September 2, 2010

Allergan Agrees To $600M Botox Settlement

Allergan Inc., maker of the popular Botox anti-wrinkle treatment, said on Wednesday that it had agreed to pay $600 million to settle an investigation into whether the company had illegally marketed the drug for off-label uses.

In a statement, Irvine, Calif.-based Allergan said it agreed to plead guilty to one misdemeanor charge of "misbranding" its drug for unapproved medical uses between 2000 and 2005, for which it would pay the government $375 million.

The settlement follows a lengthy civil and criminal probe by the U.S. Justice Department, who alleged that Allergan had attempted to maximize sales of Botox through uses not authorized by the U.S. Food and Drug Administration.

"Allergan illegally promoted Botox for uses that were not approved as safe and effective by the Food and Drug Administration, including pain, headache, spasticity, and juvenile cerebral palsy," said Assistant Attorney General Tony West.

Some of these uses have since been approved or are being considered for approval by the FDA.

West said Allergan had "paid kickbacks to induce physicians to inject Botox for off-label uses" and engaged in other abuses.

"Allergan also taught doctors how to bill for off-label uses, including coaching doctors on how to miscode Botox claims, leading to millions of dollars of false claims being submitted to federal and state government programs like Medicare and Medicaid," he said.

"These are not victimless crimes. When our public health care programs are burdened with fraudulent charges, it drives the cost of health care up for all of us."

Sally Yates, U.S. Attorney for the Northern District of Georgia, suggested that Allergan had promoted off-label use of the drug as a way to increase profits.

"The FDA had approved therapeutic uses of Botox for only four rare conditions, yet Allergan made it a top corporate priority to maximize sales of far more lucrative off-label uses that were not approved by FDA," she told the Wall Street Journal.

Allergan also agreed to pay an additional $225 million to resolve civil claims from the Justice Department under the False Claims Act. However, the company denied any liability connected to the civil claims.

"The civil settlement is an element of a global settlement that Allergan believes is in the best interest of its stockholders. However, Allergan denies liability associated with these civil allegations and does not believe there is merit to them factually or legally," Allergan said in a statement.

The company said it would take a $610 million to $615 million pretax charge during the third quarter as a result of the settlement.

"This settlement is in the best interest of our stockholders as it resolves all matters at issue in the investigation, avoids substantial costs of litigation, as well as the substantial risks to Allergan associated with government enforcement action in these matters, and permits us to focus our time and resources on productively developing new treatments for patients and the medical community," said Douglas Ingram, Allergan's executive vice president.

Botox was first approved in the U.S. two decades ago for the treatment of eye muscle disorders.  The drug contains the lethal botulism toxin, and when injected in small doses paralyzes muscles, eliminating wrinkles.

The FDA approved the use of Botox for upper-limb spasticity treatment earlier this year.  Allergan said it expects the agency to rule later this year on the company's application to market Botox for the treatment of chronic migraine headaches.


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