The Seventh Circuit recently held in Astellas US Holding, Inc. v. Federal Insurance Company, No. 21-3075 WL 3221737 (7th Cir. 2023) (“Astellas”) that insurance policies may need to cover settlements designed to compensate a party and make them whole, including settlements paid the United States government, and the cost of defense in False Claims Act cases.
Background
In Astellas, the Department of Justice investigated Astellas’ contributions to patient assistance plans in connection with its androgen receptor inhibitors which were used to treated metastatic prostate cancer.
In 2012, Astellas created and launched a new androgen receptor inhibitor used to treat metastatic prostate cancer that did not respond to surgical intervention. Over several years, Astellas contributed almost $130 million to targeted and general patient assistance funds. Throughout the government’s investigation, Astellas’ marketing executive acknowledged that he “hoped” and “expected” that Astellas’ contributions would result in financial benefits for the company. That said, he maintained that the key purpose of these donations was charitable and clarified that Astellas had made no effort to calculate “a return on investment.”
Astellas’ Settlement with the Government
Eventually, the parties entered into a settlement agreement in which Astellas paid the government $100 million. Of this $100 million, $50 million was labeled “restitution to the United States” for tax purposes. Once this settlement was...
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