Abbott To Pay $1.5 Billion In Civil, Criminal Penalties For Depakote Off-Label Promotion

ABINGDON, Va. - Abbott Laboratories Inc. on May 7 pleaded guilty to one misdemeanor criminal charge and agreed to pay $1.5 billion in criminal fines, civil penalties and forfeiture for off-label marketing its anti-epilepsy drug Depakote despite knowing that it was not effective for those purposes (United States of America v. Abbott Laboratories, No. 1:12-cr-26, United States of America, ex rel. Meredith McCoyd v. Abbott Laboratories, et al., No. 1:07-cv-81, United States of America ex rel. Susan Mulcahy, et al., No. 1:08-cv-54, United States of America, ex rel. Tamara Dietzler v. Abbott Laboratories, No. 1:09-cv-51, United States of America ex rel. Thomas J. Spetter, Jr., No. 1:10-cv-6, W.D. Va.).

(Criminal information available.  Document #28-120518-005F.  Criminal plea agreement available.  Document #28-120518-006P.  Civil settlement agreement available.  Document #28-120518-007P.  Criminal forfeiture available.  Document #28-120518-008R.  Corporate integrity agreement available.  Document #28-120518-009P.)

Abbott pleaded guilty in the U.S. District Court for the Western District of Virginia to a misdemeanor charge of misbranding Depakote, Depakote ER and Depakote Sprinkle in violation of the Food, Drug and Cosmetic Act (FDCA).  Under a plea agreement, Abbott will pay a criminal fine of $500 million, forfeit assets of $198.5 million, pay $1.5 million to the Virginia Medicaid Fraud Control Unit and serve five years' probation.

No restitution was ordered.

Compliance Requirements

The plea agreement also requires Abbott to report any probable violations of the FDCA to the federal probation office, to have Abbott's CEO certify compliance with the reporting requirements and for the Abbott board of directors to annually report on the effectiveness of its compliance programs.

Also during the five-year probation, Abbott will not compensate sales representatives for off-label sales, will ensure that continuing medical education grant decisions are not controlled by sales and marketing employees, will require that letters to health care providers contain accurate and unbiased medical information and will have policies ensuring that approved clinical trial results are published in a consistent and transparent manner.

The guilty plea was entered during a proceeding before Judge Samuel G. Wilson, who must issue a final acceptance.

Civil Settlement

In addition to the guilty plea, Abbott entered into a civil settlement to resolve claims under the False Claims Act and the Anti-Kickback Statute that its off-label promotion and kickbacks to health care and pharmacy providers caused false claims to be submitted to federal and state health care programs such as Medicare and Medicaid.  Abbott agreed to pay $800 million plus interest to the federal government.

In the false claims/kickback settlement, $560.8 million will go to the federal government and $239.1 million to states participating in the settlement.

Meredith McCoyd, a qui tam relator who filed the first of four whistle-blower lawsuits against Abbott, will receive $84 million from the federal share as statutory payment for bringing a whistle-blower lawsuit.  According to the settlement agreement, the other relators - Susan Mulcahy, Doreen Merriam, Sondra Knowles, Tamara Dietzler and Thomas J. Spetter Jr. - will determine allocation of the $84 million in separate agreements among themselves.

Criminal Allegations

In the criminal case, the United States alleged that Abbott promoted Depakote for off-label use in controlling agitation and aggression in elderly dementia patients and to treat schizophrenia.  The drug is approved only to treat epileptic seizures, bipolar mania and migraines.

In an agreed statement of facts, the government says Abbott admits that from 1998 to 2006, it maintained a specialized sales force to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients.  In addition, the government says that from 2001 to 2006, Abbott marketed Depakote in combination with atypical antipsychotic drugs to treat schizophrenia even though clinical trials failed to demonstrate that adding Depakote to a regimen was any more effective that atypical antipsychotics alone.

The government says that in 1999, Abbott discontinued a clinical trial of using Depakote to treat dementia after an increase in adverse events including somnolence, dehydration and anorexia.

Dodge Drug Restrictions

The government says Abbott's sales representatives promoted Depakote in nursing homes because the drug was not subject to certain provision of the Omnibus Budget Reconciliation Act (OBRA) of 1987 and laws implementing regulations designed to prevent the use of unnecessary medications in nursing homes.  The government said Abbott's sales representatives exploited OBRA loopholes, telling nursing home they could avoid administrative burdens and costs of complying with OBRA by using Depakote.

The government says that to effectuate off-label sales, Abbott paid millions of dollars in rebates to pharmacies that supplied long-term care facilities and that rebates were intended to increase the use of Depakote.  In addition, the government says Abbott created programs and materials to train consultant pharmacists about off-label use of Depakote.

From 2001 to 2006, the government says, Abbott marketed Depakote to treat schizophrenia despite the failure of two studies to support that use.  Although the studies failed, Abbott waited nearly two years to tell its sales representatives about the results and waited another two years to publish the results, the government says.

Civil Allegations

In the civil settlement, the federal government and states alleged that from 1998 to 2008, Abbott promoted Depakote for off-label uses including behavioral disturbances in dementia patients, psychiatric conditions in children and adolescents, schizophrenia, depression, anxiety, conduct disorders, obsessive-compulsive disorder, post-traumatic stress disorder, alcohol and drug withdrawal, attention deficit disorder and autism.

The government says that Abbott's false and misleading statements about the safety, efficacy, dosing and cost-effectiveness of Depakote to control behavioral disturbances in dementia patients was intended to help nursing homes avoid compliance with OBRA's restrictions on antipsychotic drugs.

The civil settlement also covers allegations that Abbott offered and paid kickbacks to health care professionals and long-term care pharmacy providers to get them to prescribe or buy Depakote and to influence the content of continuing medical education programs.

The civil claims were made in four False Claims Act lawsuits filed in the Western District of Virginia:  United States of American ex rel. Meredith McCoyd v. Abbott Laboratories (No. 1:07-81), United States of America ex rel. Susan Mulcahy, et al. v. Abbott Laboratories (No. 1:08-54), United States of America ex rel. Tamara Dietzler v. Abbott Laboratories (No. 1:09-51) and United States of America ex rel. Thomas J. Spetter, Jr. v. Abbott Laboratories (No. 1:10-cv-6).

Corporate Integrity Agreement

Also as part of the civil settlement, Abbott entered into a five-year corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services.  The government says that if Abbott commits a material breach of the integrity agreement, it is subject to exclusion from participating in federal health care programs.

In November, Abbott reported that it established a $1.5 billion litigation reserve related to ongoing settlement discussions related to Depakote.  The company previously disclosed the investigation in regulatory filings.

In a May 7 statement, Abbott noted that it "cooperated fully" with the investigation.  The company said that the compliance and certification measures called for in the settlements will transfer to AbbVie, a research-based drug company Abbott will spin off by the end of 2012.

Abbott said is it confident it has programs in place to satisfy the settlement requirements.  It said it has "established robust compliance programs to ensure its marketing programs meet the needs of health care providers and legal requirements."

2nd Largest Payment

The Justice Department says the settlement is the second largest payment by a drug company.  It said that with the Abbott settlement, it has recovered more than $10.2 billion in False Claims Act settlements since January 2009.

The government also says it has collected $3.9 million in criminal fines, forfeiture, disgorgement and restitution for violations of the FDCA.

The United States is represented by U.S. Attorney Timothy J. Heaphy and Rick A. Mountcastle of the U.S. Attorney's Office in Roanoke, Va.; Steven R. "Randy" Ramseyer of the U.S. Attorney's Office in Abingdon; Carol Wallack, Lauren Bell, Jill Furman, Brian McCabe and Edward C. Crooke of the U.S. Justice Department in Washington, D.C.; Gregory E. Demske of the U.S. Department of Health and Human Services in Washington; Paul J. Hutter of the U.S. Department of Defense in Washington; Shirley R. Patterson of the U.S. Office of Personnel Management in Washington; David Cope of the U.S. Office of Personnel Management in Washington and Cecily A. Rayburn of the U.S. Department of Labor in Washington.

Abbott is represented by Henry J. DePippo of Kirkland & Ellis in New York; James L. Brochin and Theodore V. Wells Jr. of Paul, Rifkin, Wharton & Garrison in New York; Mark R. Filip of Kirkland & Ellis in Chicago; and Abbott General Counsel Laura J. Schumacher of Abbott Laboratories in Abbott Park, Ill.

Relators' Counsel

McCoyd is represented by Reuben A. Guttman of Grant & Eisenhofer in Wilmington, Del.  Mulcahy, Merriam and Knowles are represented by James A. Backstrom of James A. Backstrom Counselor At Law in Philadelphia.

Dietzler is represented by Susan M. Coler of Halunen & Associates in Minneapolis and Steven M. Sprenger of Sprenger & Lang in Washington.  Spetter is represented by W. Scott Simmer of Blank Rome in Washington.

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