Allergan to pay $600 million to settle Botox case

Allergan Inc., the Irvine maker of anti-wrinkle drug Botox, has agreed to pay the federal government $600 million to settle civil and criminal allegations that it marketed the blockbuster treatment for unapproved uses, the Justice Department said Wednesday.

The specialty pharmaceutical firm also agreed to plead guilty to a single misdemeanor count of promoting Botox for relief of headaches and other uses for which the drug, made from a form of botulism, is not approved by the Food and Drug Administration.

A Justice Department spokesman estimated that the settlement was among the 10 largest healthcare settlements by the department.

The agreement ends more than two years of scrutiny of Allergan’s activities spawned by whistle-blowers. The company was accused of making it “a top corporate priority to maximize sales of Botox” for unapproved uses between 2000 and 2005, according to documents released at a Justice Department news briefing.

Allergan paid doctors to attend meetings promoting unlawful marketing and to lobby healthcare payers to cover off-label use of the drug, according to the documents, which said the company spent $8 million on a purportedly independent, online neurotoxin education organization to “stimulate increased use of Botox.”

In addition to headaches, Botox, an injectable prescription drug, was improperly promoted as a treatment for spasticity, pain and cerebral palsy, the government said.

Botox was widely used off-label to treat cerebral palsy in both children and adults, often with good results. But the drug and competing products also carry “black box” warnings that the botulinum toxin can spread from the area of injection to produce possible life-threatening symptoms, such as trouble breathing and swallowing.

Such hazards are primarily associated with the therapeutic use of the drug, not with its cosmetic applications, which tend to be in relatively small doses.

“These are not victimless crimes. When our public healthcare programs are burdened with fraudulent charges, it drives up the cost of healthcare for all of us,” Assistant Atty. Gen. Tony West said.

Douglas S. Ingram, an Allergan executive vice president, said the settlement was “in the best interest of our stockholders,” resolved all issues and avoided significant litigation costs and “the substantial risks to Allergan associated with government enforcement action in these matters.”

Under federal law, once a drug has been approved for a particular use, doctors can prescribe it for other purposes. But pharmaceutical companies are not permitted to promote such unapproved uses because the drug hasn’t been proved safe and effective through clinical trials and other studies.

The criminal settlement includes a fine of $375 million. Allergan denied liability on civil accusations but agreed to pay $225 million to federal and state governments to cover the cost of false claims submitted to government healthcare programs as a result of the unlawful marketing practices.

Allergan also agreed to enter into a five-year corporate integrity agreement with federal authorities in which it pledged to step up compliance with healthcare and drug laws.

The company also dropped a suit filed last year against the Justice Department and the FDA in which it asserted that FDA limits on off-label promotion violated its 1st Amendment right to speak to doctors about its products.

Both agreements are subject to court approval.

The five whistle-blowers in the case — Amy Lang, Charles Rushin, Cher Beilfuss, Kathleen O’Connor-Masse and Edward Hallivis — will divide $37.8 million from the federal share of the settlement.

The settlement was criticized as inadequate by Sidney Wolfe, director of health research at the nonprofit Public Citizen, which had urged the FDA to require stronger warnings about possible adverse events associated with the off-label use of Botox.

The amount Allergan will pay is a fraction of what the company earned from off-label promotion of the drug, Wolfe said.

“That’s why the stock went up and why Wall Street is breathing a sigh of relief,” he said. “As long as penalties are less than the money from improper sales, they’ll keep doing it.”

Allergan shares gained $1.86, or 3%, on Wednesday to $63.28. The FDA released news of the settlement early in the day.

Global sales of Botox, for both cosmetic and therapeutic uses, were $1.3 billion last year. Allergan does not break out sales between the two categories, nor does it disclose the amount derived from off-label sales, spokeswoman Caroline Van Hove said.

The settlement is not expected to have any effect on earnings, she said, because the cost will come out of $2 billion in cash the company has on hand.

Botox was approved in 1989 as a treatment for eye muscle disorders, and in 2002 for its better-known temporary wrinkle-erasing capabilities. It also is approved for involuntary muscle contractions and for excessive underarm sweating.

It does its wrinkle-smoothing work by paralyzing nerve endings around muscles.

azajac@tribune.com