Allergan to plead guilty, pay $600 million for Botox charges

The maker of anti-wrinkle agent Botox has reached a $600 million settlement with federal prosecutors in Atlanta and agreed to plead guilty to illegal promotion of the product.

Under the agreement, Allergan Inc. will plead guilty to a misdemeanor charge of "misbranding" Botox by persuading physicians to prescribe it for unapproved uses. From 2000 through 2005, the Irvine, Calif.-based company illegally marketed Botox to treat headaches, pain, cerebral palsy in children and spasticity, a disorder of the central nervous system, federal prosecutors said.

The settlement calls for Allergan to pay a criminal fine totaling $375 million and a civil settlement of $225 million. It will be the largest settlement reached by the U.S. Attorney's Office in Atlanta. The deal is not final until approved by a federal judge.

Botox is best known as a cosmetic application to smooth out wrinkles and the Food and Drug Administration has approved the product for limited therapeutic use. This includes treatment of involuntary eyelid contractions, neck muscle spasms, crossed eyes and excessive underarm sweating.

Promotion of Botox for so-called "off-label" uses was illegal, U.S. Attorney Sally Yates said Wednesday.

"Yet Allergan made it a top corporate priority to maximize sales of far more lucrative off-label uses that were not approved by FDA," she said. "Allergan further demanded tremendous growth in these off-label sales year after year, even when there was little clinical evidence that these uses were effective."

Botox's worldwide sales totaled $1.3 billion last year and $691 million during the first six months of 2010. The revenue was split about evenly between therapeutic and cosmetic use.

The criminal investigation began three years ago with a lawsuit filed in U.S. District Court in Atlanta by two whistle-blowers who live in the metro area -- Charles Rushin, a former Botox sales representative, and Amy Lang, a doctor who worked for Allergan as a consultant.

"When they started this, they had no idea if anyone would believe what they said, so they did it on faith," John Floyd, their Atlanta attorney, said. "This settlement vindicates their decision to come forward. We're happy to see it."

Two other lawsuits filed by three more whistle-blowers in other jurisdictions were transferred to Atlanta. One suit, filed in Boston, accused Allergan of allowing regional managers to pay kickbacks to doctors who prescribed off-label uses of Botox, said Marcella Auerbach, a Ft. Lauderdale attorney representing two whistle-blowers.

The five whistle-blowers will split $37.8 million, plus accrued interest, as part of the civil settlement.

In a statement, Allergan said it believed the settlement was in the best interest of its stockholders.

"However, Allergan denies liability associated with these civil allegations and does not believe there is merit to them factually or legally," the company said.

In March, the FDA approved Botox for the treatment of increased muscle stiffness in the elbow, wrist and fingers for adults with upper limb spasticity, the company said. Allergan added that it also expects the FDA to approve the therapeutic use of Botox to treat chronic migraines.