$600 million Fraud Settlement by Botox Maker (Allergan) & Unanswered Questions

HEALTH CARE FRAUD
$600 Million Settlement in Botox Case by Allergan (Irvine, CA) – but Key Questions Remain!

“The pharmaceutical company Allergan has agreed to pay $600 million in criminal and civil penalties for aggressively promoting its flagship drug Botox for uses not approved by the Food and Drug Administration (FDA), for paying kickbacks to doctors, and for other violations of the False Claims Act.

Today’s announcement represents the culmination of a complex, three-year investigation by the FBI and our federal partners in which millions of documents and dozens of hours of electronic evidence were collected.

“This case sends a clear message,” said Brian Lamkin, special agent in charge of our Atlanta Division, “that the FBI will not allow manufacturers to promote their prescriptions or products for uses beyond their intended purpose.”

Botox is widely known for its cosmetic use, but the FDA has approved the drug for therapeutic treatment in a few rare cases.   Still, for nearly a decade, Allergan—an international company based in California—made it a top corporate priority to maximize sales in the lucrative off-label market.  The company promoted the drug to treat headaches, pain, spasticity, and juvenile cerebral palsy—all without FDA approval.”

Click HERE to READ the rest of the FBI’s Press Release.

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Per Matthew Perrone – Associated Press:

“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 governments 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 to post on its website any payments to doctors, such as honoraria, travel or lodging.”

Click HERE to READ the rest of the AP article.

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In my professional judgment, the company could have avoided the $600 million payment (including $225 million in civil fines and the $25 million in forfeiture of assets) if it had had a very strong, and effective compliance and auditing program , especially since in December 2001 TAP (Takeda Abbot Pharm – a joint venture) agreed to pay $875 Million to Dept of Justice for a similar issue, and Allergan’s known non-compliance was primarily from 2000-20005.

Key Unanswered questions:

1)  What impact does this have on the annual Management Representations that the company gave its external auditors as part of its annual independent audit, which this past year was Ernst & Young LLP.

2) How informed was Allergan’s “Audit and Finance Committee” a Board Committee since in its oversight role, a key primary duty and responsibility is to “review the integrity of the Corporation’s Financial Statements, financial reporting process, and systems of internal controls regarding finance, accounting, and [LEGAL COMPLIANCE]“; and how will Allergan’s Audit Committee ensure effective and efficient compliance so that they do not face any future potential personal liability under the Caremark Business Judgment Rule (see Caremark Case).

3)  Did any member of senior management represent to the Board that it was not aware of any non-compliance, when in fact they were, which might imply that they were in violation of SARBANES-OXLEY in particular section 404, and 406, and section 302 (B).

4)  Since this involved the marketing and un-approved use of this product which could have had adverse medical consequences to the patient, will there be any Jail Time for these CRIMINAL actitiviesIf not, Why not?

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Per Allergan Press Release:

“As part of its global settlement, Allergan has entered into a Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S. Department of Health and Human Services.  Under the CIA, Allergan will maintain its current compliance program and undertake a series of compliance-related obligations, including additional monitoring, maintenance of specific written standards, auditing, training, education, reporting and disclosure, for five years.  The CIA also provides for an independent third-party review organization to assess and report on Allergan’s compliance program.”

Click HERE to Read the rest of the Company’s Press Release:

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posted by Francisco J. Barragan

former Chief Audit Executive at 4 multinational companies, including pharmaceutical and biotech companies.


About Francisco Barragan