Vol 22, 2013 Annals of Health Law 440
PROSECUTIONS OF PHARMACEUTICAL COMPANIES
shareholder suits against companies accused of off-label marketing. These
suits can lead to large settlements, accompanied by hefty fees for plaintiffs’
counsel. For example, Pfizer’s $2.3 billion settlement with the DOJ in
2009, which resolved allegations about off-label marketing of a number of
drugs, triggered the filing of several derivative suits within just a few
months of the announcement. The suits were consolidated in the U.S.
District Court for the Southern District of New York.221 The parties
reached a settlement whereby Pfizer agreed to undertake additional
compliance activities and to establish a $75 million fund to support a
regulatory and compliance committee that would oversee its marketing
practices. In April 2011, the court approved the settlement and the
accompanying $22 million fee award to plaintiffs’ counsel.222
More recently, following Allergan’s guilty plea and $600 million
settlement with the DOJ over allegations that it illegally marketed Botox for
off-label uses, the company and its directors have been faced with a bevy of
derivative actions by shareholders.223 Plaintiff shareholders in the
consolidated action In re Allergan, Inc. Shareholder Derivative Litigation224
in the United States District Court for the Central District of California
alleged that Allergan’s directors caused the company to illegally promote
Botox for off-label uses.225 The claims for violations of the Securities and
Exchange Act of 1934, breach of fiduciary duty, corporate waste, unjust
enrichment, and insider trading were ultimately dismissed based on a
determination that the plaintiffs had failed to establish demand futility, as
required by applicable Delaware law to pursue these claims against
directors without making a prior demand to cease the offending conduct.226
Multiple rounds of motions to dismiss were required to reach that result.227
However, even the dismissal of the consolidated federal complaint did
not mean the end of the matter for Allergan and its directors. Three months
after the dismissal of the consolidated federal action, the Delaware
Chancery Court refused to dismiss a parallel state action, Louisiana
Municipal Police Employees’ Retirement System v. Pyott, that was brought
221. In re Pfizer Inc. Shareholder Derivative Litigation, 722 F. Supp. 2d 453, 454-57
(S.D.N. Y. 2010).
222. Order and Judgment Approving Class Action Settlement, In re Pfizer Inc.
Shareholder Derivative Litigation, No. 09 Civ. 7822 (JSR) (S.D.N. Y. April 29, 2011).
223. For a synopsis of Allergan’s marketing efforts, the investigation by multiple
government agencies, the settlement, and the various derivative actions, see Louisiana
Municipal Police Employees’ Retirement System v. Pyott, C. A. No. 5795-VCL, 46 A.3d
313, 317-22 (Del. Ch. 2012).
224. In re Allergan, Inc. Shareholder Derivative Litigation, No. 10-cv-1352, 2012 U.S.
Dist. LEXIS 5590 ( C.D. Cal. Jan. 17, 2012)
225. Id. at *7-12.