RICO Claims Against |Abbott Labs Revived

CHICAGO (CN) - Originally dismissed as untimely, the 7th Circuit has revived RICO claims against Abbott Labs for promoting anti-seizure drug Depakote for off-label uses.

Abbott Laboratories agreed to pay $1.6 billion in 2012 after dozens of state and federal authorities sued over its off-label promotion of Depakote.

The settlement includes $700 million in criminal penalties, $100 million to states for consumer-protection matters, and $800 million to resolve cases brought simultaneously by the U.S. government and 49 states.

Abbott also agreed to plead guilty to misbranding, a misdemeanor under the Food, Drug and Cosmetic Act, for which it faces five years of probation.

Depakote's three approved uses by the Food and Drug Administration are to treat epileptic seizures, bipolar mania and the prevention of migraines.

The lawsuits complained that Abbott promoted Depakote for schizophrenia - though

tests showed that the drug is an ineffective solo treatment for that condition - as well as to control agitation and aggression in elderly dementia patients.

Fifteen months after the settlement, several health benefit plans and service funds filed a class action asserting that Abbott's off-label marking of Depakote constituted a civil violation of federal anti-racketeering law.

Abbott moved to dismiss the complaint, calling the lawsuit untimely under the four-year RICO statute of limitations since the allegedly unlawful behavior began in 1998.

A federal judge agreed, but the 7th Circuit reversed Monday, crediting arguments by the funds that plaintiffs could not have discovered Abbott's illegal marketing scheme before its 2012 guilty plea, despite its skepticism in oral argument.

"Given the allegations of the complaint, we are convinced that the district court erred by dismissing this case based on the statute of limitations without giving the parties an opportunity for discovery into when a reasonable benefit fund should have known about its injuries from off-label marketing," Judge John Tinder said, writing for the three-judge panel.

The plaintiffs want the court to toll the statute of limitations from the date of the settlement.

Allowing them to argue that, the panel said Monday that the issue of timeliness should be left for summary judgment or trial when the court has the advantage of reviewing a complete factual record, so long as there is a "conceivable set of facts" that would defeat a statute-of-limitations defense.

"The district court's departure from orthodoxy was not justified here. Even if the funds had the duty and ability to monitor off-label prescriptions, that conclusion is not clear from the complaint and requires factual determinations not appropriately made at the pleadings stage," Tinder said. "It also remains unclear when the funds actually became aware that they were paying for off-label use."

The funds do not contest that they are sophisticated entities that will be held to a higher standard than an average investor.

"But Abbott is sophisticated as well and is alleged to have taken significant effort to conceal its underhand marketing," the 16-page opinions states.

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