Allergan ($AGN) has been trying for months to resolve bribery allegations that came with its $8.5 billion buyout of Warner Chilcott and now will do that with a plea deal and a $125 million payment. For former Warner Chilcott president W. Carl Reichel, the matter is more complicated. He was arrested and had to appear in federal court in Boston for leading the alleged scheme.
According to the Department of Justice, Warner Chilcott is pleading guilty to one felony charge of healthcare fraud and will pay a $22.94 million fine. It will also pay $91.5 million to the feds and $10.6 million to states to settle civil charges. The criminal charge was based on allegations that from 2009 to 2013, managers had employees file "canned" medical justification forms to get Medicare and Medicaid to pay for prescriptions of Atelvia, which were required since it cost more than other osteoporosis drugs.
Dublin-based Warner Chilcott was acquired in 2013 by what at the time was Actavis, allowing the U.S.-based Actavis to get a better tax structure by relocating its headquarters to Ireland and picking up substantial assets in women's health. Actavis took on the Allergan name earlier this year after completing its $66 billion buyout of the Botox maker. It has acknowledged in a filing last spring that it was talking to federal prosecutors about resolving the charges.
The underlying indictment, which was unsealed on Thursday, was based in part on whistleblower cases that included many of the usual marketing allegations that other drugmakers have been tagged with in previous settlements. Those included plying doctors with expensive dinners, trips and speaker fees to induce them to prescribe Warner Chilcott drugs like Atelvia and Actonel, another Warner drug for osteoporosis. The DOJ said the whistleblowers will share $22.9 million from the federal share of the civil litigation payment.
The feds said Reichel, 57, who lives in New Jersey, was arrested and was slated to appear before a federal judge today. Two former Warner Chilcott district managers have pleaded guilty to related charges. A third has been charged, as has Longmeadow, MA, doctor Rita Luthra, 64, who is accused of accepting some of Warner Chilcott's gratuities for prescribing its osteoporosis drugs to her patients.
The news of the settlement was the second surprise Allergan offered markets on Thursday. It came hours after Allergan acknowledged that it is in "preliminary friendly discussions" with Pfizer ($PFE), which approached it about being acquired. Pfizer has been on the hunt for a company with which it could do its own tax inversion deal ever since its failed effort last year to buy AstraZeneca ($AZN). Allergan has often been mentioned as a potential target.
- here's the DOJ release