Astellas US Holding, Inc. v. Federal Insurance Co., No. 21-3075 (7th Cir. 2023)Annotate this Case
The 2005 Medicare amendment, launching prescription drug coverage, raised concerns that patient assistance plans could violate the Anti-Kickback Statute, 42 U.S.C. 1320a-7b, and the False Claims Act, 31 U.S.C. 3729, by effectively rewarding doctors and patients for choosing particular drugs. Astellas subsequently launched Xtandi, used to treat metastatic prostate cancer. Priced at $7,800 per month, Xtandi prescriptions were covered by Medicare up to about $6,000 per month. Astellas made contributions to two patient assistance plans. An Astellas marketing executive encouraged both plans to create special funds to provide co-pay assistance for only androgen receptor inhibitors like Xtandi and a few other medications. Astellas donated to the new funds but stopped after contributing about $27 million. Astellas continued contributing to broader prostate cancer funds.
The Department of Justice began investigating; the Astellas marketing executive acknowledged that he had “hoped” and “expected” that the contributions would produce financial benefits for Astellas but that Astellas had made no efforts to calculate “a return on investment.” Astellas settled with the government for $100 million--$50 million for “restitution” to the government. Astellas sought indemnification from liability insurers, including Federal, which denied coverage.
The Seventh Circuit affirmed summary judgment for Astellas. Under Illinois law, a party may not obtain liability insurance for genuine restitution it owes the victim of its intentional wrongdoing, but a party may obtain insurance for compensatory damages. In cases of ambiguity, Illinois favors settlements and freedom of contract. Federal wrote its insurance policy to try to extend coverage to the limit of what Illinois law would allow. Federal did not carry its burden of showing that the portion of the settlement payment for which Astellas seeks coverage is uninsurable restitution.