Allergan will pay $600 million to the government and drop its First Amendment suit against FDA to resolve a Department of Justice investigation of its off-label marketing of Botox (onabotulinumtoxinA).

The company pled guilty to a single criminal misdemeanor charge of misbranding the drug in violation of the Food, Drug, and Cosmetic Act, for which it will pay a $350 million criminal fine and forfeit assets of $25 million. In addition, Allergan will pay states and the federal government $225 million to resolve civil claims brought under the False Claims Act that its marketing practices caused false claims to be submitted to government health care programs. That sum includes $33 million for the Medicaid program.

The federal share of the civil settlement is $210.2 million while states will receive $14.7 million. State attorneys general participated in the investigation. Fifty states coordinated their efforts by appointing a team of four attorneys and two analysts led by an attorney at the Oregon Department of Justice. Oregon's Medicaid program will receive $171,041 under the settlement.

The plea and sentence is not final until it is accepted by the federal court in the Northern District of Georgia.

DoJ Says Allergan Taught Docs To Bill For Off-Label Use

The DoJ said that in 2003, Allergan doubled the size of its reimbursement team to assist doctors in obtaining payments for off-label Botox injections. Allergan "held workshops to teach doctors and their office staffs how to bill for off-label uses, conducted detailed audits of doctors' billing records to demonstrate how they could make money by injecting Botox, and operated the Botox Reimbursement Hotline, which provided a wide array of free on-demand services to doctors for off-label uses," the DoJ said in a release.

The civil settlement resolves three qui tam, or whistleblower, suits filed against the company in federal court in the Northern District of Georgia. Five whistleblowers will receive $37.8 million of the federal share of the settlement.

One complaint, filed by Cher Beilfuss, a former Allergan regional healthcare policy manager, and Kathleen O'Connor-Masse, a former reimbursement account manager, in 2008 alleges that the company provided kickbacks to health care providers in the form of consulting services, clinical trials and educational grants for prescribing Botox for off-label uses. It cites one instance in which Allergan paid a physician who saw three headache patients $1,000.

The complaint says that in 2006 Botox therapeutic sales were $330,000 and that approximately 80 percent of reimbursement for Botox was for off-label prescriptions.

Role Of Third Party Vendors Cited

The complaint further claims that Allergan used a third party vendor, Alphamedica, to facilitate reimbursement information and that the vendor discussed off-label coverage and administered a Botox speakers' bureau. The suit also alleges that Allergan sponsored a third party hotline administered by Covance Market Access.

"The purpose of the hotline was for physicians to be able to call and obtain off-label billing assistance including draft letters written for them to get Botox paid for by the insurance companies or government healthcare programs," the complaint states. "Covance Market Access would provide packets of studies containing off-label studies to the physicians."

Another whistleblower suit was filed in 2007 by Amy Lang, a physician hired by Allergan to speak about Botox off-label use at continuing medical education programs, and Charles Rushin, a neuroscience medical consultant at Allergan. Among other things they claim that Allegan taught and encouraged physicians and their staffs to use false or improper codes on claim forms.

A third complaint was filed last year by Allergan sales employee Albert Hallivis, territory business manage for the southern Baltimore region. It alleges that urologist David Gordon promoted Botox for urinary problems during a presentation at a medical meeting.

A Silver Lining For The Brand

While the settlement is a rebuke to Allergan's past promotional practices, it could in fact clear the way for more Botox sales to treat migraine. The application for the expanded label is pending at FDA with a user fee date in October, and the resolution of the suits and the "continuing policing mechanisms that they establish work to clear the path for an approval decision by FDA," the research firm Concept Capital noted in a bulletin following the announcement of the settlement.

The analysts see developing a Risk Evaluation and Mitigation Strategy as a prerequisite for getting the migraine claim approved, but "if Allergan agrees to set the bar high for the degree of training" it could have two benefits for Botox, since it:

# Creates a hurdle that any competitor must meet or exceed; and

# Slows the sales roll-out and may make payers more amenable to coverage.

"One of the ironies of the upcoming REMS requirement for Botox migraine is that it is likely to put the government in the position of reviewing and sanctioning education/promotion programs very similar to the off-label programs for which Allergan is paying substantial fines," the analysts note. "The REMS programs may replicate - with oversight - some of the techniques of training and key leader education efforts that are cited in the complaints against Allergan."

Allergan Forced To Dismiss Suit Against FDA

Botox was approved by FDA in 1989 for treatment of crossed eyes and uncontrolled blinking and subsequently received approval for cervical dystonia and excessive underarm sweating. In March FDA also approved the drug to treat adult upper-limb spasticity. The government claimed that from 2000 through 2005 Allergan engaged in a marketing campaign that targeted patients with headache, pain, spasticity and juvenile cerebral palsy.

In April 2009, a year before FDA approved the drug for spasticity, the agency ordered every manufacturer of botulinum toxin to implement REMS and add a boxed warning to their drug labeling about the risk of swallowing and breathing difficulties in those treated for spasticity. Six months later Allergan filed suit against the agency claiming that its restrictions on what it could tell physicians about unapproved uses violated the First Amendment (Also see "Allergan's Freedom From Expression Suit Challenges Gov't REMS, Off-Label Powers" - Pink Sheet, 2 October, 2009.).

Allergan said the government required it to dismiss the suit as a condition of the settlement.

"Allergan is disappointed that the court was not afforded an opportunity to hear and rule on these important First Amendment issues, as Allergan believes that physicians, patients, manufacturers, payers, and ultimately the quality of evidence-based medicine itself would have benefited from a ruling clarifying the law," the company said in a release.

Allergan denied liability with regard to the civil allegations and said it "does not believe there is merit to them factually or legally."

Part of An Industry Pattern

Allergan also entered into a five-year Corporate Integrity Agreement with the HHS Office of Inspector General. The CIA is similar to those recently imposed on other pharmaceutical companies. It requires that Allergan's board of directors, or a committee of the board, annually review the company's compliance program and pass a resolution that it is effective; that certain senior executives annually certify that their departments are compliant with federal health care program requirements; and that the company post payments to physicians on its website.

While Allergan has resolved its biggest government-related headache, another investigation is hanging over its head. The company reported in a Securities and Exchange Commission filing earlier this year that in September 2009 it had received a subpoena from the Oregon DoJ for documents relating to sales and marketing practices for its acne medicine Aczone (dapsone).

Allergan is the latest of a string of pharmaceutical companies to settle DoJ investigations of off-label marketing practices. Last year Pfizer paid a record $2.3 billion to resolve allegations of off-label marketing of four drugs and kickbacks to health care providers involving nine other drugs ('The Pink Sheet' DAILY, Sept. 2, 2009). Among other settlements, last year Lilly paid $1.4 billion and pled guilty to misbranding its antipsychotic Zyprexa (olanzapine) and in April AstraZeneca agreed to a $520 million civil settlement to resolve allegations involving its antipsychotic Seroquel (quetiapine).

-Brenda Sandburg (b.sandburg@elsevier.com)

Botox Reimbursement Training Is Driving Factor In Allergan Settlement With DOJ

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