protonix. These purported class actions have been stayed pending resolution
of the underlying patent litigation in the U.S. District Court for the
District of New Jersey.

Rapamune (sirolimus)
In March 2010, Watson Laboratories Inc. - Florida (Watson Florida) notified
us that it had filed an abbreviated new drug application with the FDA
seeking approval to market a generic version of Rapamune. Watson Florida
asserted the invalidity and non-infringement of a method-of-use patent
which (including the six-month pediatric exclusivity period) expires in
January 2014 and a solid-dosage formulation patent which (including the
six-month pediatric exclusivity period) expires in 2018. In April 2010, we
filed actions against Watson Florida and three other Watson entities in the
U.S. District Courts for the District of Delaware and the Southern District
of Florida asserting the infringement of the method-of-use patent. In June
2010, our action in the Southern District of Florida was transferred to the
District of Delaware and consolidated with our pending action there. In
January 2013, the court ruled that the method-of-use patent is valid and
infringed, thereby preventing Watson Florida and the three other Watson
entities from marketing a generic version of Rapamune in the U.S. prior to
the expiration of that patent, subject to a possible appeal of the decision
by Watson Florida and the three other Watson entities.

Tygacil (tigecycline)
In October 2009, Sandoz, Inc., a division of Novartis AG (Sandoz), notified
Wyeth that it had filed an abbreviated new drug application with the FDA
seeking approval to market a generic version of Tygacil. Sandoz asserts the
invalidity and non-infringement of two of Wyeth’s patents relating to
Tygacil, including the basic patent, which expires in 2016. In December
2009, Wyeth filed suit against Sandoz in the U.S. District Court for the
District of Delaware asserting infringement of the basic patent. In January
2013, this action was settled on terms that are not material to Pfizer.

EpiPen
King Pharmaceuticals, Inc. (King) brought a patent-infringement action
against Sandoz in the U.S. District Court for the District of New Jersey in
July 2010 as the result of its abbreviated new drug application with the
FDA seeking approval to market an epinephrine injectable product. Sandoz is
challenging patents, which expire in 2025, covering the next-generation
autoinjector for use with epinephrine that is sold under the EpiPen brand
name.

Embeda (morphine sulfate/naltrexone hydrochloride extended-release capsules)
In August 2011, Watson Florida notified us that it had filed an abbreviated
new drug application with the FDA seeking approval to market a generic
version of Embeda extended-release capsules. Watson Florida asserts the
invalidity and non-infringement of three formulation patents that expire in
2027. In October 2011, we filed an action against Watson Florida in the
U.S. District Court for the District of Delaware asserting the infringement
of, and defending against the allegations of the invalidity of, the three
formulation patents.

Torisel (temsirolimus)
In December 2011, we brought patent-infringement actions in the U.S.
District Court for the District of Delaware against Sandoz and Accord
Healthcare, Inc. USA and certain of its affiliates (collectively, Accord)
as a result of their abbreviated new drug applications with the FDA seeking
approval to market generic versions of Torisel before the expiration of the
basic patent in 2014. In May 2012, we brought an action in the same court
against Sandoz for infringement of a formulation patent that expires in
2026. In September 2012, our actions against Sandoz and Accord were
consolidated in the District of Delaware.

Pristiq (desvenlafaxine)
Beginning in May 2012, several generic manufacturers notified us that they
had filed abbreviated new drug applications with the FDA seeking approval
to market generic versions of Pristiq. Each of the generic manufacturers
asserts the invalidity, unenforceability and/or non-infringement of one or
both of two patents for Pristiq that expire in 2022 and in 2027. Beginning
in June 2012, we filed actions against these generic manufacturers in the
U.S. District Court for the District of Delaware and, in certain instances,
also in other jurisdictions asserting the validity, enforceability and
infringement of those patents.

ACTION IN WHICH WE WERE THE DEFENDANT

Lipitor (atorvastatin)
In the U.K., while the patent protection for Lipitor expired in November
2011, the exclusivity period was extended by six months to May 6, 2012 by
virtue of the pediatric extension to the supplementary protection
certificate. In September 2011, Dr. Reddy’s Laboratories (U.K.) Limited
filed an action in the High Court of Justice seeking revocation of the
six-month pediatric extension and damages resulting from the inability to
launch its generic Lipitor product during the pediatric extension period in
the U.K. and certain other European Union (EU) markets. The action was
based upon the interpretation of the EU Pediatric Medicines Regulation. In
December 2012, the court decided in our favor, rejecting Dr. Reddy's claim
in its entirety. In January 2013, this action was settled on terms that are
not material to Pfizer.

A2. Legal Proceedings––Product Litigation

Like other pharmaceutical companies, we are defendants in numerous cases,
including but not limited to those discussed below, related to our
pharmaceutical and other products. Plaintiffs in these cases seek damages
and other relief on various grounds for alleged personal injury and
economic loss.

Asbestos

*  Quigley

Quigley Company, Inc. (Quigley), a wholly owned subsidiary, was acquired by
Pfizer in 1968 and sold products containing small amounts of asbestos until
the early 1970s. In September 2004, Pfizer and Quigley took steps that were
intended to resolve all pending and future claims against Pfizer and
Quigley in which the claimants allege personal injury from exposure to
Quigley products containing asbestos, silica or mixed dust. We recorded a
charge of $369 million pre-tax ($229 million after-tax) in the third
quarter of 2004 in connection with these matters.

In September 2004, Quigley filed a petition in the U.S. Bankruptcy Court
for the Southern District of New York seeking reorganization under Chapter
11 of the U.S. Bankruptcy Code. In March 2005, Quigley filed a
reorganization plan in the Bankruptcy Court that needed the approval of 75%
of the voting claimants, as well as the Bankruptcy Court and the U.S.
District Court for the Southern District of New York. In connection with
that filing, Pfizer entered into settlement agreements with lawyers
representing more than 80% of the individuals with claims related to
Quigley products against Quigley and Pfizer. The agreements provide for a
total of $430 million in payments, of which $215 million became due in
December 2005 and has been and is being paid to claimants upon receipt by
Pfizer of certain required documentation from each of the claimants. The
reorganization plan provided for the establishment of a trust (the Trust)
for the evaluation and, as appropriate, payment of all unsettled pending
claims, as well as any future claims alleging injury from exposure to
Quigley products.

In February 2008, the Bankruptcy Court authorized Quigley to solicit an
amended reorganization plan for acceptance by claimants. According to the
official report filed with the court by the balloting agent in July 2008,
the requisite votes were cast in favor of the amended plan of
reorganization.

The Bankruptcy Court held a confirmation hearing with respect to Quigley’s
amended plan of reorganization that concluded in December 2009. In
September 2010, the Bankruptcy Court declined to confirm the amended
reorganization plan. As a result of the foregoing, Pfizer recorded
additional charges for this matter of approximately $1.3 billion pre-tax
(approximately $800 million after-tax) in 2010. Further, in order to
preserve its right to address certain legal issues raised in the court’s
opinion, in October 2010, Pfizer filed a notice of appeal and motion for
leave to appeal the Bankruptcy Court’s decision denying confirmation.

In March 2011, Pfizer entered into a settlement agreement with a committee
(the Ad Hoc Committee) representing approximately 40,000 claimants in the
Quigley bankruptcy proceeding (the Ad Hoc Committee claimants). Consistent
with the additional charges recorded in 2010 referred to above, the
principal provisions of the settlement agreement provide for a settlement
payment in two installments and other consideration, as follows:

*  the payment to the Ad Hoc Committee, for the benefit of the Ad Hoc
Committee claimants, of a first installment of $500 million upon receipt by
Pfizer of releases of asbestos-related claims against Pfizer Inc. from Ad
Hoc Committee claimants holding $500 million in the aggregate of claims
(Pfizer began paying this first installment in June 2011);

*  the payment to the Ad Hoc Committee, for the benefit of the Ad Hoc
Committee claimants, of a second installment of $300 million upon Pfizer’s
receipt of releases of asbestos-related claims against Pfizer Inc. from Ad
Hoc Committee claimants holding an additional $300 million in the aggregate
of claims following the earlier of the effective date of a revised plan of
reorganization and April 6, 2013;

*  the payment of the Ad Hoc Committee’s legal fees and expenses incurred
in this matter up to a maximum of $19 million (Pfizer began paying these
legal fees and expenses in May 2011); and

*  the procurement by Pfizer of insurance for the benefit of certain Ad Hoc
Committee claimants to the extent such claimants with non-malignant
diseases have a future disease progression to a malignant disease (Pfizer
procured this insurance in August 2011).

Following the execution of the settlement agreement with the Ad Hoc
Committee, Quigley filed a revised plan of reorganization and accompanying
disclosure statement with the Bankruptcy Court in April 2011, which it
amended in June 2012. In August 2012, the Bankruptcy Court authorized
Quigley to solicit the revised plan of reorganization for acceptance by
claimants. The balloting agent's preliminary tabulation report filed with
the court reflects that the requisite number of asbestos-related claimants
cast votes in favor of the revised plan. A class of claimants holding
non-asbestos-related, unsecured claims voted against the revised plan.
However, we believe that, under applicable bankruptcy law, the revised plan
may be confirmed notwithstanding the vote of the non-asbestos-related
claimants.

Under the revised plan, and consistent with the additional charges recorded
in 2010 referred to above, we expect to contribute an additional amount to
the Trust, if and when the Bankruptcy Court confirms the plan, of cash and
non-cash assets (including insurance proceeds) with a value in excess of
$550 million. The Bankruptcy Court must find that the revised plan meets
the standards of the U.S. Bankruptcy Code before it confirms the plan. We
expect that, if approved by claimants, confirmed by the Bankruptcy Court
and the District Court and upheld on any subsequent appeal, the revised
reorganization plan will result in the District Court entering a permanent
injunction directing pending claims, as well as future claims, alleging
asbestos-related personal injury from exposure to Quigley products to the
Trust, subject to the recent decision of the Second Circuit discussed
below. There is no assurance that the plan will be approved by claimants or
confirmed by the courts.

In April 2012, the U.S. Court of Appeals for the Second Circuit affirmed a
ruling by the U.S. District Court for the Southern District of New York
that the Bankruptcy Court’s preliminary injunction in the Quigley
bankruptcy proceeding does not prohibit actions directly against Pfizer
Inc. for alleged asbestos-related personal injury from exposure to Quigley
products based on the “apparent manufacturer” theory of liability under
Pennsylvania law. The Second Circuit’s decision is procedural and does not
address the merits of the plaintiffs’ claims under Pennsylvania law. After
the Second Circuit denied our petition for a rehearing, in September 2012,
we filed a petition for certiorari with the U.S. Supreme Court seeking a
reversal of the Second Circuit’s decision. In July 2012, the Second Circuit
had granted a stay of its decision while the U.S. Supreme Court considers
our petition for certiorari.

In a separately negotiated transaction with an insurance company in August
2004, we agreed to a settlement related to certain insurance coverage which
provides for payments to an insurance proceeds trust established by Pfizer
and Quigley over a ten-year period of amounts totaling $405 million. Most
of these insurance proceeds, as well as other payments from insurers that
issued policies covering Pfizer and Quigley, would be paid, following
confirmation, to the Trust for the benefit of present unsettled and future
claimants with claims arising from exposure to Quigley products.

*  Other Matters

Between 1967 and 1982, Warner-Lambert owned American Optical Corporation,
which manufactured and sold respiratory protective devices and asbestos
safety clothing. In connection with the sale of American Optical in 1982,
Warner-Lambert agreed to indemnify the purchaser for certain liabilities,
including certain asbestos-related and other claims. As of December 31,
2012, approximately 66,400 claims naming American Optical and numerous
other defendants were pending in various federal and state courts seeking
damages for alleged personal injury from exposure to asbestos and other
allegedly hazardous materials. Warner-Lambert is actively engaged in the
defense of, and will continue to explore various means to resolve, these
claims.

Warner-Lambert and American Optical brought suit in state court in New
Jersey against the insurance carriers that provided coverage for the
asbestos and other allegedly hazardous materials claims related to American
Optical. A majority of the carriers subsequently agreed to pay for a
portion of the costs of defending and resolving those claims. The
litigation continues against the carriers who have disputed coverage or how
costs should be allocated to their policies, and the court held that
Warner-Lambert and American Optical are entitled to payment from each of
those carriers of a proportionate share of the costs associated with those
claims. Under New Jersey law, a special allocation master was appointed to
implement certain aspects of the court’s rulings.

Numerous lawsuits are pending against Pfizer in various federal and state
courts seeking damages for alleged personal injury from exposure to
products containing asbestos and other allegedly hazardous materials sold
by Gibsonburg Lime Products Company (Gibsonburg). Gibsonburg was acquired
by Pfizer in the 1960s and sold products containing small amounts of
asbestos until the early 1970s.

There also are a small number of lawsuits pending in various federal and
state courts seeking damages for alleged exposure to asbestos in facilities
owned or formerly owned by Pfizer or its subsidiaries.

Celebrex and Bextra
Beginning in late 2004, actions, including purported class actions, were
filed in various federal and state courts against Pfizer, Pharmacia
Corporation (Pharmacia) and certain current and former officers, directors
and employees of Pfizer and Pharmacia. These actions include (i) purported
class actions alleging that Pfizer and certain current and former officers
of Pfizer violated federal securities laws by misrepresenting the safety of
Celebrex and Bextra, and (ii) purported class actions filed by persons who
claim to be participants in the Pfizer or Pharmacia Savings Plan alleging
that Pfizer and certain current and former officers, directors and
employees of Pfizer or, where applicable, Pharmacia and certain former
officers, directors and employees of Pharmacia, violated certain provisions
of the Employee Retirement Income Security Act of 1974 (ERISA) by selecting
and maintaining Pfizer stock or Pharmacia stock as an investment
alternative when it allegedly no longer was a suitable or prudent
investment option. In June 2005, the federal securities and ERISA actions
were transferred for consolidated pre-trial proceedings to a Multi-District
Litigation (In re Pfizer Inc. Securities, Derivative and "ERISA" Litigation
MDL-1688) in the U.S. District Court for the Southern District of New York.
In the consolidated federal securities action in the Multi-District
Litigation, the court in March 2012 certified a class consisting of all
persons who purchased or acquired Pfizer stock between October 31, 2000 and
October 19, 2005. In November 2012, several institutional investors that
had opted out of the certified class filed three, separate, multi-plaintiff
actions in the Southern District of New York against the same defendants
named in the consolidated class action, asserting allegations substantially
similar to those asserted in the consolidated class action.

Various Drugs: Off-Label Promotion Actions
In May 2010, a purported class action was filed in the U.S. District Court
for the Southern District of New York against Pfizer and several of our
current and former officers. The complaint alleges that the defendants
violated federal securities laws by making or causing Pfizer to make false
statements, and by failing to disclose or causing Pfizer to fail to
disclose material information, concerning the alleged off-label promotion
of certain pharmaceutical products, alleged payments to physicians to
promote the sale of those products and government investigations related
thereto. Plaintiffs seek damages in an unspecified amount. In March 2012,
the court certified a class consisting of all persons who purchased Pfizer
common stock in the U.S. or on U.S. stock exchanges between January 19,
2006 and January 23, 2009 and were damaged as a result of the decline in
the price of Pfizer common stock allegedly attributable to the claimed
violations.

Hormone-Replacement Therapy


*  Personal Injury and Economic Loss Actions

Pfizer and certain wholly owned subsidiaries and limited liability
companies, including Wyeth and King, along with several other
pharmaceutical manufacturers, have been named as defendants in
approximately 10,000 actions in various federal and state courts alleging
personal injury or economic loss related to the use or purchase of certain
estrogen and progestin medications prescribed for women to treat the
symptoms of menopause. Although new actions are occasionally filed, the
number of new actions was not significant in the fourth quarter of 2012,
and we do not expect a substantial change in the rate of new actions being
filed. Plaintiffs in these suits allege a variety of personal injuries,
including breast cancer, ovarian cancer, stroke and heart disease. Certain
co-defendants in some of these actions have asserted indemnification rights
against Pfizer and its affiliated companies. The cases against Pfizer and
its affiliated companies involve one or more of the following products, all
of which remain approved by the FDA: femhrt (which Pfizer divested in
2003); Activella and Vagifem (which are Novo Nordisk products that were
marketed by a Pfizer affiliate from 2000 to 2004); Premarin, Prempro,
Aygestin, Cycrin and Premphase (which are legacy Wyeth products); and
Provera, Ogen, Depo-Estradiol, Estring and generic MPA (which are legacy
Pharmacia & Upjohn products). The federal cases have been transferred for
consolidated pre-trial proceedings to a Multi-­District Litigation (In re
Prempro Products Liability Litigation MDL-1507) in the U.S. District Court
for the Eastern District of Arkansas. Certain of the federal cases have
been remanded to their respective District Courts for further proceedings
including, if necessary, trial.

This litigation consists of individual actions, a few purported statewide
class actions and a purported provincewide class action in Quebec, Canada,
a statewide class action in California and a nationwide class action in
Canada. In March 2011, in an action against Wyeth seeking the refund of the
purchase price paid for Wyeth’s hormone-replacement therapy products by
individuals in the State of California during the period from January 1995
to January 2003, the U.S. District Court for the Southern District of
California certified a class consisting of all individual purchasers of
such products in California who actually heard or read Wyeth’s alleged
misrepresentations regarding such products. This is the only
hormone-replacement therapy action to date against Pfizer and its
affiliated companies in the U.S. in which a class has been certified. In
addition, in August 2011, in an action against Wyeth seeking damages for
personal injury, the Supreme Court of British Columbia certified a class
consisting of all women who were prescribed Premplus and/or Premarin in
combination with progestin in Canada between January 1, 1997 and December
1, 2003 and who thereafter were diagnosed with breast cancer.

Pfizer and its affiliated companies have prevailed in many of the
hormone-replacement therapy actions that have been resolved to date,
whether by voluntary dismissal by the plaintiffs, summary judgment, defense
verdict or judgment notwithstanding the verdict; a number of these cases
have been appealed by the plaintiffs. Certain other hormone-replacement
therapy actions have resulted in verdicts for the plaintiffs and have
included the award of compensatory and, in some instances, punitive
damages; each of these cases has been appealed by Pfizer and/or its
affiliated companies. The decisions in a few of the cases that had been
appealed by Pfizer and/or its affiliated companies or by the plaintiffs
have been upheld by the appellate courts, while several other cases that
had been appealed by Pfizer and/or its affiliated companies or by the
plaintiffs have been remanded by the appellate courts to their respective
trial courts for further proceedings. Trials of additional
hormone-replacement therapy actions are underway or scheduled in 2013.

Most of the unresolved actions against Pfizer and/or its affiliated
companies have been outstanding for more than five years and could take
many more years to resolve. However, opportunistic settlements could occur
at any time. The litigation process is time-consuming, as every
hormone-replacement action being litigated involves contested issues of
medical causation and knowledge of risk. Even though the vast majority of
hormone-replacement therapy actions concern breast cancer, the underlying
facts (e.g., medical causation, family history, reliance on warnings,
physician/patient interaction, analysis of labels, actual, provable injury
and other critical factors) can differ significantly from action to action,
and the process of discovery has not yet begun for a majority of the
unresolved actions. In addition, the hormone-replacement therapy litigation
involves fundamental issues of science and medicine that often are
uncertain and continue to evolve.

As of February 2013, Pfizer and its affiliated companies had settled, or
entered into definitive agreements or agreements-in-principle to settle,
approximately 95% of the hormone-replacement therapy actions pending
against us and our affiliated companies. Since the inception of this
litigation, we have recorded aggregate charges with respect to those
actions, as well as with respect to the actions that have resulted in
verdicts against us or our affiliated companies, of approximately $1.6
billion. In addition, we have recorded aggregate charges of approximately
$100 million that provide for the expected costs to resolve all remaining
hormone-replacement therapy actions against Pfizer and its affiliated
companies, excluding the class actions and purported class actions referred
to above. The approximately $100 million charges are an estimate and, while
we cannot reasonably estimate the range of reasonably possible loss in
excess of the amounts accrued for these contingencies given the
uncertainties inherent in this product liability litigation, as described
above, additional charges may be required in the future.


*  Government Inquiries; Action by the State of Nevada

Pfizer and/or its affiliated companies also have received inquiries from
various federal and state agencies and officials relating to the marketing
of their hormone-replacement products. In November 2008, the State of
Nevada filed an action against Pfizer, Pharmacia & Upjohn Company and Wyeth
in state court in Nevada alleging that they had engaged in deceptive
marketing of their respective hormone-replacement therapy medications in
Nevada in violation of the Nevada Deceptive Trade Practices Act. The action
seeks monetary relief, including civil penalties and treble damages. In
February 2010, the action was dismissed by the court on the grounds that
the statute of limitations had expired. In July 2011, the Nevada Supreme
Court reversed the dismissal and remanded the case to the district court
for further proceedings.

Effexor


*  Personal Injury Actions

A number of individual lawsuits and multi-plaintiff lawsuits have been
filed against us and/or our subsidiaries in various federal and state
courts alleging personal injury as a result of the purported ingestion of
Effexor.


*  Antitrust Actions

Beginning in May 2011, actions, including purported class actions, were
filed in various federal courts against Wyeth and, in certain of the
actions, affiliates of Wyeth and certain other defendants relating to
Effexor XR, which is the extended-release formulation of Effexor. The
plaintiffs in each of the class actions seek to represent a class
consisting of all persons in the U.S. and its territories who directly
purchased, indirectly purchased or reimbursed patients for the purchase of
Effexor XR or generic Effexor XR from any of the defendants from June 14,
2008 until the time the defendants’ allegedly unlawful conduct ceased. The
plaintiffs in all of the actions allege delay in the launch of generic
Effexor XR in the U.S. and its territories, in violation of federal
antitrust laws and, in certain of the actions, the antitrust, consumer
protection and various other laws of certain states, as the result of Wyeth
fraudulently obtaining and improperly listing certain patents for Effexor
XR, enforcing certain patents for Effexor XR, and entering into a
litigation settlement agreement with a generic manufacturer with respect to
Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the
individual actions or on behalf of the putative class in the purported
class actions) for alleged price overcharges for Effexor XR or generic
Effexor XR in the U.S. and its territories since June 14, 2008. All of
these actions have been consolidated in the U.S. District Court for the
District of New Jersey. In October 2012, the court stayed these actions
pending the review by the U.S. Supreme Court of an action, to which the
Company is not a party, involving a similar legal issue.

Zoloft
A number of individual lawsuits and multi-plaintiff lawsuits have been
filed against us and/or our subsidiaries in various federal and state
courts alleging personal injury as a result of the purported ingestion of
Zoloft. Among other types of actions, the Zoloft personal injury litigation
includes actions alleging a variety of birth defects as a result of the
purported ingestion of Zoloft by women during pregnancy. Plaintiffs in
these birth-defect actions seek compensatory and punitive damages and the
disgorgement of profits resulting from the sale of Zoloft. In April 2012,
the federal birth-defect cases were transferred for consolidated pre-trial
proceedings to a Multi-District Litigation (In re Zoloft Products Liability
Litigation MDL-2342) in the U.S. District Court for the Eastern District of
Pennsylvania.

Neurontin


*  Off-Label Promotion Actions in the U.S.

A number of lawsuits, including purported class actions, have been filed
against us in various federal and state courts alleging claims arising from
the promotion and sale of Neurontin. The plaintiffs in the purported class
actions seek to represent nationwide and certain statewide classes
consisting of persons, including individuals, health insurers, employee
benefit plans and other third-party payers, who purchased or reimbursed
patients for the purchase of Neurontin that allegedly was used for
indications other than those included in the product labeling approved by
the FDA. In 2004, many of the suits pending in federal courts, including
individual actions as well as purported class actions, were transferred for
consolidated pre-trial proceedings to a Multi-District Litigation (In re
Neurontin Marketing, Sales Practices and Product Liability Litigation
MDL-1629) in the U.S. District Court for the District of Massachusetts.

In the Multi-District Litigation, in 2009, the court denied the plaintiffs’
renewed motion for certification of a nationwide class of all consumers and
third-party payers who allegedly purchased or reimbursed patients for the
purchase of Neurontin for off-label uses from 1994 through 2004. In May
2011, the court denied a motion to reconsider its class certification
ruling.

In 2010, the Multi-District Litigation court partially granted our motion
for summary judgment, dismissing the claims of all of the proposed class
representatives for third-party payers and four of the six proposed class
representatives for individual consumers. In June 2011, three third-party
payer proposed class representatives appealed both the dismissal and the
denial of class certification to the U.S. Court of Appeals for the First
Circuit.

Also in the Multi-District Litigation, in February 2011, a third-party
payer who was not included in the proposed class action appealed a
dismissal order to the U.S. Court of Appeals for the First Circuit.

Plaintiffs are seeking certification of statewide classes of Neurontin
purchasers in actions pending in California and Illinois. State courts in
New York, Pennsylvania, Missouri and New Mexico have declined to certify
statewide classes of Neurontin purchasers.

In January 2011, the U.S. District Court for the District of Massachusetts
entered an order trebling a jury verdict against us in an action by a
third-party payer seeking damages for the alleged off-label promotion of
Neurontin in violation of the federal Racketeer Influenced and Corrupt
Organizations (RICO) Act. The verdict was for approximately $47.4 million,
which was subject to automatic trebling to $142.1 million under the RICO
Act. In November 2010, the court had entered a separate verdict against us
in the amount of $65.4 million, together with prejudgment interest, under
California’s Unfair Trade Practices law relating to the same alleged
conduct, which amount is included within and is not additional to the
$142.1 million trebled amount of the jury verdict. In August 2011, we
appealed the District Court’s judgment to the U.S. Court of Appeals for the
First Circuit.


*  Personal Injury Actions in the U.S. and Certain Other Countries

A number of individual lawsuits have been filed against us in various U.S.
federal and state courts and in certain other countries alleging suicide,
attempted suicide and other personal injuries as a result of the purported
ingestion of Neurontin. Certain of the U.S. federal actions have been
transferred for consolidated pre-trial proceedings to the same
Multi-District Litigation referred to in the first paragraph of the
“Neurontin - Off-Label Promotion Actions in the U.S.” section above.


*  Antitrust Action in the U.S.

In January 2011, in a Multi-District Litigation (In re Neurontin Antitrust
Litigation MDL-1479) that consolidates four actions, the U.S. District
Court for the District of New Jersey certified a nationwide class
consisting of wholesalers and other entities who purchased Neurontin
directly from Pfizer and Warner-Lambert during the period from December 11,
2002 to August 31, 2008 and who also purchased generic gabapentin after it
became available. The complaints allege that Pfizer and Warner-Lambert
engaged in anticompetitive conduct in violation of the Sherman Act that
included, among other things, submitting patents for listing in the Orange
Book and prosecuting and enforcing certain patents relating to Neurontin,
as well as engaging in off-label marketing of Neurontin. Plaintiffs seek
compensatory damages on behalf of the class, which may be subject to
trebling.

Lipitor


*  Whistleblower Action

In 2004, a former employee filed a “whistleblower” action against us in the
U.S. District Court for the Eastern District of New York. The complaint
remained under seal until September 2007, at which time the U.S. Attorney
for the Eastern District of New York declined to intervene in the case. We
were served with the complaint in December 2007. Plaintiff alleges
off-label promotion of Lipitor in violation of the Federal Civil False
Claims Act and the false claims acts of certain states, and he seeks treble
damages and civil penalties on behalf of the federal government and the
specified states as the result of their purchase, or reimbursement of
patients for the purchase, of Lipitor allegedly for such off-label uses.
Plaintiff also seeks compensation as a whistleblower under those federal
and state statutes. In addition, plaintiff alleges that he was wrongfully
terminated, in violation of the anti-retaliation provisions of applicable
federal and New York law, and he seeks damages and the reinstatement of his
employment. In 2009, the court dismissed without prejudice the off-label
promotion claims and, in 2010, plaintiff filed an amended complaint
containing off-label promotion allegations that are substantially similar
to the allegations in the original complaint. In November 2012, the
District Court dismissed the amended complaint. In December 2012, the
plaintiff appealed the District Court's decision to the U.S. Court of
Appeals for the Second Circuit.


*  Antitrust Actions

Beginning in November 2011, purported class actions relating to Lipitor
were filed in various federal courts against Pfizer, certain affiliates of
Pfizer, and, in most of the actions, Ranbaxy, among others. The plaintiffs
in these various actions seek to represent nationwide, multi-state or
statewide classes consisting of persons or entities who directly purchased,
indirectly purchased or reimbursed patients for the purchase of Lipitor
(or, in certain of the actions, generic Lipitor) from any of the defendants
from March 2010 until the cessation of the defendants’ allegedly unlawful
conduct (the Class Period). The plaintiffs allege delay in the launch of
generic Lipitor, in violation of federal antitrust laws and/or state
antitrust, consumer protection and various other laws, resulting from (i)
the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain
patent litigation involving Lipitor, and Pfizer granted Ranbaxy a license
to sell a generic version of Lipitor in various markets beginning on
varying dates, and (ii) in certain of the actions, the procurement and/or
enforcement of certain patents for Lipitor. Each of the actions seeks,
among other things, treble damages on behalf of the putative class for
alleged price overcharges for Lipitor (or, in certain of the actions,
generic Lipitor) during the Class Period. In addition, individual actions
have been filed against Pfizer, Ranbaxy and certain of their affiliates,
among others, that assert claims and seek relief for the plaintiffs that
are substantially similar to the claims asserted and the relief sought in
the purported class actions described above. These various actions have
been consolidated for pre-trial proceedings in a Multi-District Litigation
(In re Lipitor Antitrust Litigation MDL-2332) in the U.S. District Court
for the District of New Jersey.

Chantix/Champix


*  Actions in the U.S.

A number of individual lawsuits have been filed against us in various
federal and state courts alleging suicide, attempted suicide and other
personal injuries as a result of the purported ingestion of Chantix, as
well as economic loss. Plaintiffs in these actions seek compensatory and
punitive damages and the disgorgement of profits resulting from the sale of
Chantix. In October 2009, the federal cases were transferred for
consolidated pre-trial proceedings to a Multi-District Litigation (In re
Chantix (Varenicline) Products Liability Litigation MDL-2092) in the U.S.
District Court for the Northern District of Alabama.

In late-November 2012, we began advanced settlement discussions with
various law firms that represent the plaintiffs in the majority of these
actions as well as persons who have asserted claims but not filed legal
actions. As of February 2013, we had settled, or entered into definitive
agreements or agreements-in-principle to settle, approximately 80% of the
known Chantix claims in the U.S., including actions pending in the MDL and
in state courts. In connection with these settlements and settlement
agreements and agreements-in-principle, we recorded aggregate charges in
2012 of approximately $273 million. In addition, we recorded aggregate
charges in 2012 of approximately $15 million that provide for the expected
costs to resolve all remaining Chantix actions in the MDL and in state
courts and all other known Chantix claims in the U.S. The approximately $15
million aggregate charges are an estimate, and while we cannot estimate the
range of reasonably possible loss in excess of the amounts accrued given
the uncertainties inherent in this litigation, as described below,
additional charges may be required in the future in connection with certain
pending actions and claims and unknown claims relating to Chantix.

The federal Chantix actions were consolidated in the MDL more than three
years ago, and the unresolved Chantix federal and state actions and other
known, unresolved Chantix claims could take many more years to resolve.
However, opportunistic settlements could occur at any time. The litigation
process is time-consuming, as every Chantix action being litigated involves
contested issues of medical causation and knowledge of risk. Although the
vast majority of Chantix actions allege neuropsychiatric injuries, the
nature of the alleged injuries varies widely, from completed suicide to
attempted suicide resulting in hospitalization to the exacerbation of
pre-existing depression or anxiety. In addition to the widely varying types
of injuries at issue, the underlying facts (e.g., medical causation;
smoking, psychiatric and family history; reliance on warnings;
physician/patient interaction; analysis of labels; actual, provable injury;
and other critical factors) can differ significantly from action to action,
and the process of discovery has not yet begun for a majority of the
unresolved actions. In addition, the Chantix litigation involves
fundamental issues of science and medicine that often are uncertain and
continue to evolve. As a result of the foregoing factors, we are unable to
estimate the range of reasonably possible loss in excess of the amounts
accrued.


*  Actions in Canada

Beginning in December 2008, purported class actions were filed against us
in the Ontario Superior Court of Justice (Toronto Region), the Superior
Court of Quebec (District of Montreal), the Court of Queen’s Bench of
Alberta, Judicial District of Calgary, and the Superior Court of British
Columbia (Vancouver Registry) on behalf of all individuals and third-party
payers in Canada who have purchased and ingested Champix or reimbursed
patients for the purchase of Champix. Each of these actions asserts claims
under Canadian product liability law, including with respect to the safety
and efficacy of Champix, and, on behalf of the putative class, seeks
monetary relief, including punitive damages. In June 2012, the Ontario
Superior Court of Justice certified the Ontario proceeding as a class
action, defining the class as consisting of the following: (i) all persons
in Canada who ingested Champix during the period from April 2, 2007 to May
31, 2010 and who experienced at least one of a number of specified
neuropsychiatric adverse events; (ii) all persons who are entitled to
assert claims in respect of Champix pursuant to Canadian legislation as the
result of their relationship with a class member; and (iii) all health
insurers who are entitled to assert claims in respect of Champix pursuant
to Canadian legislation. The Ontario Superior Court of Justice certified
the class against Pfizer Canada Inc. only and ruled that the action against
Pfizer Inc. should be stayed until after the trial of the issues that are
common to the class members. The actions in Quebec, Alberta and British
Columbia have been stayed in favor of the Ontario action, which is
proceeding on a national basis.

Bapineuzumab
In June 2010, a purported class action was filed in the U.S. District Court
for the District of New Jersey against Pfizer, as successor to Wyeth, and
several former officers of Wyeth. The complaint alleges that Wyeth and the
individual defendants violated federal securities laws by making or causing
Wyeth to make false and misleading statements, and by failing to disclose
or causing Wyeth to fail to disclose material information, concerning the
results of a clinical trial involving bapineuzumab, a product in
development for the treatment of Alzheimer’s disease. The plaintiff seeks
to represent a class consisting of all persons who purchased Wyeth
securities from May 21, 2007 through July 2008 and seeks damages in an
unspecified amount on behalf of the putative class. In February 2012, the
court granted the defendants’ motion to dismiss the complaint. In March
2012, the plaintiff filed a motion seeking the court’s permission to file
an amended complaint. In December 2012, the court granted the plaintiff's
motion and, in January 2013, the defendants filed a motion to dismiss the
amended complaint.

In July 2010, a related action was filed in the U.S. District Court for the
Southern District of New York against Elan Corporation (Elan), certain
directors and officers of Elan, and Pfizer, as successor to Wyeth. Elan
participated in the development of bapineuzumab until September 2009. The
complaint alleges that Elan, Wyeth and the individual defendants violated
federal securities laws by making or causing Elan to make false and
misleading statements, and by failing to disclose or causing Elan to fail
to disclose material information, concerning the results of a clinical
trial involving bapineuzumab. The plaintiff seeks to represent a class
consisting of all persons who purchased Elan call options from June 17,
2008 through July 29, 2008 and seeks damages in an unspecified amount on
behalf of the putative class. In June 2011, the court granted Pfizer’s and
Elan’s motions to dismiss the complaint. In July 2011, the plaintiff filed
a supplemental memorandum setting forth the bases that the plaintiff
believed supported amendment of the complaint. In August 2011, the court
dismissed the complaint with prejudice. In February 2013, the U.S. Court of
Appeals for the Second Circuit affirmed the District Court's dismissal of
the complaint.

Thimerosal
Wyeth is a defendant in a number of suits by or on behalf of vaccine
recipients alleging that exposure through vaccines to cumulative doses of
thimerosal, a preservative used in certain childhood vaccines formerly
manufactured and distributed by Wyeth and other vaccine manufacturers,
caused severe neurological damage and/or autism in children. While several
suits were filed as purported nationwide or statewide class actions, all of
the purported class actions have been dismissed, either by the courts or
voluntarily by the plaintiffs. In addition to the suits alleging injury
from exposure to thimerosal, certain of the cases were brought by parents
in their individual capacities for, among other things, loss of services
and loss of consortium of the injured child.

The National Childhood Vaccine Injury Act (the Vaccine Act) requires that
persons alleging injury from childhood vaccines first file a petition in
the U.S. Court of Federal Claims asserting a vaccine-related injury. At the
conclusion of that proceeding, petitioners may bring a lawsuit against the
manufacturer in federal or state court, provided that they have satisfied
certain procedural requirements. Also under the terms of the Vaccine Act,
if a petition has not been adjudicated by the U.S. Court of Federal Claims
within a specified time period after filing, the petitioner may opt out of
the proceeding and pursue a lawsuit against the manufacturer by following
certain procedures. Some of the vaccine recipients who have sued Wyeth to
date may not have satisfied the conditions to filing a lawsuit that are
mandated by the Vaccine Act. The claims brought by parents for, among other
things, loss of services and loss of consortium of the injured child are
not covered by the Vaccine Act.

In 2002, the Office of Special Masters of the U.S. Court of Federal Claims
established an Omnibus Autism Proceeding with jurisdiction over petitions
in which vaccine recipients claim to suffer from autism or autism spectrum
disorder as a result of receiving thimerosal-containing childhood vaccines
and/or the measles, mumps and rubella (MMR) vaccine. There currently are
several thousand petitions pending in the Omnibus Autism Proceeding.
Special masters of the court have heard six test cases on petitioners’
theories that either thimerosal-containing vaccines in combination with the
MMR vaccine or thimerosal-containing vaccines alone can cause autism or
autism spectrum disorder.

*  In February 2009, special masters of the U.S. Court of Federal Claims
rejected the three cases brought on the theory that a combination of MMR
and thimerosal-containing vaccines caused petitioners’ conditions. After
these rulings were affirmed by the U.S. Court of Federal Claims, two of
them were appealed by petitioners to the U.S. Court of Appeals for the
Federal Circuit. In 2010, the Federal Circuit affirmed the decisions of the
special masters in both of these cases.

*  In March 2010, special masters of the U.S. Court of Federal Claims
rejected the three additional test cases brought on the theory that
thimerosal-containing vaccines alone caused petitioners’ conditions.
Petitioners did not seek review by the U.S. Court of Federal Claims of the
decisions of the special masters in these latter three test cases, and
judgments were entered dismissing the cases in April 2010.

*  Petitioners in each of the six test cases have filed an election to
bring a civil action.
Rebif
We have an exclusive collaboration agreement with EMD Serono, Inc. (Serono)
to co-promote Rebif, a treatment for multiple sclerosis, in the U.S. In
August 2011, Serono filed a complaint in the Philadelphia Court of Common
Pleas seeking a declaratory judgment that we are not entitled to a 24-month
extension of the Rebif co-promotion agreement, which otherwise would
terminate at the end of 2013. We disagree with Serono's interpretation of
the agreement and believe that we have the right to extend the agreement to
the end of 2015. In October 2011, the court sustained our preliminary
objections and dismissed Serono’s complaint, and Serono has appealed the
decision to the Superior Court of Pennsylvania.

Various Drugs: Co-Pay Programs
In March 2012, a purported class action was filed against Pfizer in the
U.S. District Court for the Southern District of New York. The plaintiffs
seek to represent a class consisting of all entities in the U.S. and its
territories that have reimbursed patients for the purchase of certain
Pfizer drugs for which co-pay programs exist or have existed. The
plaintiffs allege that these programs violate the federal RICO Act and
federal antitrust law by, among other things, providing an incentive for
patients to use certain Pfizer drugs rather than less-expensive competitor
products, thereby increasing the payers’ reimbursement costs. The
plaintiffs seek treble damages on behalf of the putative class for their
excess reimbursement costs allegedly attributable to the co-pay programs as
well as an injunction prohibiting us from offering such programs. In July
2012, a substantially similar purported class action was filed against
Pfizer in the U.S. District Court for the Southern District of Illinois,
which action was stayed in October 2012 pending the outcome of the action
in the Southern District of New York. Similar purported class actions have
been filed against several other pharmaceutical companies.

A3. Legal Proceedings––Commercial and Other Matters

Average Wholesale Price Litigation
Pfizer, certain of its subsidiaries and other pharmaceutical manufacturers
are defendants in actions in various state courts by a number of states, as
well as one purported class action by certain employee benefit plans and
other third-party payers, alleging that the defendants provided average
wholesale price (AWP) information for certain of their products that was
higher than the actual average prices at which those products were sold.
The AWP is used to determine reimbursement levels under Medicare Part B and
Medicaid and in many private-sector insurance policies and medical plans.
The plaintiffs claim that the alleged spread between the AWPs at which
purchasers were reimbursed and the actual sale prices was promoted by the
defendants as an incentive to purchase certain of their products. In
addition to suing on their own behalf, some of the plaintiff states seek to
recover on behalf of individuals, private-sector insurance companies and
medical plans in their states. These various actions allege, among other
things, fraud, unfair competition, unfair trade practices and the violation
of consumer protection statutes, and seek monetary and other relief,
including civil penalties and treble damages.

Monsanto-Related Matters
In 1997, Monsanto Company (Former Monsanto) contributed certain chemical
manufacturing operations and facilities to a newly formed corporation,
Solutia Inc. (Solutia), and spun off the shares of Solutia. In 2000, Former
Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia
Corporation (Pharmacia). Pharmacia then transferred its agricultural
operations to a newly created subsidiary, named Monsanto Company (New
Monsanto), which it spun off in a two-stage process that was completed in
2002. Pharmacia was acquired by Pfizer in 2003 and is now a wholly owned
subsidiary of Pfizer.

In connection with its spin-off that was completed in 2002, New Monsanto
assumed, and agreed to indemnify Pharmacia for, any liabilities related to
Pharmacia’s former agricultural business. New Monsanto is defending and
indemnifying Pharmacia in connection with various claims and litigation
arising out of, or related to, the agricultural business.

In connection with its spin-off in 1997, Solutia assumed, and agreed to
indemnify Pharmacia for, liabilities related to Former Monsanto's chemical
businesses. As the result of its reorganization under Chapter 11 of the
U.S. Bankruptcy Code, Solutia’s indemnification obligations related to
Former Monsanto’s chemical businesses are limited to sites that Solutia has
owned or operated. In addition, in connection with its spinoff that was
completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia
for, any liabilities primarily related to Former Monsanto's chemical
businesses, including, but not limited to, any such liabilities that
Solutia assumed. Solutia's and New Monsanto's assumption of and agreement
to indemnify Pharmacia for these liabilities apply to pending actions and
any future actions related to Former Monsanto's chemical businesses in
which Pharmacia is named as a defendant, including, without limitation,
actions asserting environmental claims, including alleged exposure to
polychlorinated biphenyls. Solutia and New Monsanto are defending and
indemnifying Pharmacia in connection with various claims and litigation
arising out of, or related to, Former Monsanto’s chemical businesses.

Trade Secrets Action in California
In 2004, Ischemia Research and Education Foundation (IREF) and its chief
executive officer brought an action in California Superior Court, Santa
Clara County, against a former IREF employee and Pfizer. Plaintiffs allege
that defendants conspired to misappropriate certain information from IREF’s
allegedly proprietary database in order to assist Pfizer in designing and
executing a clinical study of a Pfizer drug. In 2008, the jury returned a
verdict for compensatory damages of approximately $38.7 million. In March
2009, the court awarded prejudgment interest, but declined to award
punitive damages. In July 2009, the court granted our motion for a new
trial and vacated the jury verdict. In February 2013, the trial court's
decision was affirmed by the California Court of Appeal, Sixth Appellate
District.

Environmental Matters
In 2009, we submitted to the U.S. Environmental Protection Agency (EPA) a
corrective measures study report with regard to Pharmacia Corporation's
discontinued industrial chemical facility in North Haven, Connecticut and a
revised site-wide feasibility study with regard to Wyeth’s discontinued
industrial chemical facility in Bound Brook, New Jersey. In September 2010,
our corrective measures study report with regard to the North Haven
facility was approved by the EPA, and we commenced construction of the site
remedy in late 2011 under an Updated Administrative Order on Consent with
the EPA. In July 2011, we finalized an Administrative Settlement Agreement
and Order on Consent for Removal Action with the EPA with regard to the
Bound Brook facility. In May 2012, we completed construction of an interim
remedy to address the discharge of impacted groundwater from that facility
to the Raritan River. In September 2012, the EPA issued a final remediation
plan for the Bound Brook facility's main plant area, which is generally in
accordance with one of the remedies evaluated in our revised site-wide
feasibility study. The estimated costs of the site remedy for the North
Haven facility and the site remediation for the Bound Brook facility are
covered by accruals previously taken by us.

We are a party to a number of other proceedings brought under the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (CERCLA or Superfund), and other state, local or foreign
laws in which the primary relief sought is the cost of past and/or future
remediation.

In February 2011, King received notice from the U.S. Department of Justice
(DOJ) advising that the EPA has requested that DOJ initiate enforcement
action seeking injunctive relief and penalties against King for alleged
non-compliance with certain provisions of the federal Clean Air Act at its
Bristol, Tennessee manufacturing facility. King has executed a tolling
agreement with the DOJ in order to facilitate the possible resolution of
this matter. We do not expect that any injunctive relief or penalties that
may result from this matter will be material to Pfizer.

In October 2011, we voluntarily disclosed to the EPA potential
non-compliance with certain provisions of the federal Clean Air Act at our
Barceloneta, Puerto Rico manufacturing facility. We do not expect that any
injunctive relief or penalties that may result from our voluntary
disclosure will be material to Pfizer. Separately, in October 2012, the EPA
issued an administrative complaint and penalty demand of $216,000 to
resolve alleged non-compliance with similar provisions of the federal Clean
Air Act that the EPA identified as part of its March 2010 inspection of the
Barceloneta facility. We have commenced discussions with the EPA seeking to
resolve this latter matter.

A4. Legal Proceedings––Government Investigations

Like other pharmaceutical companies, we are subject to extensive regulation
by national, state and local government agencies in the U.S. and in the
other countries in which we operate. As a result, we have interactions with
government agencies on an ongoing basis. It is possible that criminal
charges and substantial fines and/or civil penalties could result from
government investigations. Among the investigations by government agencies
is the matter discussed below.

The DOJ is conducting a civil investigation regarding Wyeth’s practices
relating to the pricing for Protonix for Medicaid rebate purposes prior to
Wyeth's acquisition by Pfizer. In 2009, the DOJ filed a civil complaint in
intervention in two qui tam actions that had been filed under seal in the
U.S. District Court for the District of Massachusetts. The complaint
alleges that Wyeth’s practices relating to the pricing for Protonix for
Medicaid rebate purposes between 2001 and 2006 violated the Federal Civil
False Claims Act and federal common law. The two qui tam actions have been
unsealed and the complaints include substantially similar allegations. In
addition, in 2009, several states and the District of Columbia filed a
complaint under the same docket number asserting violations of various
state laws based on allegations substantially similar to those set forth in
the civil complaint filed by the DOJ. We are exploring with the DOJ various
ways to resolve this matter.

A5. Legal Proceedings––Certain Matters Resolved in 2012

As previously reported, during 2012, several matters, including those
discussed below, were resolved or were the subject of definitive settlement
agreements or settlement agreements-in-principle.

Rapamune
In October 2012, Wyeth entered into an agreement-in-principle with the DOJ
to resolve the previously reported civil and criminal investigation with
respect to Wyeth's promotional practices relating to Rapamune prior to
Wyeth's acquisition by Pfizer. Under the agreement-in-principle, we will
pay approximately $257 million to resolve the civil allegations and
approximately $234 million to resolve the criminal allegations, and Wyeth
will plead guilty to a misdemeanor misbranding offense under the U.S.
Federal Food, Drug and Cosmetic Act. The resolution is subject to the
execution of final settlement agreements by the parties as well as court
approval, which is expected to occur in the coming months. In connection
with the agreement-in-principle, we recorded a charge of $491 million,
which is not deductible for income tax purposes, in the third quarter of
2012.

Celebrex
Pfizer and several predecessor and affiliated companies, including Monsanto
Company (Monsanto), were defendants in an action brought by Brigham Young
University (BYU) and a BYU professor in the U.S. District Court for the
District of Utah alleging, among other things, breach by Monsanto of a 1991
research agreement with BYU. Plaintiffs claimed that research under that
agreement led to the discovery of Celebrex and that, as a result, they were
entitled to a share of the profits from Celebrex sales. Plaintiffs sought,
among other things, compensatory and punitive damages and equitable relief.
On April 28, 2012, the parties reached an agreement-in-principle to settle
this action for $450 million, and we recorded a charge in that amount in
the first quarter of 2012. In June 2012, the parties entered into a final
settlement agreement, and the action was dismissed with prejudice by the
court.

B. Guarantees and Indemnifications

In the ordinary course of business and in connection with the sale of
assets and businesses, we often indemnify our counterparties against
certain liabilities that may arise in connection with the transaction or
related to activities prior to the transaction. These indemnifications
typically pertain to environmental, tax, employee and/or product-related
matters and patent-infringement claims. If the indemnified party were to
make a successful claim pursuant to the terms of the indemnification, we
would be required to reimburse the loss. These indemnifications are
generally subject to threshold amounts, specified claim periods and other
restrictions and limitations. Historically, we have not paid significant
amounts under these provisions and, as of December 31, 2012, recorded
amounts for the estimated fair value of these indemnifications are not
significant. See also Note 1E. Basis of Presentation and Significant
Policies: Fair Value.
C. Purchase Commitments

As of December 31, 2012, we have agreements totaling $3.5 billion to
purchase goods and services that are enforceable and legally binding and
include amounts relating to advertising, information technology services,
employee benefit administration services, and potential milestone payments
deemed reasonably likely to occur.

--
James Love.  Knowledge Ecology International
http://www.keionline.org, KEI DC tel: +1.202.332.2670, US Mobile:
+1.202.361.3040, Geneva Mobile: +41.76.413.6584,   twitter.com/jamie_love



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