Allergan Pleads Guilty To Misbranding Charge Agrees To Pay $600 Million In Fines And Penalties

Sep 17, 2010   

Allergan, Inc., the manufacturer of Botox ® Cosmetic, has agreed to plead guilty to one count of misbranding, a violation under the Food, Drug, and Cosmetic Act (“FDCA”). The company pled guilty to misbranding for its off-label promotion of Botox for unapproved uses.

Botox is an injectable neurotoxin commonly used in cosmetic procedures to smooth wrinkles. The FDA has also approved the use of Botox to treat certain muscle spasms and excessive underarm sweating. However, authorities allege that from 2000 to 2005 Allergan marketed Botox for use in treating headaches, pain, muscle stiffness, and cerebral palsy in juveniles, none of which were ever approved by the Food and Drug Administration (“FDA”). Under Federal law, although doctors can prescribe drugs for unapproved uses, pharmaceutical companies are prohibited from advertising or promoting unapproved uses for drugs currently on the market. Authorities also allege Allergan paid kickbacks to doctors who used Botox for off-label purposes and taught doctors how to miscode Botox claims when submitting these claims for Medicare and Medicaid billing.

Under the terms of the plea agreement, Allergan agreed to plead guilty to one count of misbranding and will pay $375 million in criminal penalties. The company also agreed to a five year compliance plan that will require it to disclose payments to doctors on its website and have senior executives and board members annually certify that the company is complying with federal regulation. The plea agreement also required the company to drop its lawsuit against the FDA which it filed in October 2009 that challenged an FDA rule that prohibits pharmaceutical companies from marketing drugs for off-label uses. Allergan also agreed to pay $225 million to resolve the civil claims against the company filed by five whistle-blowers in Georgia under the False Claims Act. The $600 million settlement is the fifth largest amount paid by a single defendant in a misbranding case.

In the wake of the companys guilty plea and $600 million penalty, a shareholder of Allergan has filed suit against the members of Allergans board of directors. The suit, filed in Delaware state court, alleges breaches of fiduciary duties and is seeking to shift settlement costs to the members of the Allergan board of directors in an effort to hold board members responsible for the $600 million in penalties the company now faces.

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