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Shareholders Sue Abbott Over Proposed Depakote Settlement

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Shareholders just announced they are suing Abbott Laboratories over a proposed Depakote settlement. The shareholder derivative action was filed this week in Illinois federal court.

According to a post on the Shareholders Foundation web site, the lawsuit was filed over alleged breaches of fiduciary duty associated with alleged off-label marketing of Depakote. The lawsuit claims that the illegal marketing cost Abbott $1.3 billion in a settlement with the United States Government and 24 states.

Executives at Abbott, federal prosecutors and state officials reached a tentative agreement mandating Abbott pay $800 million to resolve civil claims and $500 million in criminal penalties, over how the drug maker marketed its epilepsy medications for unapproved, off-label uses, said Bloomberg News, citing three people familiar with the settlement and who declined to be identified because the agreement was not made public. Earlier in the week, Abbott said it was planning to put $1.5 billion aside to cover potential costs associated with the settlement.

“Settlement negotiations are ongoing,” Abbott spokesman, Scott Stoffel, told Bloomberg News; Stoffel declined to comment any further and U.S. Justice Department spokesman, Charles Miller, had no comment.

The complaint states that some Abbott officers and directors breached their fiduciary duties due to their involvement in the alleged off-label marketing of Depakote and Depakote ER. Meanwhile, said the Shareholders Foundation, Abbott Laboratories disclosed in an October filing with the U.S. Securities and Exchange Commission (SEC) that, among other issues, it had reserved $1.5 billion “related to ongoing settlement discussions in the previously disclosed investigation by the U.S. Department of Justice … related to Depakote.”

is known generically as valproic acid and is approved to treat seizures and manic or mixed episodes associated with bipolar disorder, and to prevent migraine headaches. Off-label, Depakote is used for other, psychiatric conditions. While physicians are free to prescribe drugs off-label, it is illegal for drug makers to market medications for off-label, or unapproved, uses.

The Justice Department had been investigating Abbott over claims it marketed Depakote off-label, including as an autism treatment and as a treatment for sexual compulsions, and agitation and aggression in senior patients. The investigation was prompted by four whistleblower lawsuits filed by current and former Abbott employees who alleged that Abbott began its off-label Depakote marketing in the late 1990s. This caused false claims for prescription reimbursements to be submitted to Medicaid and other government health programs, the whistleblowers alleged.

Once finalized, this settlement will be the third-largest illegal pharmaceutical marketing agreement in U.S. history, said Bloomberg News. In 2009, Pfizer paid $2.3 billion over how it marketed its Bextra painkiller and other drugs and Eli Lilly & Co. paid $1.4 billion, also in 2009, over sales of Zyprexa, its anti-psychotic medicine.

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