Abbott to Pay $1.6 Billion to Settle Depakote Drug Allegations

Abbott Laboratories (ABT) said it reached an agreement to pay $1.6 billion to settle federal and state claims resulting from an investigation into its epilepsy medication Depakote, the second-largest drug-marketing settlement in U.S. history.

The company will pay $800 million to resolve civil allegations split among federal and state governments, $700 million for a criminal penalty, the Justice Department said in a statement. Abbott marketed the drug, approved for epilepsy, bipolar mania and migraine prevention, for unapproved uses including dementia, the U.S. said.

The settlement results from a four-year-old investigation into Abbott sales practices that began in 1998, the Abbott Park, Illinois-based company said yesterday in a statement. Abbott said it is also paying $100 million to the states to resolve consumer protection matters.

“Not only did Abbott engage in off-label promotion, but it targeted elderly dementia patients and downplayed the risks apparent from its own clinical studies,” Acting Associate Attorney General Tony West said in the Justice Department statement. “As this criminal and civil resolution demonstrates, those who put profits ahead of patients will pay a hefty price.”

Funds Set Aside

The settlement comes as Abbott officials are pushing ahead with plans to split the firm in two by the end of the year. One of the resulting companies will sell medical products and the other prescription medicines. Abbott’s first-quarter revenue climbed 4.6 percent to $9.46 billion, executives said last month.

The company previously announced it had set aside funds to pay a settlement of about this size. The agreement trails only the $2.3 billion settlement Pfizer Inc. (PFE) paid in 2009 to resolve U.S. investigations of improper marketing of its Bextra painkiller and other drugs.

“We are pleased to resolve this matter and are confident we have the programs in place to satisfy the requirements of this settlement,” Laura J. Schumacher, Abbott executive vice president and general counsel, said in the statement.

Justice Department officials said last year they were involved in “active settlement discussions” with Abbott over its Depakote marketing practices. The government agreed to join cases brought by former Abbott employees alleging the company engaged in so-called off-label marketing of the epilepsy drug starting in the late 1990s.

‘Specialized Sales Force’

“Abbott admits that from 1998 through 2006, the company maintained a specialized sales force trained to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients, despite the absence of credible scientific evidence that Depakote was safe and effective for that use,” the Justice Department said in its statement yesterday.

Abbott also marketed the drug to be used with certain antipsychotic drugs to treat schizophrenia, “even after its clinical trials failed to demonstrate that adding Depakote was any more effective than an atypical antipsychotic alone for that use,” the Justice Department said.

Federal regulators only approved Depakote for the prevention of migraines, treating acute manic episodes in bipolar patients and halting seizures in adults and children.

Under U.S. law, a doctor can prescribe a medicine for any condition as long as it’s licensed by the U.S. Food and Drug Administration and is proven to be safe and effective. Drug companies aren’t allowed to promote a drug for uses other than those approved.

Whistle-Blower Claims

The settlement also covers allegations that Abbott paid kickbacks to health-care professionals and long-term care pharmacy providers to induce them to promote or prescribe Depakote, the Justice Department said in its statement yesterday.

“This is a terrific result for the public,” Reuben A. Guttman, a Washington-based lawyer representing some of the whistle-blowers who sued Abbott, said in an interview. “This is one of the largest drug settlements of false-claim allegations in history.”

The whistle-blowers will get $84 million from the federal civil recovery portion of the settlement, according to federal False Claims Act provisions.

In the $800 million civil portion of the settlement with the U.S., Abbott will pay $560.9 million to the federal government and $239.1 million to states participating, the Justice Department said. Louisiana isn’t participating in the settlement, according to the Justice Department.

It’s the second illegal marketing settlement the government has reached with a maker of an epilepsy drug. In 2004, Pfizer’s Warner-Lambert unit pleaded guilty to federal criminal charges over illegal marketing of its Neurontin epilepsy drug and paid $430 million to resolve both criminal and civil claims over the medication.

The Depakote case is U.S. ex rel. McCoyd v. Abbott Laboratories, 1:07-CV-00081, U.S. District Court, Western District of Virginia (Abingdon).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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