The infractions took place between February 2000 and June 2001, long before the world's largest drugmaker acquired Wyeth in 2009 for $68 billion. Protonix, which belongs to a class of widely used medicines called proton pump inhibitors (PPI), has since gone off patent and is available in cheap generic versions as pantoprazole.

Protonix was approved by the U.S. Food and Drug Administration for short-term treatment of erosive esophagitis -a condition related to gastro-esophageal reflux disease, or GERD, that can only be diagnosed via endoscopy.

The Justice Department accused Wyeth of training its sales force to promote Protonix for all forms of GERD, which is far more common and likely to lead to significantly higher sales.

"Wyeth tried to cheat the system by obtaining a limited FDA approval for Protonix, fully intending to promote this drug for additional, unapproved uses," U.S. Attorney Carmen Ortiz said in a statement.

In addition, Wyeth allegedly promoted Protonix as the "best PPI for nighttime heartburn" even though there was never any clinical evidence that it was more effective than any other PPI, such as AstraZeneca's Nexium, for that use, the Justice Department said.

Pfizer issued a statement saying that it was not the target or subject of this case, but felt that settling it was in its best interest.

"Resolving this investigation regarding Wyeth's historical promotional practices of Protonix is the right thing to do," the company said. "In settling, we avoid both the cost and distraction of litigation and we expressly deny the allegations of wrongdoing."

Pfizer shares were down 14 cents at $25.50 in midday trading on the New York Stock Exchange.

(Reporting by Bill Berkrot; Editing by Maureen Bavdek and Tim Dobbyn)

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