Abbott Can Be Sued for Off-Label Sales

CHICAGO (CN) - A federal judge upheld a shareholder derivative lawsuit against Abbott Labs for its off-label marketing of Depakote, which cost the company a $1.3 billion settlement.

Abbott Laboratories received FDA approval in 1983 for Depakote, to treat epileptic seizures. Later, it was approved to treat manic disorders and migraine.

Depakote never was approved to treat aggression in patients with dementia, or for schizophrenia, but off-label prescriptions for these illnesses became common.

Physicians are allowed to prescribe drugs for off-label uses, but drug companies are not allowed to push them for that.

From 2005 to 2008 sales of Depakote accounted for 11 percent of Abbott's total sales.

Beginning in 2007, four Abbott sale reps filed qui tam complaints alleging a centralized scheme to market Depakote for off-label purposes and downplay the drug's side effects - including a significant risk of birth defects.

The Department of Justice intervened, and Abbott settled, agreeing to pay $1.3 billion and plead guilty to a criminal misdemeanor.

U.S. District Judge Virginia Kendall upheld a shareholder derivative complaint against Abbott last week.

"Unfortunately, the plea agreement that Abbott entered into with the federal government in 2012 is not the first time that Abbott has pled guilty to illegal marketing charges," Kendall wrote.

Shareholders' first complaint was dismissed last year. Their second amended complaint incorporated the government's allegations against Abbott in the civil settlement.

Based on these allegations, Kendall found it plausible that Abbott had trained sales reps to market Depakote for off-label uses, and bribed doctors with illegal kickbacks, such as sports tickets, dinners, consulting agreements and more, through 2008 instead of only until 2006.

"The government's specific contentions in the civil settlement agreement that Abbott continued to market Depakote in an off-label manner and continued to illegally remunerate physicians to promote Depakote through 2008 makes plaintiffs' allegations in the second amended complaint that this conduct occurred through 2008 plausible. The court must credit those allegations as true in assessing the sufficiency of the second amended complaint," Kendall wrote.

Abbott's Board of Directors received several red flags that violations were occurring in 2008, including letters and subpoenas from the Justice Department investigating the marketing of Depakote.

"A court may infer that a board has notice of illegal conduct if a red flag that the conduct is occurring is waved in the board's face," Kendall wrote in her 21-page opinion.

Abbott also faces a consolidated personal injury lawsuit from hundreds of consumers who claim Depakote caused their children's birth defects.

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