Bristol-Myers Squibb pays $499m fine to settle mis-selling charges

Bristol-Myers Squibb, the drug company which fired its chief executive in September after a string of ethics scandals, will pay a $499m (£254m) fine to avoid criminal charges that it overcharged the US government for medicines.

The tentative settlement also includes a "corporate integrity agreement" which will add further federal scrutiny and additional restrictions on the company's behaviour. BMS is already operating under an onerous ethics regime imposed last year after an accounting scandal.

The company said yesterday that it had reached an agreement with the district attorney of Massachusetts "to settle several investigations involving the company's drug pricing, and sales and marketing activities". Federal authorities have spent several years examining a series of allegations against BMS's salesforce. This agreement also settles allegations that BMS encouraged doctors to prescribe medicines - including the schizophrenia medicine Ability - to treat conditions for which they had not been licensed.

The bulk of the fine relates to overcharging of the US government's Medicare and Medicaid insurance schemes. These schemes reimburse patients for their medicines according to a formula based on the average wholesale price of the drugs. BMS was accused of keeping that price artificially high, while in fact supplying drugs at significant discounts.

GlaxoSmithKline, the UK's biggest drug maker, paid $70m earlier this year to settle similar accusations.

BMS had already put aside $146m to cover any fine, but the additional provisions and other financial restructuring costs announced by BMS yesterday will slash 25 per cent from the company's previously expected profit for the year.

BMS shares held steady as analysts welcomed a resolution to one of the legal uncertainties hanging over the company.

Last year BMS paid $450m in fines and was forced to appoint an independent corporate integrity monitor to the board after a $2.5bn accounting fraud. And earlier this year, the FBI raided the office of its chief executive, Peter Dolan.

BMS has already once lowered its profit guidance for the year. As a result of the new charges, it lowered its 2006 outlook for net earnings from continuing operations to between 72 cents and 77 cents a share from a previous estimate of 97 cents to $1.02.