Depakote Settlement: Abbott Swallows Its Medicine

Abbott Laboratories (NYSE:ABT) announced on Monday that it will pay $1.6 billion to settle federal and state claims to resolve a previously disclosed investigation of past sales and marketing practices relating to its neurological medication Depakote.

Don’t Miss: Express Scripts Holding First Quarter Earnings Sneak Peek.

The pharmaceutical giant will pay $800 million to resolve civil allegations between federal and state governments, a hefty $700 million for a criminal penalty, and $100 million to states to resolve consumer protection matters.

The settlement dates back to a four-year-old investigation into past sales activities involving Depakote that began in 1998. Depakote is an anti-seizure and mood-stabilizing drug to treat epilepsy, bipolar disorder, and migraine prevention. Lawsuits were filed by four groups against Abbott alleging that the company marketed the drug for off-label uses, including for treatment of schizophrenia, agitated dementia, and autism.

Furthermore, the lawsuits claimed that Abbott encouraged and trained salespeople to market Depakote’s off-label uses to nursing home directors, geriatric doctors, and other long-term care providers. The company also gave doctors illegal kickbacks to boost sales of the drug. The Department of Justice intervened in order to determine whether Abbott’s marketing of the drug violated civil and criminal laws, which also included fraudulently charging Medicare and Medicaid.

Abbott had estimated a figure close to $1.5 billion to settle the case, according to previous filings with the Securities and Exchange Commission. In addition to paying $1.6 billion, Abbott will also plead guilty to one misdemeanor violation of the Food, Drug, and Cosmetic Act for misbranding. The company will also be restricted from marketing the drug for off-label uses under terms of the settlement.

Investing Insights: The Week Ahead on Wall Street: Earnings Hits Last Lap, Consumer Credit on Tap.