Pharmaceutical executives called to carpet for off-label marketing

October 7, 2010
Allison Torres Burtka

Although a $600 million settlement between the Department of Justice (DOJ) and Allergan, Inc., over illegal marketing of its biological product Botox was approved by a judge this week, 12 of the company's executives now face a different lawsuit-one brought by a stockholder. Last month, the Louisiana Municipal Police Employees Retirement System filed a shareholder derivative lawsuit against the executives on Allergan's behalf. (La. Mun. Police Employees Ret. Sys. v. Pyott, No. 5795 (Del. Ch. filed Sept. 3, 2010).)

Following Allergan, Inc.'s $600 million settlement with the Department of Justice (DOJ) over illegal marketing of its biological product Botox, 12 of the company's executives face a shareholder derivative lawsuit. The Louisiana Municipal Police Employees Retirement System, a stockholder, filed a lawsuit against the executives on Allergan's behalf. (La. Mun. Police Employees Ret. Sys. v. Pyott, No. 5795 (Del. Ch. filed Sept. 3, 2010).)
According to the complaint, the lawsuit "seeks to shift the burden of the $600 million, plus other costs and expenses, from Allergan to the company's board of directors, who caused the company to incur these payments." The Louisiana group's lawyers declined to comment on the case because it is still in its early stages.

The type of Botox at issue was FDA-approved to treat crossed eyes, involuntary contractions of eyelid and neck muscles, and excessive underarm sweating. But the company marketed it to treat headache, pain, spasticity, and juvenile cerebral palsy as well. This year, Botox was approved to treat adult upper-limb spasticity.

The complaint notes that even after the FDA repeatedly warned the company that it had violated the Food, Drug, and Cosmetic Act, "the board failed to prevent violations of federal statutes, rules, and regulations concerning the sales and marketing of drug products."

It also says that "for nearly a decade, Allergan made it a top corporate priority to maximize sales in the lucrative off-label market."

Allergan pleaded guilty to misbranding and agreed to pay a criminal fine of $375 million. It will also pay a civil settlement of $225 million to resolve allegations that its illegal marketing practices caused false claims to be submitted to government health care programs.

As part of the settlement, the company agreed to dismiss a case it had filed against the government for violating its First Amendment rights-by taking the position that a drug company communicating truthful information to doctors about off-label uses is committing a crime.

In an announcement about the settlement, U.S. Attorney Sally Quillian Yates said that Allergan "demanded tremendous growth in these off-label sales year after year, even when there was little clinical evidence that these uses were effective."

The DOJ stepped in after five whistleblowers filed three complaints against the company. The settlement also resolves the whistleblowers' suits.
Jay Holland of Greenbelt, Maryland, who represents one of the whistleblowers, said the $600 million settlement is large enough to act as a deterrent to similar misconduct by pharmaceutical companies. "It reflects the volume of the sales Allergan profited from," he said.
The DOJ typically does not prosecute individual executives in pharmaceutical cases, but executives may find themselves on the hook for criminal charges in the future. In March, FDA commissioner Margaret Hamburg sent a letter to Sen. Charles Grassley (R-Iowa) referring to "the appropriate use of misdemeanor prosecutions, a valuable enforcement tool, to hold responsible corporate officials accountable." CNN reported that Eric Blumberg, the FDA's deputy chief counsel for litigation, also has mentioned this possibility.

Holland said the DOJ ought to target pharmaceutical company officials. "It wouldn't take many executives to serve jail time for it to act as a deterrent," he said.