Abbott Laboratories has been hit with the second largest healthcare fraud penalty in the USA after reaching a settlement concerning past sales and marketing practices relating to its seizure drug Depakote.

A deal has been struck to conclude a four-year investigation into past sales activities that began in 1998 involving Depakote (divalproex). Abbott will pay $800 million to resolve civil allegations split among federal and state governments, $700 million for a criminal penalty and $100 million to states "to resolve consumer protection matters".

As part of the resolution, Abbott has agreed to plead guilty to one misdemeanour violation of the Food, Drug and Cosmetic Act for misbranding. The company also agreed to certain other conditions, including compliance measures and a corporate integrity agreement over a five-year probationary period, to be transferred to its soon-to-be-created AbbVie pharmaceutical business.

The US Food and Drug Administration approved Depakote for three uses - epileptic seizures, bipolar mania and the prevention of migraines. However, Abbott admits that from 1998 through 2006, it maintained a specialised sales force trained to market the drug 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 antipsychotics 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.

Whistleblowers get $84 million

Four whistleblowers, former Abbott sales representatives who brought lawsuits, will receive $84 million from the settlement. Grant & Eisenhofer partner Reuben Guttman, who was lead counsel to Meredith McCoyd, the first to come forward (in 2007) with allegations regarding off-label promotion, said "Abbott's unlawful practices showed how the company elevated aggressive sales and marketing of Depakote over medical decision-making, violating basic norms of health care and ethics". He claimed that the firm "essentially preyed on two of the most helpless patient populations in children and Alzheimer's patients".

Mr Guttman added that “with healthcare fraud projected to top $60 billion annually, cases such as this should serve as a catalyst for lawmakers to take a hard look at the pharmaceutical industry”. He added that “what happened here with Abbott was a train wreck. Now is the time for Congress to create a pharmaceutical and medical device safety and investigation board, which would conduct investigations with an eye toward providing honest information and analysis to practitioners".

Acting associate attorney general Tony West noted that “not only did Abbott engage in off-label promotion, but it targeted elderly dementia patients and downplayed the risks apparent from its own clinical studies". He added that “as this criminal and civil resolution demonstrates, those who put profits ahead of patients will pay a hefty price".

Abbott general counsel Laura Schumacher said "we are pleased to resolve this matter", noting that the firm "has established robust compliance programs to ensure its marketing programs meet the needs of health care providers and legal requirements". Last October, Abbott took a $1.5 billion charge to cover the cost of a settlement.

The agreement represents the second largest payment by a drug company to resolve such probes; Pfizer paid out $2.30 billion in 2009 for illegally promoting four drugs, notably the withdrawn anti-inflammatory Bextra (valdecoxib).