Irish biotech company Elan faces a fine of more than $200 million over the way it marketed one of its drugs.
An “agreement in principle” with the US justice department will also see the company plead guilty to a misdemeanour violation of the US federal food, drug and cosmetic act.
It also faces significant additional costs under a corporate integrity agreement which it will enter under the settlement. Such agreements are imposed on drug firms for transgressions that can otherwise see them excluded from federal healthcare programmes such as medicare and medicaid, a course that would be disastrous financially.
The agreement in principle was announced after the close of markets last night. The company said it expects to “negotiate and enter a final settlement” over the coming months although there is no target date.
The case relates to the company’s marketing of Zonegran, a drug approved for the prevention of epileptic seizures and follows an investigation launched back in January 2006 by US justice department and the department of health and human services.
Elan was accused to marketing the drug for therapies other than those approved by the US food and drug administration.
While the company was not clarifying last night exactly the nature of the off-label marketing, a number of studies have suggested the drug might have some use in the treatment of obesity.
Elan said it expected to pay a fine of $203.5 million (€158.6 million) and has established a reserve of $206.3 million to cover this and related costs. Until now, Elan had made no provision for the Zonegran litigation.
The fine substantially exceeds the $130 million Elan received upfront for the sale of its US and European rights to Zonegran, although there was provision for additional earn-out payments of up to $110 million. The fine is understood to be the largest that has been imposed on Elan.
The company said it was not aware of any other pending litigation in relation to the marketing of Zonegran but conceded that the proposed settlement could trigger other lawsuits by either state governments or private individuals.
Elan acquired the rights to Zonegran from Dainippon Pharma, the Japanese company that developed it, in 1997.
