- Associated Press - Wednesday, September 1, 2010

Allergan Inc., the maker of wrinkle-smoothing Botox, has agreed to pay $600 million to settle a lengthy federal investigation into its marketing of the top-selling, botulin-based drug.

The Justice Department and the company said Wednesday in a statement that Allergan will plead guilty to one misdemeanor charge of “misbranding,” in which the company’s marketing led physicians to use Botox for unapproved uses. Those included the treatment of headaches, pain, spasticity and cerebral palsy in children.

Companies are prohibited from promoting drugs for unapproved, or “off-label,” uses.

Allergan said it will pay $375 million in connection with the plea, which includes the forfeiture of $25 million in assets. Additionally, the company will pay $225 million in civil fines - $210 million to the federal government and the rest to several states - related to the investigation, although the company denies liability for the civil claims.

Allergan, based in Irvine, Calif., also struck an agreement with the Department of Health and Human Services’ Office of the Inspector General that requires the company to submit compliance reports and post on its website any payments to doctors, such as honorariums, travel or lodging.

Allergan “paid kickbacks to induce [physicians] to inject Botox for off-label uses, and Allergan also taught doctors how to bill for off-label uses, including coaching doctors how to miscode Botox claims, leading to millions of dollars of false claims being to submitted to federal and state programs,” Assistant Attorney General Tony West said.

Allergan officials will make their first appearance in federal court on Thursday. The settlement is not official until approved by a federal judge.

The investigation was sparked by a whistleblower complaint, officials said, and five whistleblowers will split $37.8 million of the government’s share of the settlement.

Allergan’s product sales topped $4.4 billion in 2009, with Botox accounting for more than $1.3 billion of that total.

Wells Fargo analyst Larry Biegelsen said the settlement is a positive for the company’s stock because it removes uncertainty.

“We view the settlement as a positive for Allergan as it provides cost certainty … and eliminates additional related litigation cost,” Mr. Biegelsen wrote in a note to investors.

Botox is most famous for its ability to smooth frown lines on aging foreheads, but the drug - introduced in 1989 - is also approved to treat neck spasms, eye-muscle disorders and excessive underarm sweating.

Last year, the drug won approval to treat spasms in the elbows, wrists and fingers. The drug also is widely used off-label to treat cerebral palsy in children as well as in adults, and Allergan says it is in discussions with U.S. health regulators to approve the use of Botox for children with the neuromuscular disorder.

In guidelines published earlier this year, the American Academy of Neurology endorsed Botox as an “effective and generally safe treatment” for children with cerebral palsy. While the use is not approved by the Food and Drug Administration, the guidelines state that there are more studies supporting Botox than other movement-disorder drugs.

As part of the settlement, Allergan agreed to drop a lawsuit against the FDA in which the company pressed for greater leeway to discuss off-label uses with doctors.

The company argued it had a First Amendment right to educate doctors about how to use Botox, even for uses that are not currently approved. FDA’s rules are designed to stop companies from promoting drugs for uses that haven’t been federally confirmed as safe and effective.

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