On May 3, 2023, the Seventh Circuit Court of Appeals, in Astellas US Holding Inc. v. Federal Insurance Co., held that a liability insurer was required to contribute its limits toward its insured’s payment to settle potential anti-kickback claims because the insurer did not show that such amounts were uninsurable restitution.
Astellas, a Japanese drugmaker, launched a drug to treat metastatic prostate cancer in 2012. Astellas priced the treatment at $7,800 per month, with Medicare to cover approximately $6,000 of the total amount. With the launch of its new drug, Astellas also began to contribute to two patient assistance plans, which were set up to help patients needing the type of drug offered by Astellas.
In 2017, the Department of Justice issued a civil investigative demand to Astellas regarding possible violations of the False Claims Act, the Anti-Kickback Statute, and the criminal health care fraud provision of the Health Insurance Portability and Accountability Act concerning Astellas’ contributions to the patient assistance plans. Astellas and the DOJ avoided litigation by agreeing to a settlement of $100 million in April 2019. Significantly, for tax purposes, $50 million of the total settlement amount was labeled as “restitution to the United States.”
Federal Insurance Co. was one of several liability insurers of Astellas, which provided a directors and officers excess liability policy for $10 million. Federal denied coverage because the policy did not cover...
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