Washington State

Office of the Attorney General

Attorney General

Bob Ferguson


Washington State Attorney General announces three drug company settlements 

OLYMPIA – Washington State Attorney General Rob McKenna announced $3.9 million worth of new settlements with drug companies today. The settlements involve the marketing of drugs in a way that runs afoul of Food and Drug Administration (FDA) regulations. Those marketing practices, government attorneys say, illegally extract money from Medicaid.

“Taxpayers, who fund Medicaid, pay millions for medications every year,” McKenna said. “They deserve to know that their money is being spent for drugs to treat approved illnesses. Today’s settlement returns millions of those hard-earned dollars back to the programs for which they were intended.”

McKenna added that so far this year, his Medicaid Fraud Control Unit (MFCU) has recovered $18.4 million through legal action against drug companies. More than $19 million was recovered in 2009.

The Attorney General’s Office joined the federal government and other states to reach agreements with the makers of Botox, famous as a wrinkle-fighter, the makers of the cystic fibrosis drug TOBI and a company that produces drugs for angina and stomach, intestinal, and urinary tract disorders

In an effort to protect public health, the FDA approves the treatments for which drugs may be marketed. When drug manufacturers promote their drugs for treatments outside of those approved – a practice known as “off-label” marketing – government health-care programs buy more drugs than they would otherwise. Federal and state officials look out for such over-spending.


According to today’s announcement, Allergan, Inc., and Allergan USA, Inc. will settle allegations of off-label marketing of Botox to treat patients suffering from conditions including headaches, overactive bladders and muscle spasms.  Allergan’s marketing included providing physicians with “free” reimbursement services and support, and training them to use a particular Medicaid billing code in order to obtain reimbursement for off-label uses. Allergan also funded continuing medical education programs, honoraria and grants to health care professionals to promote off-label uses.

Botox was initially approved for strabismus (crossed eyes), blepharospasm (uncontrollable eye blinking), cervical dystonia (abnormal head and neck posture with involuntary contractions) and underarm sweating. 

The United States Attorney for the Northern District of Georgia filed a charge alleging a misdemeanor violation of the Food, Drug and Cosmetic Act.  In a plea agreement, Allergan agrees to plead guilty and pay millions in penalties. That includes $600 million in national and state settlements, to be calculated based on how much was improperly spent on the drugs in each state between Jan. 1, 2001 and Dec. 31, 2008.

Of the $584,000 received by Washington state, the Medicaid Program receives $136,000 in restitution and $136,000 is sent to the state’s general fund. The rest is returned to the federal government to cover its share of Medicaid funding.


Washington will receive $3.1 million as part of a national settlement with Novartis Pharmaceuticals Corporation and Novartis Vaccines & Diagnostics, Inc. Approximately $497,000 is paid to the Medicaid Program and $973,000 in penalties go to the general fund. The rest is returned to the federal government.

The agreement with Novartis resolves allegations that the company promoted the use of tobramycin, a cystic fibrosis drug marketed as TOBI, for uses not approved by the FDA.  The settlement also resolves claims brought by three former employees of Chiron Corporation, the company that manufactured and marketed TOBI before it was acquired by Novartis in 2006.

The participating states and the federal government alleged that from January 2001 through July 2006 TOBI was marketed for off- label treatments. The off-label marketing included promoting the drug for diseases other than cystic fibrosis and for use in cystic fibrosis patients under the age of six. As a result of this settlement, Novartis will pay damages equal to double the amount the state expended for prescriptions written as a result the company’s off- label marketing. 


Schwarz Pharma, Inc., a Delaware corporation, and Schwarz Pharma Manufacturing, Inc., an Indiana corporation will settle allegations that the companies violated FDA regulations concerning the regulatory status of the drugs Deponit and Hyoscyamine Sulfate Extended Release (Hyoscyamine Sulfate ER) and failed to notify the Centers for Medicare and Medicaid Services (CMS) that the drugs no longer qualified for coverage under Medicaid. 

Schwarz will pay the states and the federal government a total of $22 million dollars in damages and penalties to compensate Medicaid and various federal healthcare programs for its conduct. Washington state receives $236,133. About $88,000 goes to state Medicaid and $34,000 into the general fund, with the rest returned to the federal government.

Deponit is a patch that has been used to prevent angina.  Hyoscyamine Sulfate ER is an antispasmodic medication for stomach, intestinal, and urinary tract disorders.  The FDA decided in 1997 and 1999 that these drugs would be ineligible for reimbursement by government health care programs.  Government attorneys allege that Schwarz misrepresented the regulatory status of both drugs and failed to advise the drugs did not qualify for coverage under federal health care programs.  As a result, the government says Schwarz knowingly caused false claims to be submitted.  These drugs never received full regulatory approval for safety and effectiveness, and neither product is currently on the market.

A National Association of Medicaid Fraud Control Units team participated in the investigation and conducted the settlement negotiations with Schwarz on behalf of the settling states.  Team members included representatives from New York, South Carolina, Texas and Maine.

A team from the National Association of Medicaid Fraud Control Units represented the interests of the states during negotiations with the drug companies.



Janelle Guthrie, AGO Communications Director, (360) 586-0725