Abbott Settlement and Corporate Integrity Agreement

Continuing the recent trend of large legal settlements with pharmaceutical companies, the Department of Justice (DOJ) this week announced that Abbott Laboratories Inc. (Abbott), pleaded guilty and agreed to pay $1.5 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of the prescription drug Depakote for uses not approved as safe and effective by the Food and Drug Administration (FDA). 

 

According to the DOJ press release, the resolution– the second largest payment by a drug company – includes a criminal fine and forfeiture totaling $700 million and civil settlements with the federal government and the states totaling $800 million.  Abbott also will be subject to court-supervised probation and reporting obligations for Abbott’s CEO and Board of Directors.  

 

Background 

 

The FDA is responsible for approving drugs as safe and effective for specified uses.  Under the Food, Drug and Cosmetic Act (FDCA), a company in its application to the FDA must specify each intended use of a drug.  A company’s promotional activities must be limited to only the intended uses that FDA approved.   In fact, promotion by the manufacturer for other uses – known as “off-label” uses – renders the product misbranded. 

 

 The FDA approved Depakote for only three uses: epileptic seizures, bipolar mania and the prevention of migraines.  The FDA never approved the drug as safe and effective for the off-label use of controlling behavioral disturbances in dementia patients.  In 1999, Abbott was forced to discontinue a clinical trial of Depakote in the treatment of dementia due to an increased incidence of adverse events, including somnolence, dehydration and anorexia experienced by the elderly study participants administered Depakote. 

 

Abbott pleaded guilty to misbranding Depakote by promoting the drug to control agitation and aggression in elderly dementia patients and to treat schizophrenia when neither of these uses was FDA approved.  In an agreed statement of facts filed in the criminal action, Abbott admits that from 1998 through 2006, the company maintained a specialized sales force trained to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients, despite the absence of credible scientific evidence that Depakote was safe and effective for that use.  In addition, from 2001 through 2006, the company marketed Depakote in combination with atypical antipsychotic drugs to treat schizophrenia, even after its clinical trials failed to demonstrate that adding Depakote was any more effective than an atypical antipsychotic alone for that use. 

 

“Today’s settlement demonstrates our continued scrutiny of the sales and marketing practices of pharmaceutical companies that put profits ahead of patient health,” said U.S. Food and Drug Administration Commissioner Margaret Hamburg, M.D.  “The FDA will continue its due diligence and hold pharmaceutical companies accountable for marketing practices that undermine the drug approval process.”

 

Abbott has pleaded guilty to a criminal misdemeanor for misbranding Depakote in violation of the FDCA.  Under the plea agreement, Abbott will pay a criminal fine of $500 million, forfeit assets of $198.5 million, and submit to a term of probation for five years.   In addition, Abbott will also pay $1.5 million to the Virginia Medicaid Fraud Control Unit.  

 

As a condition of probation, Abbott will report any probable FDCA violations to the probation office, its CEO will certify compliance with this reporting requirement, and its board will report annually on the effectiveness of the company’s compliance program. 

 

In addition, Abbott agrees that during the term of probation, the company will not compensate sales representatives for off-label sales, will ensure that continuing medical education (CME) grant-making decisions are not controlled by sales and marketing, will require that letters communicating medical information to healthcare providers be accurate and unbiased, and will have policies designed to ensure that clinical trials are approved by the company’s medical or scientific organizations and published in a consistent and transparent manner. 

 

Corporate Integrity Agreement 

 

In addition to the criminal and civil resolutions, Abbott has also executed a Corporate Integrity Agreement(CIA) with the Department of Health and Human Services, Office of Inspector General (HHS-OIG).  The five-year CIA requires, among other things, that Abbott’s board of directors review the effectiveness of the company’s compliance program, that high-level executives certify to compliance, that Abbott maintain standardized risk assessment and mitigation processes, and that the company post on its website information about payments to doctors.  Abbott is subject to exclusion from federal health care programs, including Medicare and Medicaid, for a material breach of the CIA and subject to monetary penalties for less significant breaches. 

 

“As a result of OIG’s joint investigation with our federal and state partners, Abbott Laboratories will enter one of the pharmaceutical industry’s largest settlements and pay $1.5 billion for unlawfully promoting its drug Depakote, including to nursing home patients with dementia,” said HHS Inspector General Daniel R. Levinson.  “Our integrity agreement will hold Abbott accountable for preventing future violations of federal health care laws and FDA requirements, which will protect federal programs, taxpayers and our most vulnerable patients.” 

 

The CIA, among other things, has relevant provisions regarding continuing medical education (CME).  The CIA uses the boilerplate language to define the term “Third Party Educational Activity” as “any continuing medical education (CME), disease awareness, or other scientific, educational, or professional program, meeting, or event governed by Federal health care programs and/or FDA requirements and supported by PPG, including but not limited to, sponsorship of symposia at medical conferences.” 

 

“Covered persons” include “all contractors, subcontractors, agents, and other persons who perform any of the Covered Functions on behalf of PPG, including, but not limited to third party vendors who provide services relating to the Covered Functions (e.g., for speaker programs or medical education programs.)” 

 

Under the CIA, Abbott must implement written policies and procedures that address the “sponsorship or funding of grants (including educational grants) or charitable contributions.  These Policies and Procedures shall be designed to ensure that PPG’s funding and/or sponsorship complies with all applicable Federal health care program and FDA requirements.” (p. 14). 

 

Abbott must also must implement written policies and procedures that address funding of, or participation in, any Third Party Educational Activity.  These Policies and Procedures must be designed to ensure that PPG’s funding and/or sponsorship of such programs satisfies all applicable Federal health care program and FDA requirements. The Policies and Procedures must require CME grant-making decisions to be approved by Abbott’s financial or other organizations separate from sales and marketing and that financial support shall be provided only to programs that foster increased understanding of scientific, clinical or healthcare issues.” (p. 14).  The Policies and Procedures must require that:
 

 

1)    Abbott disclose its financial support of the Third Party Educational Activity and, to the extent feasible consistent with the CIA, any financial relationships with faculty, speakers, or organizers at such Activity;

2)    as a condition of funding, the third party must agree to disclose Abbott’s financial support of the Third Party Educational Activity and to require faculty, speakers, or organizers at such Activity to disclose any financial relationship with Abbott;

3)    the Third Party Educational Activity have an educational focus;

4)    the content, organization, and operation of the Third Party Educational Activity (including the faculty, educational methods, materials, and venue) be independent of Abbott’s control;

5)    Abbott support only Third Party Educational Activity that is non-promotional in tone/nature; and

6)    Abbott’s support of a Third Party Educational Activity must be contingent on the provider’s commitment to provide information at the Third Party Educational Activity that is fair, balanced, accurate and not Misleading. (p. 15).  

 

Abbot must also develop and implement a monitoring program for medical education grants.  Grant requests must be submitted to a grant management department(s) in the finance organization(s) (or another organization that is separate from sales and marketing) and all such requests shall be processed in accordance with standardized criteria developed by the grant management department(s).  Abbott must continue the medical education grant process described above (or an equivalent process) throughout the term of the CIA, and must notify the OIG in writing at least 60 days prior to the implementation of any new process or system subsequent to the Effective Date. 

 

To the extent not already accomplished, within 120 days after the Effective Date,

 

Abbott must establish a Grants Monitoring Program through which it must conduct audits for each Reporting Period of at least 30 medical education grants in the United States.

 

The Grants Monitoring Program will select grants for review both on a risk-based targeting approach and on a sampling approach.  Abbott U.S. compliance personnel (or other appropriately trained Abbott personnel who are independent from the monitored functional area) will conduct Grants Monitoring by reviewing proposal documents (including grant requests), approval documents, contracts, payments and materials relating to the grant office’s review of the requests, and documents and materials relating to the grants and any events or activities funded through the grants in order to assess whether the activities were conducted in a manner consistent with Abbott’s Policies and Procedures.  Results from the Grant Monitoring Program, including the identification of potential violations of policies, will be compiled and reported to the U.S. Compliance Department for review and follow-up as appropriate. 

 

Abbott represented in the CIA that it posts, at least annually, information on its company website regarding educational grants and charitable donations to U.S medical and other health care professional organizations, patient organizations, academic institutions, hospitals, medical education companies and other scientific associations in amounts of more than $200.  The information posted on the company website includes: (1) definitions for the types of grants and donations posted; (2) list of recipients in alphabetical order; and (3) payment amount and purpose.   

 

Under the CIA, Abbott must continue to post (and provide updates to) the above-described information about Abbott-supported educational grants and charitable donations throughout the term of this CIA. Abbott must notify the OIG in writing at least 60 days prior to any change in the substance of its policies regarding the funding of such educational grants and charitable donations or posting of the above-referenced information relating to such funding. 

 

Conclusion 

 

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Kathleen Sebelius, Secretary of HHS.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.   

 

One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $7.4 billion since January 2009 in cases involving fraud against federal health care programs.  With the settlement announced today, the Justice Department’s total recoveries in False Claims Act cases since January 2009 will exceed $10.2 billion.   During this same time, the department has secured $3.9 billion in criminal fines, forfeiture, disgorgement, and restitution relating to violations of the FDCA.