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Abbott Labs to Pay $1.6 Billion to Settle Consumer Protection and Misbranding Claims

Abbott Laboratories (Abbott), an Illinois company, will pay over $1.6 billion in penalties to the federal government and several states related to its alleged illegal promotion of the prescription drug Depakote for off-label uses, as announced by the settling parties on May 7, 2012.  Specifically, the government has alleged that the Company:

  • marketed Depakote,  in nursing homes for the control of agitation and aggression in elderly dementia patients between 1998 and 2006, a use not approved by the the Food and Drug Administration,
  • unlawfully promoted Depakote for a broader set of unapproved, non-medically accepted uses for which Medicare and Medicaid could not reimburse providers between 1998 and 2008, and
  • made false and misleading statements about the safety, efficacy, dosing and cost-effectiveness of Depakote for some of these unapproved uses.

The proposed settlement includes the following terms:

Civil False Claims Act (FCA) violations: $800 million

  •    Five-year Corporate Integrity Agreement
  •    Medicare and other federal health care programs: $291 million
  •    Medicaid: $239 million to the states and $270 million to the federal government

Criminal Food, Drug and Cosmetic Act (FDCA) violations: $700 million

  • Five-year term of probation for pleading guilty to misbranding
  • Federal Fine: $500 million
  • Criminal Asset Forfeiture Penalties: $198.5 million
  • Investigative Costs to the Virginia Medicaid Fraud Control Unit (MFCU): $1.5 million

State Consumer Protection Laws: $100 million

The civil FCA component of the settlement resolves allegations presented in four whistleblower qui tam actions filed in the Western District of Virginia in late 2007; the whistleblowers who filed the suits will share an award of $84 million out of the settlement proceeds.  Forty-four states and the District of Columbia will share the proceeds of the state consumer protection settlement.

The settlement is significant for at least two reasons.  First, according to the Virginia Attorney General and the Department of Justice, the FDCA component of the settlement is the second largest payment by a drug company for such conduct.  Second, the $100 million state consumer protection settlement is the largest settlement paid by a drug company under those laws.  This settlement is the latest in a trend toward use of state consumer protection laws to increase recoveries to states, as evidenced most recently by the $1.1 billion judge’s award after a jury trial against a Johnson & Johnson subsidiary for violating the Arkansas Deceptive Trade Practices Act.  Moreover, this settlement – specifically, the large number of states that will share in the monetary proceeds – demonstrates that federal and state governments continue to cooperate with each other to pursue health care enforcement cases.

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