UPDATE 1-Medicis agrees to $9.8 mln settlement-DOJ

(Adds company statement, dateline)

NEW YORK, May 8 (Reuters) - Medicis Pharmaceutical Corp. (MRX.N: Quote, Profile, Research, Stock Buzz) will pay $9.8 million to settle allegations that it promoted its anti-fungal cream Loprox for unapproved uses, the U.S. Department of Justice said on Tuesday.

The drug company had allegedly promoted Loprox -- typically used for fungal skin conditions such as athlete's foot -- among pediatricians as a treatment for diaper rash from about November 2001 through April 2004.

Loprox, known chemically as ciclopirox, is only approved by the U.S. Food and Drug Administration as a fungicide for patients over 10 years of age, the Justice department said.

The settlement resolves, without admission of liability, all federal and state civil claims related to the case, Medicis said. The company sold its Ascent Pediatrics unit in 2004.

Medicis said it had entered into a Corporate Integrity Agreement with the Department of Health and Human Services in an effort to show that it was reinforcing regulatory compliance in the sale and promotion of its products.

"Medicis confronted this situation head on and fully cooperated with the government, consistent with the company's strong commitment to compliance and integrity," Jason Hanson, general counsel of Medicis, said in a statement.

(Additional reporting by Anant Vijay Kala in Bangalore)