Healthy Skepticism Library item: 7201

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: media release

Bristol-Myers Squibb Announces Agreement In Principle to Settle Federal Investigation Into Pricing, Sales And Marketing Practices
Bristol-Myers Squibb 2006 Dec 21
http://newsroom.bms.com/index.php?s=press_releases&item=226

Abstract:

Bristol-Myers Squibb Company
(NYSE: BMY) (“the Company”), the United States Department of Justice, and the Office of the United States Attorney for the District of Massachusetts have reached an agreement in principle, subject to approval by the U.S.
Department of Justice (DOJ), to settle several investigations involving the Company’s drug pricing, and sales and marketing activities. The investigations began several years ago.

The agreement in principle provides for a civil resolution and an expected payment of $499 million. There would be no criminal charges against the Company. The agreement in principle also provides for the Company to enter into a corporate integrity agreement with the Office of Inspector General
(OIG) of the U.S. Department of Health and Human Services (HHS). The settlement is contingent upon the parties’ agreement to the terms of a final settlement agreement, including on the terms of the corporate integrity agreement, and approval by the DOJ. There can be no assurance that the settlement will be finalized.

As a result of the agreement in principle, the Company has increased its reserves related to these investigations by $353 million, bringing the aggregate reserves for these matters to $499 million. The increased reserve will be recorded in the fourth quarter of 2006. The aggregate reserves reflect the Company’s estimate of the expected probable loss with respect to these matters, assuming the settlement is finalized. If the settlement is not finalized, the amount reserved may not reflect eventual losses.

In addition, the Company will record an estimated pre-tax charge of $220 million for the previously disclosed debt restructuring completed in the fourth quarter. This charge is unrelated to the agreement in principle.

The two charges discussed above were not reflected in the Company’s previously issued 2006 earnings guidance. Accordingly, the Company is lowering its 2006 full-year earnings guidance for fully diluted earnings per share from continuing operations on a GAAP basis to between $0.72 and $0.77, from $0.97 and $1.02 as previously provided at the end of the third quarter of 2006. The Company’s revised GAAP guidance is based on the assumption that none of the expected payment under the settlement agreement will be tax deductible. The Company’s previous accrual of $146 million in connection with the matter also was recorded on the assumption that there would not be any tax benefit associated with the charge. The Company expects that a portion but not all of the expected $499 million settlement payment will be tax deductible, although the amount of the tax benefit cannot be reasonably estimated at this time.