Botox maker Allergan Inc. recently plead guilty to criminal misbranding charges stemming from their role in improperly marketing the popular injectable for "off label" uses. According to the Associated Press, Allergan will pay $375 million in fines based on the misdemeanor charge, in addition to $225 in civil fines.
Assistant Attorney General Tony West explains the case: "Allergan paid kickbacks to induce physicians to inject Botox for off-label uses, including coaching doctors how to miscode Botox claims leading to millions of dollars of false claims being submitted to federal and state programs." Allergan unsuccessfully defended its actions on First Amendment grounds -- arguing that the company had a constitutional right to educate doctors concerning the off label uses of the product.
The wrinkle-smoothing product is a cash cow for the company that made $4.4 billion in 2009. At the time of the investigation, Botox was only approved for four rather rare uses, none of which involved the cosmetic procedures the drug is best known for. Allergan was quick to comment that their guilty plea was not an admission of any false or deceptive conduct on their end. The interesting part of this settlement is not the large sum of money Allergan will be losing, but the fact that a corporation has plead guilty to a criminal charge. Criminal charges, even misdemeanor charges, are rarely brought against a corporation. The reason for this is two-fold: individuals, rather than the entire company are usually found to be responsible for criminal behavior, and the bulk of corporate wrongdoing usually fall under civil crimes.
In total, Allergan will pay the government close to $600 million in criminal and civil fines over the off label misbranding of Botox. Interestingly enough, the settlement has had a positive effect on Allergan Inc.'s stock, the Wall Street Journal reports that shares rose 3% following the announcement of the settlement.