Actavis plc (ACT) Holds Settlement Talks with DOJ

Actavis plc (NYSE:ACT) has reportedly been holding talks with the Department of Justice to resolve an enquiry on the marketing strategies of a division. The company has been charged with allegations of making payments to doctors improperly. In a filing with the SEC and court documents, the company has updated its discussions with the government.

Potential Resolution

Actavis plc (NYSE:ACT) said that its primary objective of discussing with the Government was to find a possible resolution of the establishment’s investigation. It was first disclosed in 2012 related to the investigation of Warner Chilcott, which Actavis required it in 2013. Incidentally, Actavis provided a contingent liability in respect of the case in the first quarter. However, the company has not disclosed the amount for it.

According to the rules, the companies needed to book such losses in case a company is trying to reach a possible solution to the investigation and provide an estimated liability. In the recent past, several drug firms have struck agreement with government to settle the investigations related to sales, as well as, marketing practices. Settlements come in the form of paying fines or penalties and in some cases pleading guilty to the violations of the laws of the land.

Comments Declined

Both Actavis plc (NYSE:ACT) and Department of Justice have refused to disclose anything about the possible settlement. The DOJ has sent subpoenas to Warner Chilcott, as well as, a number of its present and former employees commencing from February 2012. The drug maker has been asked to provide information such as sales and marketing besides payments to people, who recommend the drug. This was in respect of a number of products belonging to Warner Chilcott.

In 2011, two former sales executives filed a lawsuit against Warner Chilcott listing allegations and this resulted in the government initiating probe. The suit’s main allegation was the fraudulent marketing of some drugs between the period 2003 and 2011. This included birth-control pill Loestrin, osteoporosis treatment Actonel, and the ulcerative-colitis treatment Asacol.

Doctors Paid

Actavis plc (NYSE:ACT) has also been accused of paying doctors inducing them to prescribe the drugs and promote the use of the drugs, which were not approved by the FDA in the United States. As a result, the government had to pay for prescriptions for the drug that should not have been paid. Other allegations also included treating nurses and doctors to dinners, as well as, drinks. In fact, some events were dubbed as ‘nurses’ night out’ to apply pressure on prescribing the drugs.

The government’s incentive to part with information of suspected fraud might have obviously lured the former staff to file their lawsuit. The Government’s act provides room for such staff to earn a port of any possible recovery from such a lawsuit.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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