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Depakote Marketing Suit Takes a Tumble in 7th Circ.

CHICAGO (CN) - The 7th Circuit seemed reluctant Friday to revive claims by health benefit plans that reimbursed members for Depakote, an anti-seizure drug that Abbott Laboratories has admitted to marketing improperly.

Abbott Laboratories has already faced four False Claims Act suits over Depakote, settling them in 2012 for $1.6 billion, and the drugmaker had admitted to previous improper marketing of Depakote for off-label purposes.

In this phase of the billion-dollar litigation, the plaintiffs are multi-employer health benefit plans and service funds.

They sought in 2013 to represent a class of third-party payers who, on behalf of their members, reimbursed or paid for Depakote that Abbott allegedly marketed for the treatment of dementia without approval by the U.S. Food and Drug Administration.

A federal judge allowed a later shareholder suit, but U.S. District Judge Sara Ellis threw out the RICO claims by the benefit plans in this case for missing the statute of limitations.

"The funds allege they began paying for these prescriptions in 1998, and it was at that point that the funds could or should have discovered they were paying for off-label uses," she wrote. "A reasonable plaintiff would have. The funds' broad statement that Abbott concealed its involvement in the marketing of Depakote is not enough to excuse their lack of diligence."

Still able to refile their dismissed state-law claims, the plaintiffs took the RICO issue to the 7th Circuit.

Their attorney, James Sabella, insisted that normal diligence would not have made a difference.

"The court dismissed the case not on the facts, but on its speculation as to when a reasonable plan would have brought suit," he told the three-judge panel.

Judge Kenneth Ripple cut in: "But do we have any idea when the payers became aware?"

"Not at all," Sabella replied. "We need more fact-finding. They didn't know the prescriptions were off-label."

Judge John Tinder failed to throw the attorney off by noting that "a plan doesn't just pay any prescription."

"Actually that's a factual issue," Sabella said. "Plans generally pay if a doctor prescribes it. Every plan pays for thousands of prescriptions, and doctors often write prescriptions off-label."

Tinder pointed out that Abbott was being investigated as early as 2005, but Sabella insisted that this was not enough.

"I don't think that just paying a prescription amounts to discovery of the issue," he said.

"The defense talks about qui tam suits being unsealed in 2011," the attorney added. "That's hardly the kind of thing insurers can discover, just a couple suits."

Citing 11th Circuit precedent, Sabella concluded: "The insurers had to pay if the drug was prescribed, whether for approved or off-label use."

Defense attorney William Cavanaugh disagreed. "A diligent third-party payer would've discovered this before 2009," he said. "The first injury took place in 1998."

Tinder took up Sabella's logic: "But off-label uses are not unusual."

"But 11 years went by," Cavanaugh said. "Articles were published. This is a sophisticated entity in the business of investigating insurance claims, with a fiduciary duty."

Ripple noted "that may be true, but I don't know because I don't have facts in front of me."

This echoed the call by plaintiffs for more discovery before deciding the claim.

Tinder seemed skeptical.

"I don't see how the fiduciary duty helps you," the judge said. "It runs to the beneficiaries."

"No," the attorney replied. "They made a strategic decision to focus on equitable estoppel of the statute of limitations, not these other arguments. There are no allegations of any investigations."

Tinder replied: "But this is the complaint, in which they don't have a duty to plead around the statute of limitations."

Cavanaugh took up the argument. "You can plead yourself out of a case, and they admitted that their injury goes back to 1998," the judge said.

Today was Tinder's last regular sitting day before he assumes senior status and retires. In a brief speech to begin the day, Judge Michael Kanne said: "Indiana's produced some outstanding judges, but Judge Tinder is near if not at the top of that list." Both he and Ripple are from Indiana as well.

The Sidney Hillman Health Center of Rochester, a local Teamsters chapter and a fund run by the United Food and Commercial Workers Unions are the named plaintiffs in the class action at issue.

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