Allergan pleads guilty and agrees to pay $600 million to settle charges that it marketed Botox for off-label uses
According to the Department of Justice, Allergan made it a “top corporate priority” to maximize sales of Botox for off-label uses by employing illegal marketing tactics. Those tactics included 1) calling on providers who typically treated patients with Botox for off-label conditions, 2) conducting workshops on how to bill for off-label uses of Botox and 3) operating a hotline that provided free on-demand services to doctors for off-label uses. In addition, Allergan lobbied government health care programs to expand coverage for off-label uses, officials said.
Pharmaceutical companies should be aware of the fact that bodily injury claims resulting from off-label promotion may not be covered by their Product Liability insurance. Most policies exclude coverage for willful and intentional non-compliance with FDA regulations. Other policies are more specific on this subject, with exclusions for damages arising out of dissemination of information in connection with any unapproved use of a product in violation of any law or regulation.
Shortly after the announcement of the DOJ settlement, Allergan was sued by its shareholders. Will their Directors’ & Officers’ (D&O) Liability insurance policies exclude coverage for these claims? Virtually all D&O policies exclude coverage for deliberate fraudulent acts. Will Allergan’s insurer(s) assert that these actions were fraudulent and that the guilty plea constitutes “final adjudication” in an attempt to exclude coverage? Will the D&O insurance market respond to this settlement by adding exclusionary language to their policies for off-label promotion? Time will tell.
About the Author
Michael Kearney is an Executive Vice President at WGA and co-leader of the Life Sciences Practice in WGA’s Property and Casualty Group . He specializes in working with life sciences and high technology companies, with a new emphasis on green companies, such as biofuel manufactures and clean technology.