Antitrust Law Daily Wrap Up, RICO—N.D. Ill.: Abbott Labs dodges new Depakote® class action, (Aug 15, 2014)

By Greg Hammond, J.D.

A number of multi-employer benefit plans and health services funds were unable to bring racketeering claims against Abbott Laboratories, after the company admitted to promoting the prescription drug Depakote® for off-label purposes and paid illegal kickbacks to health care professionals. In dismissing the Racketeer Influenced and Corrupt Organizations Act (RICO) claims, the federal district court in Chicago determined that the claims were time-barred under the relevant four-year statute of limitations (Sidney Hillman Health Center, of Rochester v. Abbott Laboratories, August 14, 2014, Ellis, S.).

Background. Depakote is a prescription drug developed by Abbott and approved by the FDA for treating epileptic seizures, acute mania, particular absence seizures, and adult migraine prevention. In previous consolidated qui tam actions, Abbott admitted to knowingly promoting the sale and use of the drug for unapproved purposes, such as the treatment of dementia, schizophrenia, ADHD, narcotic drug withdrawal, and other uses. The company also admitted to paying illegal remuneration to health care professionals and long-term pharmacy providers for promoting Depakote for off-label uses, and agreed to pay $1.6 billion to resolve the criminal and civil claims.

The funds filed suit in August 2013, alleging that Abbott conducted a scheme to cause the funds and other third-party payors to pay for Depakote prescriptions in order to treat non-FDA approved conditions, in violation of FDA regulations. They further asserted that patients received no additional benefit from the drugs and may have suffered unnecessary side effects. In support of the funds’ RICO claims, they argued that Abbott engaged in the predicate acts of bribery and mail and wire fraud.

Statute of limitations. Abbott moved to dismiss the funds’ RICO claims under the applicable four-year statute of limitations period. Applying the discovery rule, the court determined that the funds knew or should have discovered that they were reimbursing the cost of off-label Depakote uses in 1998, when the first payments for such off-label uses were made. In addition, the court found that because the funds failed to allege any additional injury or change in scheme from 1998 through 2012, and failed to plead any predicate RICO act within the four-year period prior to the complaint being filed, the separate accrual doctrine could not apply.

Equitable estoppel and tolling. The funds argued that the statute of limitations should be tolled under the doctrine of equitable estoppel. To succeed on such a theory, they were required to demonstrate that Abbott took active steps to prevent them from suing during the four-year time period. However, the court determined that equitable estoppel does not apply in this case, as the funds failed to plead that Abbott took any additional actions to prevent them from timely filing suit.

The doctrine of equitable tolling was also inapplicable in this case. According to the court, “a plaintiff who invokes equitable tolling to suspend the statute of limitations must bring suit within a reasonable time after he has obtained, or by due diligence could have obtained, the necessary information.” However, the court determined that a reasonable plaintiff in this case would have discovered its injury in 1998, and the funds would therefore have to attempt to investigate the injury at that point, to trigger any consideration of equitable tolling. Even if the funds diligently attempted to investigate their injury beginning in 1998, the delay would be too long to apply the doctrine, the court determined.

The case number is 13 C 5865.

Attorneys: Catherine Jeanne O’Suilleabhain (Grant & Eisenhofer PA) for Sidney Hillman Health Center of Rochester. Jonathan D. Karmel (The Karmel Law Firm) for United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund. William F. Cavanaugh, Jr. (Patterson Belknap Webb & Tyler LLP) for Abbott Laboratories.

Companies: Sidney Hillman Health Center of Rochester; United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund; Abbott Laboratories

Cases: RICO IllinoisNews