Allergan Directors Are Sued Over Marketing of Botox - Bloomberg

Allergan Directors Are Sued Over Marketing of Botox - Bloomberg: "Allergan Inc. directors should be held liable for opening up the maker of wrinkle smoother Botox to criminal sanctions and a $600 million settlement by allowing the drug to be marketed for unapproved uses, investors said in a lawsuit.

Allergan’s board approved so-called off-label marketing plans for Botox as part of the company’s strategic plans and ignored repeated violations of federal law governing the sales and marketing of drugs, a Louisiana pension fund said in its Delaware Chancery Court lawsuit. The suit seeks to force directors to return money to the company to offset the settlement payout.

Allergan, based in Irvine, California, agreed Sept. 1 to plead guilty to a single misdemeanor charge in settling a U.S. probe of its Botox marketing practices. The company will pay $375 million in criminal fines and $225 million to resolve civil claims filed by the U.S. Justice Department.

“The off-label marketing practices have already caused injury to the company and will continue to cause harm by virtue of the fines it has agreed to pay in connection with those illegal sales and marketing practices,” the fund’s lawyers said in the Sept. 3 complaint.

Allergan officials said in a U.S. Securities and Exchange Commission filing today that they are still studying the suit. The drugmaker “expects to contest it vigorously,” Matthew Maletta, Allergan’s associate general counsel, said in the filing.

Unapproved Uses

Prosecutors alleged Allergan executives pushed salespeople to market the anti-wrinkle drug for headache, pain, muscle stiffness and juvenile cerebral palsy, which weren’t approved by the U.S. Food and Drug Administration.

Although doctors may prescribe drugs for uses not approved as safe and effective by government regulators, companies are forbidden to market them for off-label uses.

The global settlement concluded a more than two-year investigation that some analysts have said has held up FDA approval for use of Botox to treat migraines.

The drug, already Allergan’s top product with $1.3 billion in annual sales, may generate an additional $1 billion with use in migraines, according to Aaron Gal, an analyst at Sanford C. Bernstein & Co. in New York.

Executive Compensation

The Louisiana Municipal Police Employees Retirement System, which invested in Allergan’s shares, filed a so-called derivative suit against the company’s board on behalf of the company. Any money recovered will go back into the drugmaker’s coffers, not directly to investors.

Because the Botox off-label marketing plan was part of the company’s “strategic plan,” directors either knowingly approved of the illegal sales or were asleep at the switch while subordinates carried them out, the suit contends.

David Pyott, Allergan’s chairman and chief executive officer, directly benefitted from the illegal Botox sales through increases to his compensation package, the fund’s lawyers added in the suit. Pyott should be forced to return some of that compensation, the suit said.

The case is Louisiana Municipal Police Employees Retirement System v. Pyott, 5795, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.

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