UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

PUBLIC SCHOOL RETIREMENT SYSTEM 

OF THE SCHOOL DISTRICT OF KANSAS 

CITY, MISSOURI, derivatively on behalf of 

Nominal Defendant ABBOTT 

LABORATORIES, 

 Plaintiff, 

 v. 

MILES D. WHITE, H. LAURANCE 

FULLER, ROXANNE S. AUSTIN, W. 

JAMES FARRELL, SAMUEL C. SCOTT, III, 

GLENN F. TILTON, WILLIAM A. OSBORN, 

ROBERT J. ALPERN, JEFFREY LEIDEN, 

WILLIAM DALEY, W. ANN REYNOLDS, 

DAVID OWEN, ROY ROBERTS, WILLIAM 

SMITHBURG, BOONE POWELL, JR., JACK 

GREENBERG, JOHN WALTER, ADDISON 

RAND, DAVID JONES, THOMAS C. 

FREYMAN, RICHARD A. GONZALEZ, 

MARY SZELA, JAMES TYREE, WILLIAM 

G. DEMPSEY, HOLGER LIEPMANN, JOHN 

LANDGRAF, DAVID GOFFREDO, and P. 

LOREEN MERSHIMER, 

 Defendants, 

and 

ABBOTT LABORATORIES, 

 Nominal Defendant.

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VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT

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TABLE OF CONTENTS

INTRODUCTION .......................................................................................................................... 1 

JURISDICTION AND VENUE ..................................................................................................... 5 

THE PARTIES................................................................................................................................ 6 

A. Plaintiff ................................................................................................................... 6 

B. The Nominal Corporate Defendant......................................................................... 6 

C. The Board of Directors ........................................................................................... 6 

D. Former Board Members.......................................................................................... 7 

E. Senior Executives.................................................................................................. 10 

F. Former Senior Executives..................................................................................... 11 

FACTUAL BACKGROUND....................................................................................................... 12 

A. Abbott’s Marketing Strategy................................................................................. 12 

B. Applicable Laws and Regulations Governing Abbott’s Operations..................... 13 

1. FDA Regulation of Drug Marketing and Promotion ................................ 13 

a. The FDA Regulates What Drugs May be Marketed, and the 

Uses for Which They May be Marketed....................................... 13 

b. FDA Regulations Prohibit Off-Label Marketing and False 

and Misleading Statements About a Drug’s Use. ......................... 14 

2. Prescription Drug Reimbursement Under Medicaid and Other 

Federal Health Care Programs.................................................................. 15 

3. The Anti-Kickback Statute ....................................................................... 16 

C. Abbott’s Illicit Marketing Practices Have Been the Target of Multiple 

Investigations ........................................................................................................ 17 

1. An Abbott Subsidiary Gets Investigated, and Settles With the U.S. 

Government for Defrauding Medicare and Medicaid............................... 17 

2. As the TAP Investigation and Settlement Were Coming to a Close, 

the Government Turned its Sights to Abbott ............................................ 19 

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3. Shareholder Derivative Suits Arise From the Settlements of the 

2001 TAP Investigation and the 2003 Ross Investigation........................ 21 

4. Abbott Settles A Third Derivative Litigation Arising From the 

Company’s Illegal Conduct ...................................................................... 22 

D. Fiduciary Duties of Abbott’s Management and Board......................................... 23 

E. Abbott Board Duties and Policies Created From the Various Derivative 

Litigation Settlements ........................................................................................... 29 

1. The Abbott CIA (imposed in 2003).......................................................... 29 

2. Modifications to the Public Policy Committee Charter (2004 and 

2005) ......................................................................................................... 31 

F. Abbott Illegally Promotes Off-Label Uses of Depakote, Causing the 

Company to Reserve $1.5 Billion In Anticipation of Settling the 

Government Investigation..................................................................................... 33 

1. The Criminal Promotion of Depakote....................................................... 33 

a. Abbott Creates the LTC Group..................................................... 35 

b. Abbott’s Management Trains its Sales Force to Manipulate 

Healthcare Professionals............................................................... 38 

c. Abbott Funds Clinical Practice Guidelines to Deceive 

Healthcare Professionals............................................................... 40 

d. Abbott Improperly “Details” the Depakote Products ................... 42 

i. Abbott Targets P&T Committees ..................................... 43 

ii. Abbott Utilizes In-Services to Promote the OffLabel Use of the Depakote Products................................. 44 

iii. Abbott’s “Decile” Ranking System .................................. 44 

e. Abbott Exploits OBRA-87 Limits to Promote the Depakote 

Products......................................................................................... 45 

f. Abbott Backs the Depakote Products With Misleading 

Clinical Studies ............................................................................. 46 

i. The Failed Tariot 738 Study ............................................. 46 

ii. The Unfounded Manji Article........................................... 47 

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iii. Abbott Illegally Sponsors the Porsteinsson 817 

Study ................................................................................. 48 

iv. Dr. Tariot Reconsiders the Findings From His 738 

Study, But Abbott Ignores the Truth................................. 49 

g. Abbott Uses Medical Journal “Supplements” to Promote 

the Depakote Products .................................................................. 50 

h. Abbott Bribes “Key Opinion Leaders” to Increase Sales of 

the Depakote Products .................................................................. 51 

i. Abbott Sets Up Speaker Presentations Rife With Off-Label 

Promotions .................................................................................... 52 

j. Abbott Uses CMEs as Promotional Events for the Depakote 

Products......................................................................................... 53 

k. The LTC Sales Force Falsify Medical Education Requests 

for Off-Label Information About the Depakote Products............. 54 

2. The Government Launches Its Investigation Into Depakote .................... 55 

3. Abbott and the DOJ Engage in “Active” Settlement Negotiations, 

and Abbott Sets Aside $1.5 Billion in Anticipation of Settlement........... 56 

G. Defendants Were Twice Warned About Off-Label Marketing of Depakote 

as well as Other Drugs .......................................................................................... 58 

H. Additional Illegal Marketing Activities May Put Abbott at Risk of 

Exclusion from Federal Programs ........................................................................ 59 

DEMAND ON THE BOARD OF DIRECTORS WOULD BE FUTILE .................................... 60 

COUNT I ..................................................................................................................................... 63 

COUNT II ..................................................................................................................................... 64 

RELIEF REQUESTED................................................................................................................. 65 

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The Public School Retirement System of the School District of Kansas City, Missouri 

(“Plaintiff”), by and through its undersigned counsel, hereby makes the following allegations in 

its Verified Derivative Complaint (the “Complaint”) on behalf of Abbott Laboratories (“Abbott” 

or the “Company”), as the nominal defendant, against certain current and former directors (the 

“Board” or the “Director Defendants”) and senior executives (the “Executive Defendants”) of 

Abbott (collectively, the “Defendants”). The allegations herein are based upon Plaintiff’s 

personal knowledge as to its own acts, and on information and belief, including the investigation 

of counsel and review of publicly available information, as to all other matters. 

INTRODUCTION

1. This derivative action stems from the Defendants’ role in a decade-long criminal 

marketing practice that ran rampant throughout the entire Company. On October 19, 2011, 

Abbott disclosed in a Form 8-K filed with the U.S. Securities and Exchange Commission (the 

“SEC”) that, as a result of this practice, it was forced to set aside a $1.5 billion reserve (the 

“Reserve”) to cover potential liabilities relating to a U.S. Department of Justice (the “DOJ”) 

investigation (the “Government Investigation”) into the sales and marketing of Abbott’s flagship 

seizure drug Depakote® (“Depakote”). 

2. As detailed in recently-unsealed complaints filed by whistleblowers Thomas 

Spetter (the “Government Complaint”) and Susan Mulcahy, Doreen Merriam, Sondra Knowles, 

Meredith McCoyd, and Tamara Dietzler, former Abbott sales representatives and employees (the 

“Whistleblower Complaints”), the Company engaged in a systematic campaign to illegally 

promote Depakote, Depakote Sprinkles®, Depacon®, Depakene®, and Depakote ER® (the 

“Depakote Products”) for “off-label” uses (the “Fraudulent Marketing Scheme”), which resulted 

in the submission of hundreds of thousands of false claims to federal and state health care 

programs in violation of federal law. Not only were Abbott sales representatives trained to 

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specifically market the Depakote Products for various impermissible off-label uses, Abbott 

provided illegal kickbacks to healthcare professionals to increase sales of the Depakote Products, 

and made false statements to physicians concerning the safety and efficacy of the drugs. 

3. In order to fully capitalize on the Fraudulent Marketing Scheme, Abbott focused 

its efforts on long-term care (“LTC”) facilities, the majority of whose residents are age 65 and 

older, and thus qualify for prescription reimbursement under federal and state health care 

programs, including Medicare and Medicaid. The Fraudulent Marketing Scheme continued for 

more than 10 years, beginning at least as early as January 1, 1998 and lasting until January 1, 

2009. 

4. As discussed in detail below, between October 3, 2001 and January 1, 2009 (the 

“Relevant Period”), Defendants consciously disregarded multiple red flags, shirking their 

oversight responsibility at every turn, in order to maximize Company profits. Moreover, 

Defendants knowingly permitted the Fraudulent Marketing Scheme despite contractually 

mandated systems designed to put the Board on notice of the very things that led to the 

Government Investigation and Reserve. Most egregiously, certain of the Executive Defendants 

actually encouraged and participated in the Fraudulent Marketing Scheme. 

5. The anticipated fine that the $1.5 billion Reserve was set aside to absorb marks 

the third major financial penalty for Abbott or an Abbott subsidiary since 2001, and the second 

criminal guilty plea for illegal marketing and sales practices in the same period. Indeed, 

settlements with the Government in 2001 and 2003, as well as settlements with shareholders in 

related derivative litigation, have already cost the Company at least $1.5 billion in fines and 

payouts alone. Additional more recent settlements in 2010 cost the Company another nearly 

$200 million. As a result of the earlier instances of misconduct, Defendants had agreed, through 

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a Corporate Integrity Agreement (“CIA”), to establish and administer internal compliance 

mechanisms to directly inform the Board of the Company’s compliance or non-compliance with 

drug marketing laws. Moreover, as a result of the derivative settlement agreements, Abbott’s 

Public Policy Committee was specifically tasked with creating and monitoring a reporting 

system designed to ensure that the Company remained in regulatory compliance, and if not, to 

alert the Company’s Board. 

6. In 2001, TAP Pharmaceutical Products Inc. (“TAP”), an Abbott joint venture, 

agreed to pay an $875 million fine to the Government to settle allegations that TAP had 

implemented a marketing scheme through which TAP paid illegal kickbacks to healthcare 

professionals in order to increase sales of its prostate cancer drug Lupron® (“Lupron”). This 

$875 million fine consisted of $290 million for TAP’s criminal conduct, $559.5 million to 

resolve its federal civil False Claims Act liabilities for filing false and fraudulent claims with 

the Medicare and Medicaid programs, and $25.5 million to the states for similar fraudulent 

conduct. As part of the settlement, TAP also entered into a CIA that imposed requirements as to 

how TAP supervised its sales and marketing staff and required the company to revise its 

Medicare and Medicaid reporting practices. 

7. Less than two years later, in 2003, Abbott paid $614.5 million to settle federal 

criminal claims relating to its illegal sales practices. A Government sting operation netted 

Abbott employees in the Company’s Ross Products Division (“Ross”), who were offering 

kickbacks to undercover federal agents to purchase Ross’s products, and advising them how to 

fraudulently bill the Government for those items. As part of the settlement, Abbott also entered 

into a CIA with the Office of Inspector General (“OIG”) of the U.S. Department of Health and 

Human Services (“HHS”) that required Abbott’s Board to engage in regular training and 

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education regarding compliance with all federal health care program requirements, including 

the federal anti-kickback statute, and on proper and improper promotion, marketing, and sales 

practices.

8. Thus, by 2003, Abbott’s Board had agreed to adopt a specific mechanism that 

reported any non-compliance with health laws directly to the Board. 

9. Even before 2003, however, Defendants were aware that Abbott’s improper 

marketing practices extended far beyond the conduct at issue in the TAP and Ross settlements. 

Specifically, between 1997 and 2009, Abbott received at least six Warning Letters from the 

Food and Drug Administration’s (the “FDA”) Division of Drug Marketing, Advertising, and 

Communications (“DDMAC”) concerning improper or unlawful marketing materials that 

promoted off-label uses of Abbott products. Moreover, a 1998 Warning Letter sent to Abbott’s 

former Chief Executive Officer and Chairman of the Board, Duane Burnham, provided 

Defendants with specific notice concerning illegal marketing of the Depakote Products. 

10. Additionally, Abbott settled a shareholder derivative lawsuit in 2004. Although 

the underlying allegations of the lawsuit were not directly tied to fraudulent marketing practices, 

the settlement is nevertheless important to the Board’s abdication of responsibility as alleged 

herein, because it mandated changes to the charter of the Board’s Public Policy Committee. 

Specifically, pursuant to the charter amendment, the Public Policy Committee was tasked with a 

responsibility to “assist the Board in fulfilling its oversight responsibility with respect to: 

public policy, regulatory . . . and government affairs and healthcare compliance issues that 

affect Abbott.” The functions of the Public Policy Committee were further enhanced less than a 

year later, in 2005, when Abbott settled derivative actions arising out of the conduct leading to 

the above-described TAP and Ross settlements. The settlement of these actions required Abbott 

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to create a reporting mechanism through which management would inform the Board and Public 

Policy Committee of healthcare compliance issues, including misconduct such as that alleged in 

the Fraudulent Marketing Scheme. 

11. Despite every indication that the Company’s marketing practices needed to be 

entirely revamped, Defendants took no corrective action. Defendants’ conduct represents a 

breach of their fiduciary duties that resulted in significant harm to the Company. In addition to 

the enormous fine that Abbott is expected to pay to settle the DOJ claims regarding the 

Fraudulent Marketing Scheme—which Abbott has set aside the $1.5 billion Reserve to cover—

Abbott has incurred substantial legal expenses in defending numerous whistleblower and 

personal injury actions arising out of its illegal marketing of the Depakote Products, and has 

relatedly suffered irreversible damage to its reputation. 

12. Defendants knew or should have been aware of the widespread, illegal activities 

constituting the Fraudulent Marketing Scheme. That the Board failed to take action to halt these 

activities is a per se breach of fiduciary duty. This litigation seeks to hold Defendants 

accountable for the damage that their conduct has visited and will continue to visit on the 

Company. 

JURISDICTION AND VENUE

13. This Court has jurisdiction pursuant to 28 U.S.C. § 1332(a)(1) in that Plaintiff and 

Defendants are citizens of different states and the matter in controversy exceeds the jurisdictional 

amount of $75,000, exclusive of interest and costs. This action is not a collusive action designed 

to confer jurisdiction on a court of the United States that it would not otherwise have. 

14. Venue is proper in this District pursuant to 28 U.S.C. § 1391(a)(1) because 

nominal defendant Abbott is headquartered in this District. Moreover, a substantial portion of 

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the occurrences complained of herein occurred in this District. In addition, one or more of the 

Defendants either reside in, or maintain offices in, this District. 

THE PARTIES

A. Plaintiff 

15. Plaintiff Public School Retirement System of the School District of Kansas City, 

Missouri (“KCPSRS”), a political subdivision of the State of Missouri, is a current shareholder 

of the Company, was a shareholder at the time of the misconduct complained of herein, and has 

been a shareholder of Abbott continuously since that time. 

B. The Nominal Corporate Defendant 

16. Nominal defendant Abbott is an Illinois corporation with its principal place of 

business in Abbott Park, Illinois. According to its public filings, Abbott’s principal business is 

the discovery, development, manufacture, and sale of a broad and diversified line of health care 

products. Abbott employs more than 90,000 people around the world. The Company conducts 

its business both directly and through a number of subsidiary entities. 

C. The Board of Directors 

17. Defendant Miles D. White (“White”) is Abbott’s Chief Executive Officer 

(“CEO”) and Chairman of its Board. White has served as a director of the Company since 1998, 

and became its CEO in 1999. Upon information and belief, White is a citizen of Illinois. 

18. Defendant H. Laurance Fuller (“Fuller”) has served as a director of the Company 

since 1988. Fuller has been a member of the Board’s Nominations and Governance Committee 

since 2003, and currently serves as its Chairman. Upon information and belief, Fuller is a citizen 

of Illinois. 

19. Defendant Roxanne S. Austin (“Austin”) has served as a director of the Company 

since 2000. Austin has been a member of the Board’s Audit Committee since 2007, currently 

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serving as its Chairman, and a member of the Board’s Public Policy Committee since 2003. 

Upon information and belief, Austin is a citizen of California. 

20. Defendant W. James Farrell (“Farrell”) has served as a director of the Company 

since 2006. Farrell has been a member of the Board’s Nominations and Governance Committee 

since 2005. Upon information and belief, Farrell is a citizen of Illinois. 

21. Defendant Samuel C. Scott, III (“Scott”) has served as a director of the Company 

since 2007. Scott has been a member of the Board’s Audit Committee since 2007. Upon 

information and belief, Scott is a citizen of Illinois. 

22. Defendant Glenn F. Tilton (“Tilton”) has served as a director of the Company 

since 2007. Tilton has been a member of the Board’s Audit Committee since 2007. Upon 

information and belief, Tilton is a citizen of Illinois. 

23. Defendant William A. Osborn (“Osborn”) has served as a director of the 

Company since 2008. Osborn has been a member of the Board’s Nominations and Governance 

Committee since 2010. Upon information and belief, Osborn is a citizen of Illinois. 

24. Defendant Robert J. Alpern, M.D. (“Alpern”) has served as a director of the 

Company since 2008. Alpern has been a member of the Board’s Public Policy Committee since 

2009. Upon information and belief, Alpern is a citizen of Connecticut. 

25. Defendants White, Fuller, Austin, Farrell, Scott, Tilton, Osborn, and Alpern are 

collectively referred to as the “Current Director Defendants.” 

D. Former Board Members 

26. Defendant Jeffrey Leiden, M.D., Ph.D. (“Leiden”) served as a director of the 

Company from 1999 to 2006. In addition, Leiden served as the President and Chief Operating 

Officer (“COO”) of Abbott’s Pharmaceutical Products Division from 2001 until 2006. Leiden 

was a member of the Board’s Public Policy Committee in 1999. Leiden also previously served 

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as a director of TAP Pharmaceuticals, an Abbott joint venture. Upon information and belief, 

Leiden is a citizen of Illinois. 

27. Defendant William Daley (“Daley”) served as a director of the Company from 

2004 to 2011. Daley was a member of the Board’s Public Policy Committee from 2004 to 2009. 

Upon information and belief, Daley is a citizen of Illinois. 

28. Defendant W. Ann Reynolds, Ph.D. (“Reynolds”) served as a director of the 

Company from 1980 to 2010. Reynolds was a member of the Board’s Public Policy Committee 

from 1999 to 2009, serving as its Chairman since 2003. Reynolds was also a member of the 

Board’s Audit Committee from at least as early as 1997 to 2001, and a member of the 

Nominations and Governance Committee from at least as early as 1997 to 2000 and again from 

2003 to 2009. Upon information and belief, Reynolds is a citizen of Florida. 

29. Defendant the Rt. Hon. Lord David Owen (“Owen”) served as a director of the 

Company from 1996 to 2010. Owen was a member of the Board’s Audit Committee and 

Nominations and Governance Committee from at least as early as 1997 to 2010. Upon 

information and belief, Owen is a citizen of the United Kingdom. 

30. Defendant Roy Roberts (“Roberts”) served as a director of the Company from 

1998 until 2011. Roberts was a member of the Board’s Public Policy Committee from 1999 to 

2011, serving as its Chairman in 2010, and was a member of the Board’s Nominations and 

Governance Committee from 1998 to 2011. Upon information and belief, Roberts is a citizen of 

Michigan. 

31. Defendant William Smithburg (“Smithburg”) served as a director of the Company 

from 1982 to 2011. Smithburg was a member of the Board’s Public Policy Committee from 

1999 to 2003, serving as its Chairman from 1999 to 2002, and was a member of the Board’s 

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Audit Committee from 2002 to 2011. Upon information and belief, Smithburg is a citizen of 

Illinois. 

32. Defendant Boone Powell, Jr. (“Powell”) served as a director of the Company from 

1985 to 2008. Powell was a member of the Board’s Public Policy Committee from 2004 to 

2008, and was a member of the Board’s Audit Committee from at least as early as 1997 to 2003. 

Upon information and belief, Powell is a citizen of Texas. 

33. Defendant Jack Greenberg (“Greenberg”) served as a director of the Company 

from 2000 to 2007. Greenberg was a member of the Board’s Audit Committee from 2003 to 

2006, and was a member of the Board’s Nominations and Governance Committee from 2001 to 

2002. Upon information and belief, Greenberg is a citizen of Illinois. 

34. Defendant John Walter (“Walter”) served as a director of the Company from 1990 

to 2006. Walter was a member of the Board’s Public Policy Committee from 2001 until 2005, 

and was a member of the Board’s Audit Committee from at least as early as 1997 to 2005. Upon 

information and belief, Walter is a citizen of Florida. 

35. Defendant Addison Rand (“Rand”) served as a director of the Company from 

1992 to 2006. Rand was a member of the Board’s Nominations and Governance Committee 

from at least as early as 1997 to 2004. Upon information and belief, Rand is a citizen of 

Connecticut. 

36. Defendant David Jones (“Jones”) served as a director of the Company from 1982 

to 2003. Jones was a member of the Board’s Public Policy Committee from 1999 to 2002, a 

member of the Board’s Audit Committee from at least as early as 1997 to 2001, and a member of 

the Board’s Nominations and Governance Committee from at least as early as 1997 to 2002. 

Upon information and belief, Jones is a citizen of Kentucky. 

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37. Defendants Leiden, Daley, Reynolds, Owen, Roberts, Smithburg, Powell, 

Greenberg, Walter, Rand, and Jones are collectively referred to as the “Former Director 

Defendants.” 

E. Senior Executives 

38. Defendant Thomas C. Freyman (“Freyman”) serves as Executive Vice President, 

Finance and Chief Financial Officer (“CFO”) of the Company. He was appointed to his current 

role in 2004 and has served as Abbott’s CFO since 2001. Upon information and belief, Freyman 

is a citizen of Illinois. 

39. Defendant Richard A. Gonzalez (“Gonzalez”) has served as Abbott’s Executive 

Vice President, Pharmaceutical Products Group, since July 2010, after a brief retirement from the 

Company. Gonzalez first joined Abbott in 1977 and held various senior management positions 

before retiring in 2007, including serving as Abbott’s President and Chief Operating Officer. 

Gonzalez also served as a director of the Company from 2001 to 2007. Upon information and 

belief, Gonzalez is a citizen of Florida. 

40. Defendant Mary Szela (“Szela”) has served as Abbott’s Senior Vice President, 

Global Strategic Marketing and Services, Pharmaceutical Products Group, since January 2010. 

Szela joined Abbott in 1987 and has held a series of leadership positions at Abbott, including 

Vice President, Commercial Pharmaceutical Operations, where she was responsible for sales and 

marketing of Abbott’s pharmaceutical brands. Szela also served as Senior Vice President, U.S. 

Pharmaceuticals, from 2008 to 2009. Upon information and belief, Szela is a citizen of Illinois. 

41. Defendants Freyman, Gonzalez, and Szela are collectively referred to as the 

“Executive Defendants.” 

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F. Former Senior Executives 

42. Defendant James Tyree (“Tyree”) served as Abbott’s Executive Vice President, 

Pharmaceutical Products Group, from 2007 to 2009. Tyree also served as Abbott’s Senior Vice 

President, Pharmaceutical Operations, from 2006 to 2007. Upon information and belief, Tyree is 

a citizen of Illinois. 

43. Defendant William G. Dempsey (“Dempsey”) is a former Abbott executive, 

having served in numerous senior leadership positions in the Pharmaceutical Products Division 

from 1982 to 2007. Dempsey served as Abbott’s Executive Vice President, Pharmaceutical 

Products Group, from 2006 to 2007. Dempsey also served as Abbott’s Senior Vice President, 

Pharmaceutical Operations, from 2003 to 2006. Upon information and belief, Dempsey is a 

citizen of Illinois. 

44. Defendant Holger Liepmann (“Liepmann”) served as Abbott’s Executive Vice 

President, Pharmaceutical Products Group, in 2006. Upon information and belief, Liepmann is a 

citizen of Nevada. 

45. Defendant John Landgraf (“Landgraf”) served as Abbott’s Senior Vice President, 

Pharmaceuticals, Manufacturing and Supply, from 2004 to 2010. Upon information and belief, 

Landgraf is a citizen of Illinois. 

46. Defendant David Goffredo (“Goffredo”) served as Abbott’s Senior Vice 

President, Pharmaceutical Operations, from 2001 to 2002. Upon information and belief, 

Goffredo is a citizen of Colorado. 

47. Defendant P. Loreen Mershimer (“Mershimer”) served as Abbott’s Vice 

President, Pharmaceutical Products, Integrated Healthcare Marketing and Policy, from 2001 to 

2006. Upon information and belief, Mershimer is a citizen of Illinois. 

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48. Defendants Tyree, Dempsey, Liepmann, Landgraf, Goffredo, and Mershimer are 

collectively referred to as the “Former Executive Defendants.” 

* * * 

49. The Current Director Defendants, Former Director Defendants, Executive 

Defendants, and the Former Executive Defendants are collectively referred to as “Defendants.” 

FACTUAL BACKGROUND

A. Abbott’s Marketing Strategy 

50. Abbott is a global, broad-based health care company that focuses on the 

discovery, development, manufacture, and sale of a broad and diversified line of health care 

products in the United States and worldwide. Abbott’s products include HUMIRA®, TriCor®, 

Trilipix®, Simcor®, Niaspan®, Kaletra®, AluviaTM, Norvir®, Lupron®, Synagis®, AndroGel®, 

Ultane®, Sevorane®, Zemplar®, Synthroid®, Biaxin®, Klacid®, Klaricid®, and Creon®. 

These drugs contribute greatly to Abbott’s bottom line. For example, HUMIRA’s worldwide 

sales were $6.5 billion in 2010, up from $5.5 billion in 2009, and $4.5 billion in 2008. Until 

recently, Depakote had been one of Abbott’s top selling drugs. Notably, Depakote sales have 

dropped from $1.3 billion in 2008—the end of the Fraudulent Marketing Scheme—to $161 

million in 2010. As discussed below, Abbott’s Depakote marketing practices throughout the 

Relevant Period were designed to systematically increase its market share in violation of federal 

regulations. Once those marketing practices ceased in January 2009, Depakote sales plummeted. 

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B. Applicable Laws and Regulations Governing Abbott’s Operations 

1. FDA Regulation of Drug Marketing and Promotion 

a. The FDA Regulates What Drugs May be Marketed, and the 

Uses for Which They May be Marketed 

51. Abbott’s drug business is subject to regulation and oversight by the FDA. Under 

the Food, Drug and Cosmetics Act (“FDCA”), 21 U.S.C. §§ 301-97, new pharmaceutical drugs 

cannot be marketed or sold in the United States unless the sponsor of the drug demonstrates to 

the satisfaction of the FDA that the drug is safe and effective for each of its intended uses. 21 

U.S.C. § 355(a), (d). 

52. To determine whether a drug is “safe and effective,” the FDA relies on 

information provided by a drug’s manufacturer; it does not, itself, conduct any substantial 

analyses or studies. Applications for FDA approval (known as New Drug Applications or 

“NDAs”) must include “full reports of investigations which have been made to show whether or 

not such drug is safe for use and whether or not such drug is effective in use.” 21 U.S.C. § 

355(b)(1)(A). 

53. U.S. food and drug laws require that “adequate and well-controlled 

investigations” be used to demonstrate a drug’s safety and effectiveness. See 21 U.S.C. § 

355(d)(7). The FDA approves a drug if there are “adequate and well-controlled clinical trials” 

that demonstrate a drug’s safety and effectiveness for its “intended conditions” of use. See 21 

U.S.C. § 355(d)(5). The “intended conditions” for use of a drug are listed in the drug’s labeling, 

which is reviewed and approved by the FDA. See 21 U.S.C. § 355(d)(1) & (2). Indications for 

use that are not listed in a drug’s labeling have not been approved by the FDA. See 37 Fed. Reg. 

16,503 (1972). 

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54. The standards that govern the FDA safety and effectiveness requirements are 

contained in statutes, regulations, notices, and guidance documents. The statutory requirement 

that a drug’s effectiveness be demonstrated by “adequate and well-controlled clinical 

investigations” has been interpreted to mean a clinical study with (1) clear objectives; (2) 

adequate design to permit a valid comparison with a control group; (3) adequate selection of 

study subjects; (4) adequate measures to minimize bias; and (5) well defined and reliable 

methods of assessing subjects’ responses to treatment. See 21 C.F.R. § 314.26. 

b. FDA Regulations Prohibit Off-Label Marketing and False and 

Misleading Statements About a Drug’s Use 

55. FDA regulations restrict how drug companies may market and promote approved 

drugs. See 21 U.S.C. §§ 331, 352; 21 C.F.R. § 314.81. Drug labels may not describe intended 

uses for the drug that have not been approved by the FDA. 21 U.S.C. §§ 331, 352. Drug labels 

include all marketing and promotional materials relating to that drug. Id. Illegal “misbranding” 

can result in criminal penalties. See 21 U.S.C. § 333. 

56. A manufacturer wishing to market or otherwise promote an approved drug for 

uses other than those listed on the approved label must resubmit the drug for a series of clinical 

trials similar to those required for the initial FDA approval. See FDA Modernization Act of 

1997 (“FDMA”), 21 U.S.C. §§ 360aaa(b), (c); see also 21 C.F.R § 314.54; 21 U.S.C. §§ 301, et 

seq. A supplemental NDA must be filed. Unless and until an additional indication is approved 

by the FDA, the unapproved use is considered to be “off-label.” 

57. “Off-label” refers to the use of an approved drug for any purpose, or in any 

manner, other than what is described in the drug’s labeling. Off-label use includes treating a 

condition at a different dose or frequency than specified on the label, or treating a different 

patient population. 

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58. Although the FDA is responsible for ensuring that a drug is safe and effective for 

the specific approved indication, the FDA does not regulate the practice of medicine. Once a 

drug is approved for a particular use, the FDA does not prohibit physicians from prescribing the 

drug for uses that are different than those approved by the FDA. Thus, off-label information 

may be disseminated to a healthcare practitioner, but only in response to an “unsolicited 

request” from the practitioner. 21 U.S.C. § 360aaa-6. 

59. Absent an unsolicited request from a physician, federal laws prohibit any 

advertising that recommends or suggests an off-label use for an approved drug. The FDA has 

interpreted “advertising” to include a significant amount of speech that would not typically be 

considered advertising. See Final Guidance on Industry-Supported Scientific and Educational 

Activities, 62 Fed. Reg. 64,074 (Dec. 3, 1997). Specifically, any manufacturer speech explaining 

one of its products is an “advertisement” for the product and is subject to the prohibitions against 

off-label marketing contained in 21 C.F.R. § 202.1. 

2. Prescription Drug Reimbursement Under Medicaid and Other 

Federal Health Care Programs 

60. Medicaid is a public assistance program providing for payment of medical 

expenses for the poor and disabled. Funding for Medicaid is shared between the federal 

government and state governments. The Medicaid program subsidizes the purchase of more 

prescription drugs than any other program in the United States. 

61. Although Medicaid is administered on a state-by-state basis, the state programs 

adhere to federal guidelines. The federal Medicaid statute sets forth the minimum requirements 

for state Medicaid programs to qualify for federal funding, which is called federal financial 

participation. 42 U.S.C. §§ 1396, et seq.

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62. Federal reimbursement for prescription drugs under the Medicaid program is 

available for “covered outpatient drugs.” 42 U.S.C. §§ 1396b(I)(10), 1396r-8(k)(2), (3). 

Covered outpatient drugs are drugs that are used for “a medically accepted indication.” Id. at § 

1396r8(k)(3). 

63. A medically accepted indication, in turn, is a use which is listed in the labeling 

approved by the FDA, or that is included in one of the drug compendia identified in the Medicaid 

statute. Id. at § 1396r-8(k)(6). 

64. As set forth in detail herein, the off-label uses of the Depakote Products promoted 

by Defendants were not eligible for reimbursement from Medicaid because the drugs’ off-label 

uses were neither listed in the labeling approved by the FDA nor included in the drug compendia 

specified by the Medicaid statute. 

3. The Anti-Kickback Statute 

65. The federal health care Anti-Kickback statute, 42 U.S.C. § 132a-7b(b), prohibits 

any person or entity from making or accepting payment to induce or reward any person for 

referring, recommending, or arranging for the purchase of any item for which payment may be 

made under a federally-funded health care program. 

66. Thus, drug companies may not offer or pay any remuneration, directly or 

indirectly, to induce physicians or others to order or recommend drugs that may be paid for by a 

federal health care program. 

67. Violation of the Anti-Kickback statute subjects the violator to exclusion from 

participation in federal health care programs, civil monetary penalties, and imprisonment of up to 

five years per violation. 42 U.S.C. §§ 1320a-7(b)(7), 1320a(a)(7). 

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C. Abbott’s Illicit Marketing Practices Have Been the Target of Multiple 

Investigations 

1. An Abbott Subsidiary Gets Investigated, and Settles With the U.S. 

Government for Defrauding Medicare and Medicaid 

68. TAP Pharmaceutical Products Inc. was a joint venture of Abbott and Japan’s 

Takeda Pharmaceuticals Company Ltd. Twenty percent of Abbott’s revenues were derived from 

TAP, and Abbott appointed some of the members of TAP’s board of directors. Abbott and TAP 

worked together in sales and in marketing certain products. 

69. In 1996, Douglas Durand, the former vice president of TAP, filed a qui tam 

lawsuit under the False Claim Act. Among other things alleged in his complaint, Durand 

asserted that he had discovered that TAP had implemented a marketing plan to increase the 

market share of Lupron, a prostate cancer drug that generated approximately $800 million a year 

in sales for TAP. As part of this scheme, doctors were given gifts and kickbacks based on the 

amount of Lupron they purchased and prescribed. Additionally, the doctors received free 

samples of Lupron in exchange for billing Medicare and other insurers the full price for those 

samples. 

70. The Lupron scheme Durand described is better known as “marketing the spread,” 

which involves the manufacturers’ practice of inflating the Average Wholesale Price (“AWP”) 

used by Medicare and other federal programs as the basis for reimbursement of the drug, while 

deeply discounting the price paid by physicians (or giving the drug to physicians for free). The 

physician would then profit from the “spread” between the artificially inflated rate and the actual 

acquisition cost of the drug. Because in setting reimbursement rates Medicare and state 

Medicaid programs would use the AWPs generated by the pharmaceutical industry, Medicare 

and Medicaid fraud could be perpetrated through pharmaceutical manufacturers such as Abbott 

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purposefully manipulating the AWP, which would increase the Company and its customers’ 

profits by increasing the amount the federal health care programs reimburse its customers. 

71. Durand also alleged that the doctors were incentivized to prescribe Lupron instead 

of other cheaper, similarly effective drugs, such as Zoladex, which was manufactured by one of 

TAP’s and Abbott’s competitors, AstraZeneca. 

72. Public documents indicate that the materials Durand provided to the Government 

included a letter dated October 13, 1995 from William C. Lucas, on behalf of a TAP competitor, 

sent to a senior attorney at Abbott, and evidence that the attorney forwarded the letter to the 

director of regulatory affairs at TAP. 

73. The letter explained that a TAP representative had made a proposal to a doctor in 

Ohio that if the doctor bought a month of Lupron for his patients, TAP would supply three 

months of Lupron for free. 

74. The Government ultimately conducted an undercover operation to investigate the 

illegal kickback scheme involving TAP and Abbott (the “TAP Investigation”). 

75. On April 20, 2001, Abbott announced that it would restate its first quarter 

earnings to include a $344 million charge in connection with “recent developments related to the 

U.S. Department of Justice investigation into the marketing and sales practices” regarding TAP 

and Lupron. 

76. On October 3, 2001, the DOJ announced that TAP pled guilty to the federal 

charge of conspiracy and paid $875 million in fines and penalties. This massive amount 

consisted of a $290 million criminal fine, which was at the time the largest criminal fine ever in a 

healthcare fraud prosecution, a payment of $559.5 million for filing false and fraudulent claims 

with the Medicare and Medicaid programs as a result of TAP’s fraudulent drug pricing schemes 

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and sales and marketing misconduct, and a payment of nearly $25.5 million to the states for 

similar fraudulent conduct and for its failure to provide the state Medicaid programs TAP’s best 

price for those drugs as required by law. Abbott received immunity for its cooperation in the 

federal investigation. 

77. As part of the settlement, TAP also entered into a Corporate Integrity Agreement, 

which bound its officers and directors (and others) (the “TAP Covered Persons”) to certain 

requirements (the “TAP CIA”). These terms included the imposition of requirements as to how 

TAP supervised its marketing and sales staff and how TAP reported to the Medicare and 

Medicaid programs the true average sale price for drugs reimbursed by those programs. In 

relevant part, the CIA also required TAP to maintain a Compliance Committee, which would 

report regularly to the board of directors of TAP on matters related to compliance with the CIA 

and with federal health care program requirements. The CIA also mandated training to all 

current and future TAP Covered Persons for the duration of the CIA—seven years (2008). This 

annual training was supposed to explain, among other things, the CIA requirements, the TAP 

Compliance program, and examples of proper and improper promotion, marketing, and sales 

practices. 

78. Among others, the TAP Covered Persons include former Abbott board member 

and Defendant Leiden. 

2. As the TAP Investigation and Settlement Were Coming to a Close, the 

Government Turned its Sights to Abbott 

79. Less than two months before the TAP settlement was announced, on August 23, 

2001, the Chicago Tribune reported that another division of Abbott, the Ross Products Division, 

was being investigated for a different kickback scheme (“Ross Investigation”). This scheme 

involved potential Medicare and Medicaid fraud related to enteral feeding equipment being 

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supplied to nursing homes and other providers caring for seriously ill people. The feeding 

equipment included enteral products and enteral nutritional products. Enteral products are 

healthcare products intended to assist patients who, because of disease or other disorder, are not 

able to ingest meals in a normal manner. Enteral nutritional products introduce nutrition into the 

stomach and digestive system of such patients. 

80. As part of the Government’s undercover investigation, dubbed “Operation 

Headwaters,” federal agents created a fictitious medical supplier known as Southern Medical 

Distributors. During its operation, various manufacturers, including Ross, offered kickbacks to 

undercover agents to entice them to purchase the manufacturers’ products and then advised them 

how to fraudulently bill the Government for those items. 

81. On June 26, 2003, Abbott announced that it planned to pay $622 million in 

connection with the settlement of the Ross Investigation, a fine that was expected to result in a 

one-time charge of $0.34 per share. 

82. A month later, on July 23, 2003, Abbott settled the Ross Investigation, incurring 

charges of approximately $614.5 million. As part of the settlement, Abbott agreed to pay 

approximately $364.8 million in damages and penalties to federal Medicare and Medicaid, and 

approximately $50 million to Medicaid programs of the 50 states and the District of Columbia. 

C.G. Nutritionals, a division of Ross, paid a $200 million fine and pled guilty to a federal charge 

of Obstruction of a Criminal Investigation of Health Care Offenses, which was entered on 

October 27, 2003. 

83. As part of the settlement, Abbott also entered into a CIA with the OIG of the 

HHS, which, among other things, required Abbott to reform the sales and marketing practices of 

its enteral feeding operations (the “Abbott CIA”). The Abbott CIA bound the current and future 

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Abbott Board (among others) (the “Abbott Covered Persons”) to its terms. Similar to the TAP 

CIA, the Abbott CIA required the Abbott Covered Persons to engage in annual training and 

education regarding compliance with all federal healthcare program requirements, including the 

federal anti-kickback statute, and on proper and improper promotion, marketing, and sales 

practices. New Abbott Covered Persons (including new Board members) were supposed to 

receive this training and education within 30 days of their employment. 

84. The Abbott CIA bound Abbott’s then-current and future directors to its terms for 

the duration of the agreement—five years (2008). The Abbott Covered Persons include 

Defendants White, Fuller, Austin, Leiden, Reynolds, Owen, Roberts, Smithburg, Powell, 

Greenberg, Walter, and Rand, who were on the Abbott Board at the time the Abbott CIA was 

executed, and Defendants Farrell, Scott, Tilton, Osborn, and Alpern, who joined the Abbott 

Board while the Abbott CIA was in effect. 

3. Shareholder Derivative Suits Arise From the Settlements of the 2001 

TAP Investigation and the 2003 Ross Investigation 

85. In October 2001, following the settlement of the TAP Investigation, Abbott 

shareholders brought derivative litigation against the Board alleging, among other things, that 

Abbott’s Board members breached their fiduciary duties by failing to take action to prevent 

improper marketing and pricing practices at TAP (the “TAP Derivative Litigation”). 

86. Likewise, beginning in June 2003, other Abbott shareholders filed derivative 

lawsuits against the Board in connection with the settlement of the Ross Investigation (the “Ross 

Derivative Litigation”). These lawsuits also alleged that the Board members breached their 

fiduciary duties in failing to stop the alleged improper business practices in the enteral nutritional 

business. 

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87. On January 5, 2005, the parties agreed to a Stipulation and Agreement of 

Settlement of the litigation involving the breaches alleged in the TAP Derivative Litigation. The 

then-current Board, which included Defendants White, Fuller, and Austin, Leiden, Daley, 

Reynolds, Owen, Roberts, Smithburg, Powell, Greenberg, Walter, and Rand, approved the terms 

of the settlement. 

88. In conjunction with the settlement of the TAP Derivative Litigation, the Board 

agreed that the charter of the Public Policy Committee would be amended to expressly address 

healthcare compliance issues. 

89. The next day, on January 5, 2005, the parties agreed to a Stipulation and 

Agreement of Settlement of the litigation involving the breaches arising out of the Ross 

Derivative Litigation. 

90. Upon information and belief, the terms of the settlement of the Ross Derivative 

Litigation created similar revisions to the charter of the Public Policy Committee as those created 

by the settlement of the TAP Derivative Litigation. 

4. Abbott Settles a Third Derivative Litigation Arising From the 

Company’s Illegal Conduct 

91. Not coincidentally, the charter of the Public Policy Committee had only been 

revised a scant two months earlier, in conjunction with the settlement of a third derivative action 

involving Abbott. That litigation arose from a 1999 Consent Decree of Permanent Injunction 

against Abbott, Miles White (Abbott’s CEO and Chairman), and Thomas D. Brown (then 

President of Abbott’s Diagnostics Division) (the “1999 Consent Decree”). 

92. As part of the 1999 Consent Decree, Abbott was required to pay a then-record 

$100 million civil fine to the FDA, withdraw 125 types of medical diagnostic test kits from the 

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U.S. market, destroy certain inventory, and make a number of corrective changes in its 

manufacturing procedures after six years of federal violations. 

93. Several Abbott shareholders brought derivative actions against the Board in 

connection with the regulatory failures that led to the 1999 Consent Decree and the resulting 

injury to the Company (the “Consent Decree Derivative Litigation”). After five years of 

litigation, the parties reached a settlement agreement in December 2004, which was subsequently 

approved by the court. The broader implications of this settlement are discussed below. 

D. Fiduciary Duties of Abbott’s Management and Board 

94. Defendants have fiduciary duties to the Company and its shareholders, including 

the duties of loyalty, good faith, and candor. In addition, Abbott’s foundational corporate 

documents also detail the requirements of the Board’s duties, requiring, inter alia, that the Board 

must actively identify and report any illegal and/or unethical business practices within the 

Company. 

95. Pursuant to Abbott’s Governance Guidelines, “[t]he board of directors shall 

review and, where appropriate, approve fundamental operating, financial, risk management and 

other corporate strategies, as well as major plans and objectives and shall monitor the 

effectiveness of management policies and decisions, including the execution of strategies.” 

Moreover, the Governance Guidelines require the Abbott Board to “comply with all laws, rules 

and regulations applicable to their capacity as directors of Abbott,” and to “report violations of 

laws, rules, regulations or the Code of Business Conduct to the Chairman of the Board and Chief 

Executive Officer, the Vice President and Chief Ethics and Compliance Officer, or any other 

appropriate Abbott personnel.” 

96. In order to ensure that the Board remains fully informed at all times, the 

Governance Guidelines state that “[e]ach director shall have complete access to Abbott’s 

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management. Abbott’s management will make itself available to answer the directors’ questions 

about Abbott between meetings.” 

97. In addition to the Governance Guidelines, Abbott maintains a Code of Business 

Conduct (the “Code”), which applies to all Defendants. The Code enumerates several 

“Principles” premised on Abbott’s “core values of honesty, fairness and integrity.” For example, 

the Code provides: 

Principle 1: Fair Dealing

We will deal honestly and ethically with Abbott and with Abbott’s 

customers, suppliers, competitors, employees and other 

stakeholders. 

We will treat people fairly. We must not take unfair advantage of 

anyone through manipulation, concealment, abuse of privileged or 

otherwise undisclosed information, misrepresentation of material 

facts or any other unfair-dealing practices. 

Principle 2: Avoiding Conflicts of Interest

A conflict situation can arise when one of us takes action or has 

interests that may make it difficult to perform our Abbott work 

objectively and effectively. 

We must avoid any investment, interest, or association that 

interferes or might interfere with the independent exercise of our 

own individual best judgment, and with our obligation to perform 

our responsibilities in the best interests of Abbott. 

For example: 

* * * 

(2) We will not accept from or give to any supplier, customer, or 

competitor any gift or entertainment except as allowed under 

[Abbott’s “Gifts, Meals and Entertainment” Policy]. 

* * * 

Principle 5: Accuracy and Integrity of Books, Records and 

Accounts

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* * * 

No transaction or arrangement shall be structured to circumvent 

Abbott’s internal control system. 

No false or artificial entries shall be made for any purpose. 

* * * 

Principle 7: Full, Fair, Accurate, Timely and Understandable 

Disclosures

We will ensure that Abbott’s public disclosures comply with all 

applicable securities laws, including all applicable financial 

reporting and accounting regulations. Strict compliance with 

Corporate and Divisional accounting policies and procedures is 

required, as is full cooperation with internal and external auditors. 

Principle 8: Compliance With Laws

We are required to familiarize ourselves with all the laws, rules 

and regulations that apply in the areas within the scope of our work 

responsibilities, including, as applicable, the following areas. 

Contact the Legal Division for advice in any area where you have 

questions. 

Food and Drug Laws 

We must comply with all applicable laws, rules, regulations, 

consent decrees and other orders of the United States Food and 

Drug Administration and any other similar governmental 

authorities in other countries where Abbott does business 

governing research, development, manufacture, distribution and 

promotion of foods, drugs, medical devices, diagnostic products, 

nutritional products or biological products. 

* * * 

Laws Relating to Government Health Care Programs 

We must comply with the laws relating to government health care 

programs in each country where Abbott does business. 

In the United States, its territories and possessions, and Puerto 

Rico, many Abbott products are reimbursed or purchased by 

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Federal Health Care Programs – programs that include Medicare, 

Medicaid, Department of Defense and Department of Veterans 

Affairs health care programs, and many other Federal or Federallyfunded programs that pay for health care items and services. These 

programs are regulated through a variety of laws affecting the 

coverage and reimbursement of Abbott products, as well as 

the sale and marketing of those products. 

Abbott is committed to full compliance with all Federal Health 

Care Program requirements, including the following: 

Federal Anti-kickback Statute 

The laws that regulate these programs include the Federal antikickback statute, which applies both to our sales and marketing 

activities and to a broad range of other activities, including 

grants, research contracts, and consulting agreements. It 

generally prohibits offering or paying (or soliciting or 

receiving) cash or other benefits to induce the purchase, order, 

or recommendation of products eligible for payment by a 

Federal Health Care Program. 

[T]o ensure Abbott’s compliance with the anti-kickback statute, 

we must carefully evaluate and properly structure any 

arrangements with parties in a position to prescribe, purchase or 

recommend Government-reimbursed products (for example, 

physicians, hospitals, nursing facilities, HMOs, PBMs, GPOs, 

or pharmacies), and must always avoid any arrangements that 

could inappropriately influence treatment or purchasing 

decisions. 

False Claims Laws 

The civil False Claims Act and other statutes prohibit 

knowingly or recklessly submitting false claims to the 

Government, or causing others to submit false claims. 

Accordingly, we must exercise care to ensure that we do not 

submit any inaccurate or otherwise improper claims for 

payment to the Government, or cause others to do so. Abbott 

contracts with Government customers and must avoid 

submitting any claims for payments not properly due. While 

Abbott does not itself submit claims to insurance programs like 

Medicare and Medicaid, many of our customers do. We must 

avoid any conduct that could lead customers to submit false 

claims by following procedures carefully designed to ensure 

that any information we provide to customers about Medicare or 

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Medicaid reimbursement for our products is accurate and 

otherwise proper. 

* * *

Civil Monetary Penalties Law 

This law authorizes the imposition of civil monetary penalties 

for a variety of conduct. . . . 

Failure to adhere to Federal Health Care Program requirements, or 

to related Abbott standards, policies and procedures, can have a 

number of serious consequences, both for Abbott and for the 

individuals involved. . . . [V]iolation of these laws may result in 

exclusion of Abbott or individual employees from participation in 

Federal Health Care Programs. (emphasis added). 

98. The Board has several committees to monitor specific aspects of Abbott’s 

business. These committees have their own supplemental charters setting forth additional 

express duties for their respective members. For example, the charter of the Audit Committee 

provides that its members “shall assist the Board in fulfilling its oversight responsibility with 

respect to . . . legal and regulatory compliance as it relates to financial matters, including 

accounting, auditing, financial reporting, and securities law issues . . . ; and Abbott’s enterprise 

risk management, including major financial risk exposures . . . .” In addition, the charter permits 

the Audit Committee, “to the extent it deems necessary or appropriate, conduct or authorize 

investigations into any matter within the scope of its authority and may retain legal counsel, 

accountants and others to assist it in the conduct of its responsibilities, including investigations.” 

99. Abbott’s Nominations and Governance Committee is expressly charged with 

ensuring that the members of the Board and the Company’s senior executive officers are 

complying with their fiduciary duties, Governance Guidelines, and Code, described above. In 

this regard, the members of the Nominations and Governance Committee must “[o]versee the 

annual evaluation of the performance of the Board, and members of management of Abbott,” 

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“annually recommend to the Board the nominees for election as directors,” and “[r]ecommend to 

the Board the persons to be elected as the executive officers of Abbott.” The Nominations and 

Governance Committee must also “[r]eview annually the qualifications, requirements, 

membership, structure and performance of committees of the Board, including the Nominations 

and Governance Committee, and make recommendations to the Board regarding committee 

memberships and chairmanship and other matters, as appropriate . . . .” Moreover, the 

Nominations and Governance Committee is required to “[r]eview and assess the adequacy of 

Abbott’s corporate governance guidelines and recommend amendments to the Board . . . .” 

100. Abbott’s Public Policy Committee is tasked with assisting the Board in fulfilling 

its oversight responsibility. The charter of the Public Policy Committee provides, in relevant 

part: 

1. Purpose. The Public Policy Committee of the Board of 

Directors shall assist the Board in fulfilling its oversight 

responsibility with respect to: public policy, regulatory (including 

regulation by the Federal Food and Drug Administration, as well 

as other domestic, foreign and international regulatory bodies) and 

government affairs and healthcare compliance issues that affect 

Abbott . . . , by discharging the responsibilities set forth below. 

* * * 

3. Authority and Responsibilities. To assist it in the conduct of its 

responsibilities, the Public Policy Committee shall consult with 

management and, to the extent it deems it necessary or appropriate, 

may seek advice and assistance from Abbott employees or others, 

and may retain legal counsel and other advisors. 

The Public Policy Committee shall report to the Board on a regular 

basis. 

* * * 

The Committee shall: 

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• Review and evaluate Abbott’s policies and practices with respect 

to maintaining legal, regulatory and healthcare compliance . . ., and 

review them with the Board as appropriate. 

• Devise a process for the dissemination of information to the 

Committee from management with respect to regulatory and 

healthcare compliance matters, including, as appropriate, 

presentations to the Committee from management concerning the 

state of regulatory compliance and all issues with respect thereto. 

• The Chief Ethics and Compliance Officer shall report to the 

Public Policy Committee on an as needed basis on any significant 

compliance issues. 

101. Defendants’ gross misconduct is wholly inconsistent with the Company’s internal 

policies and fiduciary duties by which all Defendants agreed to be bound as a condition to 

accepting their positions with the Company. 

E. Abbott Board Duties and Policies Created From the Various Derivative 

Litigation Settlements 

102. As noted above, Abbott’s Board became subject to various requirements to 

protect against misconduct relating to Medicare and Medicaid fraud, and to ensure compliance 

with all Federal health care program requirements as part of the Abbott CIA. The Board was 

also subject to additional requirements created through the settlements of the Consent Decree 

Derivative Litigation, the TAP Derivative Litigation, and the Ross Derivative Litigation. 

1. The Abbott CIA (imposed in 2003) 

103. The Abbott CIA was executed on or about July 22, 2003 by two Abbott lawyers 

on behalf of the Company. In the preamble, Abbott represented that it had already initiated 

voluntary compliance measures, including “regular training to Covered Persons concerning 

Abbott’s Code of Business Conduct” (where Covered Persons included Abbott’s current and 

future directors) and “review and disciplinary procedures aimed, in part, at ensuring that 

Abbott’s activities are in compliance with all Federal health care program requirements.” 

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104. The Abbott CIA required Abbott to direct its Chief Compliance Officer to 

develop and implement written “policies, procedures, and practices designed to ensure 

compliance with the requirements set forth in this CIA and with Federal health care program 

requirements.” Additionally, Abbott was directed to revise and redistribute its Code of Business 

Conduct, which was required to set forth, in relevant part, “Abbott’s commitment to full 

compliance with all Federal health care program requirements, including the federal antikickback statute”; “Abbott’s requirement that all of its Covered Persons shall be expected to 

comply with all Federal health care program requirements”; and, “the requirement that all of 

Abbott’s Covered Persons shall be expected to report to the Chief Compliance Officer or other 

appropriate individual designated by Abbott suspected violations of any Federal health care 

program or of Abbott’s own Policies and Procedures.” 

105. The Abbott CIA also required the Company to create an internal mechanism for 

directly reporting compliance violations to the Board and required active involvement by the 

Board in policing Abbott’s compliance with the FDCA and the federal anti-kickback statute. For 

example, the Abbott CIA specifically required the Chief Compliance Officer to “make periodic 

(or at least semi-annual) reports regarding compliance matters directly to the Board of Directors 

of Abbott, or its designated subcommittee, in such form or manner as the Board of Directors of 

Abbott determines, and shall be authorized to report on such matters to the Board of Directors at 

any time.” 

106. Additionally, the Abbott CIA called for each Board member to receive annual 

training regarding the CIA, Abbott’s Compliance Program, and specific training regarding (in 

addition to, among other things, proper methods of promoting, marketing, and selling enteral 

nutrition items and services for which Federal health care program reimbursement may be made, 

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in accordance with all applicable statutes, regulations, and requirements, including but not 

limited to, the federal anti-kickback statute) “examples of proper and improper promotion, 

marketing, and sales practices.” All of the Director Defendants who were members of the Board 

during the pendency of the Abbott CIA received this training and thereby would have been 

aware of all compliance matters, including those involving the Depakote Products, as described 

more fully below. 

2. Modifications to the Public Policy Committee Charter (2004 and 

2005) 

107. In addition to the CIA, Defendants were subject to additional notice requirements 

of compliance issues and problems as a result of various derivative litigation brought by Abbott 

shareholders. The settlements of those actions created additional systems designed to inform the 

Board of problems with the Company’s compliance with Federal healthcare regulations and 

programs, such as those involving the Depakote Products. 

108. First, the Board modified the charter of its Public Policy Committee as part of the 

settlement of the Consent Decree Derivative Litigation. This charter establishes conclusively 

that its purpose was to ensure that the Board exercised proper oversight of federal regulatory 

compliance at Abbott. According to the memorandum filed by plaintiffs in support of final 

approval of the settlement, one of the critical needs at Abbott was the “improved flow of 

information between Abbott management and the Board of Directors, in the field of regulatory 

compliance.” The Charter of the Public Policy Committee was fashioned to accomplish this 

goal, along with funds made available by Abbott to achieve improved regulatory and compliance 

activities. Additionally, “[t]he ultimate goal was for Abbott to remain in regulatory compliance, 

and if not, its Board of Directors will be aware and able to react to any non-compliant activities.” 

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109. According to the papers filed in conjunction with the settlement, discovery in 

that case revealed that “no clear mechanism existed in Abbott to provide the Board with 

information concerning regulatory issues on a timely basis.” The Public Policy Committee was 

supposed to fix this serious corporate governance problem and lessen the chances and severity of 

costly regulatory non-compliance. 

110. The modified purpose of the Public Policy Committee was set forth in its charter, 

as follows: 

The Public Policy Committee of the Board of Directors shall assist 

the Board in fulfilling its oversight responsibility with respect to: 

public policy, regulatory (including regulation by the Federal Food 

and Drug Administration, as well as other domestic, foreign and 

international regulatory bodies) and government affairs issues that 

affect Abbott (recognizing that other board committees assist the 

Board of Directors in reviewing certain areas of legal and 

regulatory compliance) . . . . 

111. Second, as noted above, as part of the settlement of the TAP Derivative 

Litigation, the purpose of the Public Policy Committee was amended to specifically include 

oversight responsibility with respect to healthcare compliance issues. In conjunction with the 

settlement of the TAP Derivative Litigation, the Board agreed that the Charter of the Public 

Policy Committee would be amended to expressly address healthcare compliance issues by 

providing that: (1) the Public Policy Committee shall assist the Board in fulfilling its oversight 

responsibility with respect to healthcare compliance issues that affect Abbott; (2) the Public 

Policy Committee shall review and evaluate Abbott’s policies and practices with respect to 

healthcare compliance and review them with the Board as appropriate; and (3) the Public Policy 

Committee shall devise a process for the dissemination of information to the Committee from 

management with respect to healthcare compliance matters. The current charter and its 

provisions are discussed supra, ¶110. 

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112. Thus, between (1) the Abbott CIA imposing requirements for Defendants to be 

regularly trained and updated on any illegal activity involving, among other things, Medicare and 

Medicaid Fraud and illegal kickbacks, and (2) the Public Policy Committee creating mechanisms 

for management to report illegal activity and violations of healthcare compliance rules and 

regulations to Defendants, Defendants knew or should have known about any possible healthcare 

compliance issues regarding the Depakote Products. As it turns out, they utterly failed in 

exercising their fiduciary duties. 

F. Abbott Illegally Promotes Off-Label Uses of Depakote, Causing the 

Company to Reserve $1.5 Billion in Anticipation of Settling the Government 

Investigation 

1. The Criminal Promotion of Depakote 

113. The Government Investigation, as alleged in the Government’s complaint, and as 

detailed in the other whistleblower complaints, establishes that Defendants were breaching their 

fiduciary duties with respect to the marketing of Depakote long before the various derivative 

lawsuits settled, and long after the charter of the Public Policy Committee was amended to catch 

and prevent such misconduct from occurring. 

114. The Government complaint details Abbott’s marketing and promotion of the 

Depakote Products. Such products are generally included in the group of anti-epileptic drugs 

(“AEDs”), which are a diverse group of pharmaceuticals used in the treatment of patients with 

epilepsy. AEDs are also used in the treatment of bipolar disorder.1

115. The Depakote Products include: (i) Depakote (divalproex sodium), which was 

first approved for marketing by the FDA on March 10, 1983 for the treatment of epilepsy; (ii) 

Depakote Sprinkles, the capsule form of Depakote, which was approved by the FDA on 

 1

 Complaint at ¶¶72, 74, United States of America ex. rel. Thomas J. Spetter, Jr. v. Abbott Labs., Civ. 

No. 1:10cv6 (J. Wilson) (D. W.Va. Feb. 4, 2011). 

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September 12, 1989 for the treatment of epilepsy in children; (iii) Depacon, the intravenous form 

of Depakote, which was approved by the FDA on December 30, 1996 for the treatment of 

various types of seizures; (iv) Depakene, the liquid form of Depakote, which was approved by 

the FDA on February 28, 1978 for the treatment of various forms of seizures; and (v) Depakote 

ER, an extended release divalproex sodium formulation, which was approved by the FDA for the 

treatment of migraines on August 4, 2000, for the treatment of epilepsy on August 14, 2003, and 

for the treatment of bipolar disorder on December 6, 2005.2

116. Despite the extremely limited FDA-approved uses of the Depakote Products, the 

Government complaint shows that Abbott promoted the Depakote Products off-label for the 

treatment of numerous ailments, including: 

a) For the adjunctive treatment of schizophrenia; 

b) To treat aggression in adults and children who were considered mentally 

retarded or developmentally disabled, despite the fact that the FDA has never approved the 

Depakote Products to treat aggression in any patient population; 

c) For the management and treatment of substance abuse in bipolar disorder; 

d) For the treatment of post-traumatic stress disorder and intermittent 

explosive disorder; 

e) To treat psychiatric conditions in children and adolescents; 

f) To treat borderline personality disorder; 

g) For the treatment of bipolar depression; 

h) For the treatment of “signs of mania”; and 

 2 Id. at ¶¶75-78. 

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i) For the treatment of symptoms for which only Depakote had received 

FDA approval to treat.3

117. Abbott’s above-described misrepresentations leave no doubt as to its blatant 

disregard for patient safety. The most appalling aspect of the Fraudulent Marketing Scheme, 

however, was the scheme’s primary target: the elderly. 

118. The Depakote Products had been (and continue to be) heavily used for the 

treatment of Medicaid, Medicare Part D, Veterans Affairs, and Federal Employees Health 

Benefits recipients, particularly for treatment of the elderly. Indeed, Depakote’s and Depakote 

Sprinkles’ reimbursements from Medicaid alone from 1991 through 2008 totaled approximately 

$5.5 billion. In addition, Medicaid’s expenditures for Depakote ER from 2000 to 2008 were 

$2.1 billion. Given that most residents of LTC facilities are age 65 and older, Abbott aimed its 

illegal and deceptive marketing efforts at these facilities.4

a. Abbott Creates the LTC Group 

119. Abbott formed the LTC Sales Force in January 1998 to market the Depakote 

Products. Until this time, Abbott’s sales representatives had sold the Depakote Products 

primarily to physicians treating epilepsy and bipolar patients. Abbott’s purpose in creating the 

LTC Sales Force, however, was to maximize off-label sales for agitation and aggression 

associated with the treatment of dementia. Notably, although Abbott had planned to attempt to 

obtain approval from the FDA to market the Depakote Products for these indications, the 

Company decided not to follow through due to concerns that the drugs caused unacceptable 

side effects. Nevertheless, the initial group of thirty LTC sales representatives, referred to as the 

 3 Id. at ¶¶297-360. 

4 Id. at ¶¶79, 86. 

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“Charter Members” of the LTC Sales Force, were directed by Abbott’s management to sell the 

Depakote Products for treatment of dementia.5

120. The Charter Members attended training courses conducted by the Company’s 

sales trainers in Abbott Park, Illinois, at which they were provided with materials outlining the 

market for sales of the Depakote Products, including the fact that the majority of LTC patients’ 

pharmacy benefits would be reimbursed by Government programs—in particular, Medicaid. 

During their training, the Charter Members were initially told to promote the Depakote Products 

only on-label, but were later taken into a different meeting room where the door was closed and 

they were given a presentation by Larry Winfield. According to the Government’s complaint, 

Mr. Winfield, an experienced Abbott neuroscience sales representative who had been selling the 

Depakote Products for several years, instructed the Charter Members that they were to ignore 

Abbott’s trainers instructions to only sell the Depakote Products on-label, and that their primary 

sales opportunities would be off-label sales in the LTC market for agitation and aggression in the 

treatment of dementia.6

121. In order to influence LTC decision-makers to use the Depakote Products, 

Abbott’s management trained its LTC Sales Force to offer the following “enhancements [that] 

are used to win favorable contracts with providers”: 

a) Up-front discounts through a charge-back system to minimize customer 

outlays and avoid rebate calculations; 

b) Rebate contracts based on market share performance; 

c) Bundled product details in connection with programs implemented to 

affect market share performance favorably for a particular product or products; 

 5 Id. at ¶¶112-14. 

6 Id. at ¶¶114-15. 

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d) Extended dating, which allowed pharmacy providers to improve cash flow 

by deferring payments; 

e) Price protection; and 

f) Availability of specialized packaging intended for the LTC market.7

122. Abbott also instructed its LTC sales representatives to provide a number of other 

kickbacks, unrelated to drug contracting, to “influence pharmaceutical market share in the 

nursing facility through control over physician prescribing habits and access to nursing facility 

patients” by providing “value-added” programs, including: 

a) Regional/local educational symposia for physicians and nurses; 

b) Nursing in-service programs; 

c) Market research; 

d) Clinical research; 

e) New product information; 

f) Advisory boards; and 

g) Support for clinical programs.8

123. By 2001, the LTC Sales Force had grown from its original 30 Charter Members to 

60 LTC sales representatives, and by 2003, it was composed of more than 100 sales 

representatives. This growth in Abbott’s LTC Sales Force was accompanied by a corresponding 

spike in off-label sales of the Depakote Products.9

124. In 2004, Abbott merged the LTC group into its hospital group and named the 

combined group its Special Account Executive Institutional Sales Group. This formality had no 

 7 Id. at ¶116. 

8 Id. at ¶117. 

9 Id. at ¶120. 

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effect on the LTC group’s function, as Abbott continued to illegally promote off-label use of the 

Depakote Products in LTC facilities throughout the United States.10 

125. By this point in time, the revised charter of the Public Policy Committee had been 

enacted for at least six months, and according to the Company’s proxy statement filed in March 

2005, the Public Policy Committee had met two times. The members of the Public Policy 

Committee at that time consisted of Defendants Austin, Daley, Reynolds, Roberts, and Rand. 

126. Thus, for any such off-label marketing during the Relevant Period, Defendants 

either purposely violated the Company’s internal polices and controls, or entirely failed to 

implement such policies and controls. 

b. Abbott’s Management Trains its Sales Force to Manipulate 

Healthcare Professionals 

127. According to the Government’s complaint, the doctors to whom Abbott promoted 

the Depakote Products reasonably believed that the information provided to them by the LTC 

Sales Force and endorsed at Abbott-sponsored speaker programs and Continuing Medical 

Education (“CME”) events was truthful. Unfortunately, these doctors’ reliance on Abbott’s 

integrity was misplaced. Abbott went to great lengths to exploit physicians’ trust, and did so 

with the specific intent to influence physicians to write more prescriptions for the Depakote 

Products, including for numerous off-label uses. Abbott’s management instructed the 

Company’s sales representatives to provide healthcare professionals with Abbott-approved 

materials, including “approved” clinical studies, industry supplements, and CME materials. 

These off-label materials were provided to healthcare professionals at one-on-one details, in-

 10 Id. at ¶121. 

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services, speaker programs (both CME and non-CME), advisory boards, conferences, dinners, 

sporting events, and cultural events.11

128. Abbott’s management trained its LTC Sales Force to “leverage” clinical 

information concerning uses of the Depakote Products when planning each sales call. Sales 

representatives were to pinpoint a study’s key findings (including off-label findings), which were 

then turned into “key selling messages.” In the event that a study contained negative information 

concerning the Depakote Products, representatives were instructed to manipulate the message by 

“[s]often[ing] the language around an unfavorable point and focus[ing] on what the strengths 

[were]” in order to make their message more compelling. Representatives were told that they 

were “selling the validity of [their] study and the product at the same time.”12

129. LTC Sales Force representatives were supplied with laptop computers to enter 

“call notes,” describing what they did on a particular sales call. These call notes were regularly 

uploaded to Abbott’s mainframe computers and were therefore available for each Abbott district 

manager, as well as its Sales and Marketing management, who tracked the success of off-label 

sales calls. In addition, district managers regularly conducted “ride-alongs” with each of their 

respective sales representatives, in order to ensure that representatives were promoting the offlabel message, as well as to “coach” them on how to improve that message. 

130. Simultaneously with the creation of the LTC Sales Force, Abbott’s management 

instituted quota and bonus programs designed to motivate the sales representatives to sell to 

doctors who could not treat their patients using the Depakote Products on-label. The quota 

system required the LTC Sales Force to detail any physician on their call lists, regardless of 

specialty, and awarded the Sales Force members with bonuses based on sales of the Depakote 

 11 Id. at ¶¶105, 107. 

12 Id. at ¶108. 

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Products. These physicians included doctors who would not normally treat patients with the 

Depakote Products’ approved indications, such as geriatric psychiatrists, geriatricians, primary 

care physicians, internal medicine physicians, and nursing home medical directors. Thus, the 

only way that the LTC Sales Force could meet the quotas was by promoting the Depakote 

Products off-label.13

131. The training given during the Relevant Period establishes that Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

c. Abbott Funds Clinical Practice Guidelines to Deceive 

Healthcare Professionals 

132. Clinical practice guidelines (“CPGs”) are summaries of “expert” opinions that are 

often used to identify standards of care, and are an important source of drug information for 

physicians. The potential for conflicts of interest and undue influence in the development of 

CPGs, however, is rife. While CPGs are typically formulated by panels of experts with the 

support of medical professional societies, non-profit organizations, or quasi-governmental 

organizations, many of these organizations are partially or fully financially supported by 

pharmaceutical manufacturers. In addition, CPG panel experts often have economic ties to the 

drug industry via research grants or speaker fees.14

133. Abbott’s financial ties to numerous physicians and organizations that published 

CPGs—and its resulting ability to taint the outcome of these purportedly independent studies—

were integral to the Fraudulent Marketing Scheme. For example, in April 1998, McGraw-Hill 

published what appeared to be independent CPGs entitled, “Treatment of Agitation in Older 

 13 Id. at ¶259-61. 

14 Id. at ¶¶124-25. 

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Persons with Dementia, A Postgraduate Medicine Special Report” (the “Guidelines”), which 

provided a set of dementia management guidelines for doctors treating the elderly. The 

Guidelines mandated the use of Depakote, Depakote Sprinkles, and Depakote ER15 as first-line 

treatment for dementia patients, even though this was not a use approved by the FDA. Notably, 

Abbott funded the Guidelines in part by “unrestricted educational grants.” When the Guidelines 

were updated in May 2001 and January 2005 as part of a CME series on the treatment of 

dementia in the elderly, Abbott also funded the updates.16

134. Moreover, among the Guidelines’ “Expert Consensus Panelists” were a number of 

physicians with financial relationships with Abbott, but the Guidelines failed to disclose any 

such financial ties.17 

135. After commissioning McGraw-Hill to publish the Guidelines, and strategically 

designating conflicted physicians as “Expert Consensus Panelists”—thereby ensuring that the 

Guidelines would tout Depakote as the premiere treatment for dementia patients—Abbott’s 

management embarked on a campaign to distribute copies of the Guidelines to healthcare 

professionals caring for LTC patients throughout the United States. Abbott hired Insight 

Therapeutics, LLC (“Insight”) to produce a pocket version of the Guidelines (the “Pocket 

Guide”)18 to be used as part of CME courses that Abbott sponsored. The Pocket Guide was 

supported through an unrestricted educational grant from Abbott. In addition, in 2000, Insight 

prepared a CD version of the Guidelines that promoted the off-label use of the Depakote 

 15 Depakote ER was not approved by the FDA until 2000. Id. at ¶129.

16 Id. at ¶¶128-29. 

17 Id. at ¶ 131. 

18 In addition to promoting treatment of agitation and aggression associated with dementia, the 

Pocket Guide also promoted, inter alia, the Depakote Products as an alternative to atypical antipsychotics 

for the treatment of psychosis for patients suffering from dementia, id. at ¶284, and as an alternative to 

antipsychotics to treat “Sundowning Syndrome” in the elderly, id. at ¶292. 

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Products for the treatment of agitation and aggression associated with dementia. Keeping with 

protocol, Abbott funded the CD with an educational grant. Abbott also funded a conversion of 

the Guidelines into a promotional piece entitled “Treatment of Dementia and Agitation: A Guide 

for Families and Caregivers” (the “Family Guide”). The Family Guide specifically promoted the 

off-label use of Depakote, stating that “Divalproex can help people with dementia that [sic] are 

showing aggression or anger.”19

136. Abbott’s efforts were, to say the least, fruitful. By 2000, sales of the Depakote 

Products nationwide grew such that an estimated 85 to 90 percent of LTC use of the Depakote 

Products was off-label. In turn, an estimated 85 percent of these off-label prescriptions were for 

Medicaid and Medicare patients.20

137. For any such guidelines made during the Relevant Period, Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

d. Abbott Improperly “Details” the Depakote Products 

138. The Government complaint also elaborates on Abbott’s “detailing,” which is the 

one-on-one promotion of drugs to physicians by pharmaceutical sales representatives. Such 

promotions typically occurred through regular office visits when “drug reps go to doctors’ 

offices to describe the benefits of a specific drug.” In an effort to increase sales of the Depakote 

Products, the Abbott LTC Sales Force engaged in numerous off-label detailing activities, 

including free luncheons, breakfasts, dinner meetings, preceptorships, grand rounds, minifellowships, and in-service training.21

 19 Id. at ¶¶132-36. 

20 Id. at ¶141. 

21 Id. at ¶¶142, 145. 

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139. For any such marketing made during the Relevant Period, Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

i. Abbott Targets P&T Committees 

140. Many healthcare organizations, such as hospitals, institutional pharmacies, state 

Medicaid agencies, and managed care organizations, maintain lists—or “formularies”—of 

preferred drugs that can be prescribed by healthcare professionals within that organization or 

which are eligible for reimbursement by that organization. The Pharmacy and Therapeutics 

(“P&T”) Committee of an organization decides which pharmaceutical products are included on 

the formulary.22

141. P&T Committees generally make formulary decisions based upon assessments of 

safety, efficacy, and tolerability. In other words, P&T Committees are trained to consider 

patients’ best interests when making a formulary decision. Patient safety being anything but a 

priority to Abbott, however, Abbott’s management instructed the Company’s sales 

representatives to provide details and in-services that peddled off-label uses of the Depakote 

Products to P&T Committee members, as well as to single out P&T Committee members for 

special attention in order to influence them to add the Depakote Products to their formularies.23

142. For any such training given during the Relevant Period, Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

 22 Id. at ¶146 

23 Id. at ¶¶146-47. 

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ii. Abbott Utilizes In-Services to Promote the Off-Label 

Use of the Depakote Products 

143. The LTC Sales Force conducted in-services for nursing home staff and for 

consultant pharmacists, which advocated for the off-label use of the Depakote Products.24

144. In addition, Abbott funded a number of CME CDs for regular use at the inservices. These CDs depicted actors pretending to be nursing home residents suffering from 

dementia, then showed a round table discussion among physicians—often with financial ties to 

Abbott—concerning treatment options for the actor patients. Not surprisingly, in each CD, the 

physicians arrived at the same conclusion: The Depakote Products were the treatment of choice 

for the elderly patient’s aggression associated with dementia.25 

145. For any illegal off-label marketing made during the Relevant Period, Defendants 

either purposely violated the Company’s internal polices and controls, or entirely failed to 

implement such policies and controls. 

iii. Abbott’s “Decile” Ranking System 

146. The Government complaint also describes the “decile” rankings—a ranking of 1 

to 10 of the overall prescribing of the Depakote Products by a physician, with 1 being the least 

number of prescriptions and 10 being the highest number of prescriptions—were a pivotal 

component of Abbott’s selection of which physicians to bribe. In violation of the Anti-Kickback 

Act, Abbott’s LTC Sales Force paid high decile physicians to perform preceptorships in order to 

influence them to prescribe the Depakote Products.26 

 24 Id. at ¶ 152. 

25 Id. at ¶¶153-58. 

26 Id. at ¶159. 

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147. For any such kickback given during the Relevant Period, Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

e. Abbott Exploits OBRA-87 Limits to Promote the Depakote 

Products 

148. All LTC facilities participating in Medicare and Medicaid must receive 

certification for compliance with federal requirements. Under the Omnibus Budget 

Reconciliation Act of 1987 (“OBRA-87”), each LTC facility must employ an outside consulting 

pharmacist who is responsible for the quality of pharmaceutical services.27

149. OBRA-87 addresses the use of anti-psychotic drugs, which are a type of 

psychotropic medications. Specifically, LTC residents who had not previously used antipsychotic drugs are prohibited from receiving these drugs unless anti-psychotic drug therapy is 

necessary to treat a specific condition, as diagnosed and documented in the resident’s clinical 

record.28

150. OBRA-87, however, did not classify the Depakote Products as “anti-psychotics.” 

Consequently, according to the Government, Abbott’s management developed an aggressive 

marketing campaign to promote the Depakote Products’ off-label use as superior to psychotropic 

drugs—in particular, anti-psychotic drugs. Abbott’s marketing campaign highlighted: (i) the offlabel use of the Depakote Products as replacements for anti-psychotics and anti-anxiety 

medications; and (ii) the flexibility resulting by prescribing the Depakote Products off-label, 

which did not exist with traditional anti-psychotics that were subject to the OBRA-87 limits.29

 27 Id. at ¶164; 42 CFR § 483.60. 

28 42 CFR § 483.25(1)(2). 

29 Id. at ¶¶168-69. 

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151. For any such marketing campaign during the Relevant Period, Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

f. Abbott Backs the Depakote Products With Misleading Clinical 

Studies 

i. The Failed Tariot 738 Study 

152. As previously noted, Abbott had initially planned to seek FDA approval to 

promote the Depakote Products for aggression associated with dementia. The Government 

complaint outlines how Abbott planned to support its application with the FDA with a study it 

commissioned known as the M97-738 Study (the “738 Study”).30 

153. The lead investigator for the 738 Study, however, was a paid Abbott consultant, 

Dr. Pierre Tariot. On July 21, 1998, during the 6th International Conference on Alzheimer’s 

Disease and Related Disorders in Amsterdam, the Netherlands, Dr. Tariot flaunted the purported 

impressive preliminary results of the 738 Study, stating that “[m]edicines commonly used to treat 

epilepsy and other seizure disorders appear to be effective at soothing the agitation in people 

with Alzheimer’s disease and other forms of dementia,” and that such medicines appear to be “as 

good as or better than the medicines physicians have available now to treat agitation.”31 

154. Notwithstanding Dr. Tariot’s initial assertions, the 738 Study had to be terminated 

prior to full enrollment due to an alarming number of participant dropouts resulting from 

excessive patient somnolence and weight loss. As such, the 738 Study was considered a 

“negative study” and could therefore not support a formal FDA application. Despite the fact that 

 30 Id. at ¶173. 

31 Id. at ¶175. 

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the 738 Study was never completed, it concluded that “[d]ivalproex sodium demonstrated a 

statistically significant effect on agitation associated with dementia.”32

155. Abbott was undeterred by—and, in fact, instructed its LTC Sales Force to 

conceal—the dangers posed by the Depakote Products. In addition to providing thousands of 

reprints of the 738 Study to the LTC Sales Force for dissemination in their off-label promotion, 

Abbott’s management trained the Company’s LTC Sales Force to tell physicians that the 738 

Study had demonstrated “the safety, efficacy and ease of use in treating agitation and aggression 

in dementia patients.” Moreover, the LTC Sales Force was instructed to state that any negative 

side effects reported during the 738 Study were the result of the use of too high an initial dose of 

the Depakote Products, and that physicians should instead “start low, go slow, titrate to clinical 

response.”33

156. For any such action taken during the Relevant Period, Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

ii. The Unfounded Manji Article 

157. Abbott also fraudulently promoted the neuroprotective effects of the Depakote 

Products in the treatment of Alzheimer’s disease and other mood disorders. A key promotional 

tool used by the LTC Sales Force in this off-label detail was the “Manji article,” published in 

2000. The Manji Article was neither peer-reviewed nor a double-blind study. Moreover, it was 

only a review of recent studies which “suggest[ed]” that the Depakote Products exhibited 

neuroprotective effects. Nonetheless, Abbott’s management instructed the LTC Sales Force to 

 32 Id. at ¶176-77. 

33 Id. at ¶¶179-80. 

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use the Manji article to drive home the claim that the Depakote Products effectively treated 

Alzheimer’s.34

158. For any such promotion made during the Relevant Period, Defendants either 

purposely violated the Company’s internal polices and controls, or entirely failed to implement 

such policies and controls. 

iii. Abbott Illegally Sponsors the Porsteinsson 817 Study 

159. Investigator-initiated studies (“IIS”) are used by drug companies to encourage 

physicians and clinical investigators to study their products and publish or present their findings. 

A legitimate IIS is generally structured such that a pharmaceutical manufacturer provides a 

monetary grant to a physician or clinical investigator, who, in turn, designs and conducts a 

clinical study on the manufacturer’s product. Conversely, an IIS that is driven by a company’s 

marketing department triggers potential liability under the Anti-Kickback Act. In addition, a 

manufacturer that is overly involved with an IIS could be viewed as the true “sponsor” of the 

trial. Thus, the trial outcome would not be independent; this lack of independence would need to 

be disclosed in publications, presentations, and other discussions.35

160. In 2001, Abbott partially funded the M98-817 Study (the “817 Study”), an IIS 

authored by Dr. Anton Porsteinsson. The actions taken by Abbott in connection with the 817 

Study leave no question that Abbott was in reality the “sponsor” of the study. For instance, the 

Government alleges that Abbott’s Marketing Department was responsible for the enrollment of 

patients, selection of nursing home sites for study participants, and communicating with 

physicians and study investigators. Second, Abbott’s Marketing Department went so far as to 

promote a contest under which nursing homes that enrolled five or more patients in the 817 

 34 Id. at ¶¶ 279-80. 

35 Id. at ¶¶182, 184. 

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Study would receive a gift of their choice from Abbott. Third, Abbott’s sales representatives 

hosted several in-services at study sites on the off-label use of the Depakote Products. Finally, 

Abbott was in charge of the 817 Study protocol, adverse event reporting, all medical issues, 

monitoring issues, and regulatory issues.36

161. Abbott began promoting the off-label results of the 817 Study well in advance of 

completion of the study in order to increase the off-label uses of the Depakote Products. When 

the results of the 817 Study were published in 2001, however, the 817 Study could only state that 

the data “suggest, but do not prove, that this form of therapy can be associated with reduced 

agitation in some patients with dementia in the nursing home.” (emphasis added). Incredibly, 

Abbott provided thousands of reprints of the 817 Study to its LTC Sales Force to use in their 

details, specifically to counter the negative aspects of the 738 Study.37

162. For any such promotion made during the Relevant Period, Defendants either 

purposely violated the Company’s internal policies and controls, or entirely failed to implement 

such policies and controls. 

iv. Dr. Tariot Reconsiders the Findings From His 738 

Study, But Abbott Ignores the Truth 

163. In 2005, Dr. Tariot published a study (the “2005 Tariot Study”) which found that 

the Depakote Products showed “no benefit” for the treatment of agitation in dementia. Despite 

Dr. Tariot’s earlier 738 Study’s suggestion that the Depakote Products could be used in the 

treatment of agitation in dementia, the 2005 Tariot Study found that none of the earlier studies 

had proved that the Depakote Products were “efficacious for agitation in dementia,” and that 

“[s]ome recommendations in consensus statements regarding possibly beneficial therapies are 

 36 Id. at ¶¶181, 185. 

37 Id. at ¶¶186-87. 

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not supported by definitive evidence.” Notably, at no time did Abbott’s management provide 

reprints of the 2005 Tariot Study to sales representatives for distribution to healthcare 

professionals.38 

164. For any such failure to distribute accurate Depakote materials during the Relevant 

Period, Defendants either purposely violated the Company’s internal policies and controls, or 

entirely failed to implement such policies and controls. 

g. Abbott Uses Medical Journal “Supplements” to Promote the 

Depakote Products 

165. Abbott also promoted the off-label use of the Depakote Products through 

“supplements” to medical journals. These supplements were rarely peer-reviewed, and regularly 

subjected to Abbott’s influence. Examples of the promotional supplements include: 

a) “Phenomenology and Treatment of Aggression Across Psychiatric 

Illnesses,” a 1999 supplement to THE JOURNAL OF CLINICAL PSYCHIATRY. The authors, 

doctors Charles B. Nemeroff and Alan F. Schatzberg, were both paid Abbott consultants, funded 

by an Abbott unrestricted educational grant. This fact was not disclosed in the supplement; 

b) “Bipolar Disorder & Impulsive Spectrum Letter, a 2001 supplement to 

PSYCHIATRIC TIMES. The supplement included an article entitled “Treating Agitation in 

Dementia with Anticonvulsants.” The supplement was prepared by CME, Inc., and supported by 

an unrestricted educational grant from Abbott. The article discussed a presentation by Dr. Alan 

Siegal, a paid Abbott consultant. Again, the article failed to disclose Dr. Siegal’s relationship 

with Abbott; and 

c) “New Strategies for Managing Dementia and Improving Medication Pass 

Outcomes,” a 2004 supplement to the periodical Geriatrics. The supplement was sponsored as a 

 38 Id. at ¶188. 

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CME, the faculty at which included Tom Snader, a regular Abbott speaker. The supplement 

presented a case study of a patient who had been suffering from agitation related to dementia and 

was prescribed Depakote ER.39

166. Abbott’s management supplied the LTC Sales Force with reprints of the 

supplements for use in their promotion of the off-label use of the Depakote Products.40

167. For any such “supplement” created during the Relevant Period, Defendants either 

purposely violated the Company’s internal policies and controls, or entirely failed to implement 

such policies and controls. 

h. Abbott Bribes “Key Opinion Leaders” to Increase Sales of the 

Depakote Products 

168. Abbott developed a core marketing strategy of identifying “Key Opinion Leaders” 

(“KOLs”), which were physicians who would influence their peers’ prescribing behavior. In 

exchange for their advocacy in support of the Depakote Products, as well as marketing activities 

such as speaker programs and CME programs across the United States, Abbott provided the 

KOLs with a number of improper kickbacks, including long-term consulting agreements, sports 

tickets, dinners, golf outings, and speaker honoraria.41 

169. Abbott grouped the KOLs into three levels, depending on their status and role in 

marketing the Depakote Products in LTC facilities. In general, the higher the KOL level 

assigned to a given physician, the more valuable the kickback provided to that physician.42

170. Abbott also relied on the KOLs to develop standing orders—which authorize 

nurses and pharmacists to administer medications according to a physician-approved protocol 

 39 Id. at ¶¶189-91, 194. 

40 Id. at ¶193. 

41 Id. at ¶¶195-98. 

42 See id. at ¶196 (explaining that Level I KOLs—the highest level—were generally awarded longterm consulting agreements with the Company, while Level II KOLs were hired on a short-term basis). 

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without first requiring the patient to undergo a physician exam—recommending the first-line, 

off-label use of the Depakote Products to treat agitation and aggression related to dementia. As a 

result, numerous geriatric patients diagnosed with dementia who displayed agitation and 

aggression were subjected to the Depakote Products in the absence of a determination mandating 

such treatment by an unbiased physician.43

171. For any such bribe paid during the Relevant Period, Defendants either purposely 

violated the Company’s internal policies and controls, or entirely failed to implement such 

policies and controls. 

i. Abbott Sets Up Speaker Presentations Rife With Off-Label 

Promotions 

172. The FDA mandates that promotional presentations must be “on-label,” must 

contain a “fair balance” of information concerning the risks and benefits of a drug, and must be 

truthful and not misleading.44

173. Abbott consistently disregarded FDA regulations by arranging hundreds of 

speaker programs for healthcare professionals at which off-label promotional presentations were 

offered. Abbott chose and negotiated with the speakers who presented, and selected the 

presentation topics. Not coincidentally, the speakers chosen were often also high decile 

prescribers of drugs to treat agitation and aggression associated with dementia. As such, the 

presentations often advocated for the off-label use of Depakote to treat agitation and aggression 

in the treatment of dementia.45 

 43 Id. at ¶¶270-74. 

44 Id. at ¶199. 

45 Id. at ¶¶201-21. 

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174. For any such presentation made during the Relevant Period, Defendants either 

purposely violated the Company’s internal policies and controls, or entirely failed to implement 

such policies and controls. 

j. Abbott Uses CMEs as Promotional Events for the Depakote 

Products 

175. CME courses, which usually consist of medical lectures featuring KOLs, are 

another key source of drug information for doctors. The content of CME programs is intended to 

be independent of drug companies. According to both the Accreditation Council for Continuing 

Medical Education and FDA guidance, independent educational grants cannot be tied to the 

purchase, sale, prescription, or recommendation of the company’s products. There cannot be 

price concessions to help offset a customer’s purchase or reimbursement of drugs, and there 

cannot be any payment to ensure that the grant recipient markets the company’s drugs during the 

educational program. In addition, responsibility for and control over the selection of content, 

faculty, educational methods, materials, and venue belong solely to the CME provider in 

accordance with their guidelines.46

176. Beginning at least as early as 1998, Abbott contracted with ABcomm, Inc. 

(“ABcomm”) to set up CME programs using KOLs to conduct CMEs. In violation of FDA 

regulations, Abbott converted the CME programs into events promoting off-label uses of the 

Depakote Products. 

177. Until at least the second quarter of 2005, Abbott was exclusively responsible for 

choosing speakers at all ABcomm meetings, which speakers were in most instances KOLs whom 

Abbott wanted to influence to use more of the Depakote Products for dementia treatment. 

Abbott also selected the topics and slides speakers were to use, the audience who would be 

 46 Id. at ¶¶222, 225. 

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invited to hear the presentations, the venues for the presentations, as well as negotiated speaker 

honoraria.47 

178. The motive behind Abbott’s hiring ABcomm is not hard to decipher. ABcomm 

was retained for the sole purpose of providing the appearance of an “arms length” transaction 

between Abbott and the educational program it was funding. In other words, in the event that 

discussions of off-label uses of the Depakote Products arose—which Abbott ensured that they 

did—ABcomm’s presence would make such discussions appear to be unrelated to Abbott. 

ABcomm was well aware of its role, and understood that its direct funding from Abbott in the 

form of educational grants was conditioned on the presentation of topics that interested Abbott 

and included speakers that spoke favorably of the Depakote Products.48 

179. For any such CME programs held during the Relevant Period, Defendants either 

purposely violated the Company’s internal policies and controls, or entirely failed to implement 

such policies and controls. 

k. The LTC Sales Force Falsify Medical Education Requests for 

Off-Label Information About the Depakote Products 

180. A “Medical Education Request” is Abbott’s in-house term for a physician request 

for off-label information for one of Abbott’s drugs. Not satisfied with the frequency at which 

such requests arose in the ordinary course of business, Abbott’s management instructed the LTC 

Sales Force to actively solicit doctors to submit Medical Information Requests for information 

concerning off-label uses of the Depakote Products. LTC sales representatives, in turn, 

submitted the Medical Information Requests to Abbott’s Medical Information Department, 

 47 Id. at ¶¶228-29, 234, 281. 

48 Id. at ¶¶230, 232. 

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making it appear as if physicians had asked for this information on their own. Abbott’s Medical 

Information Department then sent these physicians the off-label materials.49

181. This practice was not only condoned by Abbott’s senior management, but actually 

encouraged. Indeed, as described in the Government complaint, management ran sales contests 

to reward the sales representative who could get the most Medical Education Requests. 

Consequently, the LTC Sales Force improperly solicited doctors to submit thousands of Medical 

Education Requests for off-label information about the Depakote Products. Abbott’s 

management was well aware that this practice constituted illegal off-label promotion, but 

nonetheless carried on undeterred.50 

182. Accordingly, for any such fraudulent Medical Education Requests submitted 

during the Relevant Period, Defendants either purposely violated the Company’s internal policies 

and controls, or entirely failed to implement such policies and controls. 

2. The Government Launches Its Investigation Into Depakote 

183. On November 6, 2009, Abbott reported in its Form 10-Q that the Department of 

Justice began investigating Abbott’s sales and marketing activities for Depakote. According to 

the disclosure, “the government is seeking to determine whether any of these activities violated 

civil and/or criminal laws, including the Federal False Claims Act, the Food and Drug Cosmetic 

Act, and the Anti-Kickback Statute in connection with Medicare and/or Medicaid reimbursement 

to third parties.” Abbott continued using this same disclosure in each of the next two annual 

reports it filed with the SEC. 

184. Over the next two years, the Government continued its investigation, which 

included, upon information and belief, review of millions of pages of internal documents and 

 49 Id. at ¶¶265-66, 268. 

50 Id. at ¶¶267-69.

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emails as well as interviews with various current and former Abbott employees and personnel. 

For example, in its March 2010 proxy, Abbott disclosed that it had advanced defense costs on 

behalf of three former officers in connection with the Government Investigation. In its March 

2011 proxy, Abbott disclosed that the Government Investigation had expanded such that the 

Company had advanced defense costs on behalf of two current and five former officers. 

185. Among other things, the Government sought all e-mails sent or received by 

thirteen individuals from 1996 through 2008 as part of its investigation into potential federal 

violations arising out of Abbott’s impermissible off-label marketing of Depakote as a treatment 

for agitation and aggression in the elderly, and health care fraud arising out of that allegedly 

improper use. Eventually, the Government had to move to compel Abbott to produce the e-mails 

of three people (Defendants Dempsey, White, and Leiden), which the court granted. The emails 

related to Depakote and off-label marketing of other FDA approved drugs. 

186. On February 4, 2011, the DOJ elected to intervene in a whistleblower lawsuit 

filed in late 2008 by former Abbott sales representatives and unsealed a redacted version of its 

Complaint against Abbott involving the Company’s illegal scheme to promote Depakote 

Products. 

3. Abbott and the DOJ Engage in “Active” Settlement Negotiations, and 

Abbott Sets Aside $1.5 Billion in Anticipation of Settlement 

187. By June 2011, the Company and the DOJ were in “active settlement discussions” 

regarding the Government Investigation, according to Bloomberg. Nonetheless, the Company 

remained quiet in its disclosures. 

188. Even in its Form 10-Q filed on August 4, 2011 Abbott did not bother to address 

the potential enormity of the settlement of the Government Investigation. Despite having 

litigated against the Government in prior Medicaid and Medicare fraud cases, and despite the 

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industry-wide knowledge that the Government was routinely investigating and settling such 

cases for hundreds of millions of dollars, Abbott only disclosed that “[d]iscussions are ongoing 

in an effort to resolve potential civil and criminal claims arising from this matter. Abbott is 

unable to predict the outcome of this matter or to estimate the range or amount of possible loss 

and no loss reserves have been recorded for this exposure.” Nonetheless, it disclosed that “[f]or 

its legal proceedings and environmental exposures Abbott estimates the range of possible loss to 

be from approximately $85 million to $120 million.” 

189. Finally, on October 19, 2011, Abbott attempted to bury the news of the reserve in 

a Form 8-K announcing that it was splitting into two companies, one focused on diagnostics and 

medical devices and the other focused on research-based pharmaceuticals. The Form 8-K also 

mentioned that “$1.5 billion of litigation reserves related to ongoing settlement discussions in the 

previously disclosed investigation by the U.S. Department of Justice, through the U.S. Attorney 

for the Western District of Virginia, related to Depakote.” In its Form 10-Q filed November 4, 

2011, Abbott disclosed that “[d]iscussions to resolve potential civil and criminal claims arising 

from this matter have advanced to a point where Abbott believes a loss is probable and estimable 

and therefore, Abbott recorded a charge of $1.5 billion in the third quarter of 2011.” 

190. Based on its previous experience with fines arising out of Government 

investigations into fraud relating to and illegal marketing of other Company products, 

Defendants should have been able to estimate the range of possible loss prior to October 19, 

2011 and should have begun disclosing such range as early as February 2011. Defendants also 

should have been able to estimate the range based on prior fines and settlements levied by the 

DOJ against other pharmaceutical companies and Abbott’s competitors, such as Pfizer ($2.3 

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billion fine in 2009) and Eli Lilly & Company ($1.4 billion fine in 2009), for similar off-label 

marketing practices. 

G. Defendants Were Twice Warned About Off-Label Marketing of Depakote as 

well as Other Drugs 

191. In addition to the above red flags, Defendants were on notice of issues related to 

the off-label marketing and promotion of the Depakote Products and other Company drugs as far 

back as 1998. 

192. On June 26, 1998, Duane Burnham, then-CEO of Abbott, received a letter from 

HHS regarding Abbott’s promotional materials and activities for Depacon, a Depakote Product. 

After review by DDMAC, HHS found that the promotional materials violated various provisions 

of the FDCA because they promoted non-approved uses for Depacon. Among other things the 

Company was requested to do was to mail and publish a pre-approved “Dear Healthcare 

Professional” letter addressing the HHS’s concerns. 

193. Over the next ten years, Abbott would continue to receive warning letters from 

the FDA regarding off-label promotion and other illegal activity for other of the Company’s 

drugs. For example, Abbott’s Director, Regulatory Affairs, Advertising received a letter 

regarding misleading statements about Biaxin Filmtab, Granules in September 1998. In January 

2001, Abbott’s Associate Director, Regulatory Affairs, received a letter about misleading 

efficacy claims for Mivacron Injection. 

194. These letters continued to arrive even after the Abbott CIA was implemented. In 

October 2004, Abbott’s Manager, Regulatory Affairs, received a warning letter regarding 

misbranding of Kaletra Capsules and Oral Suspension. In July 2005, Abbott’s Associate 

Director, Regulatory Affairs, received a warning letter regarding misbranding of Survanta 

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intratracheal suspension. In December 2008, Abbott’s Regulatory Affairs Manager received a 

warning letter about misbranding HUMIRA Injection, Solution for Subcutaneous use. 

195. In January 2009, the Company’s regulatory manager received a warning letter 

about misbranding of various Depakote Products. 

196. The Company continued to receive such warning letters. For example, in July 

2009, Defendant White received a second warning letter about off-label promotion of Kaletra 

tablets, oral solution, and capsules. 

197. These letters, in addition to the two regarding Depakote Products, show that the 

Company continued and perhaps continues to engage in off-label promotion of its products, 

inviting additional and new scrutiny by the Government and potential action taken by 

whistleblowers or others. 

H. Additional Illegal Marketing Activities May Put Abbott at Risk of Exclusion 

from Federal Programs 

198. In 2010, Abbott settled two additional cases involving the Company’s illegal 

marketing and sales practices. The first, arising out of a whistleblower complaint filed by Ven-aCare of the Florida Keys, involved additional allegations of marketing the “spread” for certain 

Abbott drugs and violating the False Claims Act with respect to the Company’s pricing of one of 

its antibiotics and some of its generic, water-based solutions primarily used to facilitate the 

intravenous infusion or injection of other drugs. In conjunction with this settlement, Abbott 

agreed to pay $126.5 million to resolve the claims. 

199. The second case Abbott settled in 2010 involved an Abbott subsidiary, Kos 

Pharmaceuticals (“Kos”), which Abbott had acquired in 2006. In that case, the DOJ alleged that 

Kos offered and paid doctors, other medical professionals, physician groups and managed care 

organizations, illegal kickbacks in the form of money, free travel, grants, honoraria and other 

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valuable goods and services, in violation of the Anti-Kickback Statute to get them to prescribe or 

recommend Niaspan and Advicor. In conjunction with that settlement, Kos paid more than $41 

million to resolve criminal and civil liability arising from conduct relating to its drugs Advicor 

and Niaspan. 

200. As acknowledged by Abbott’s Code, any further illegal activity “may result in 

exclusion of Abbott . . . from participation in Federal Health Care Programs,” a penalty which 

would have disastrous consequences for Abbott shareholders. 

DEMAND ON THE BOARD OF DIRECTORS

WOULD BE FUTILE

201. Plaintiff brings this action derivatively in the right and for the benefit of Abbott to 

redress the breaches of fiduciary duty and other violations of law by Defendants as alleged 

herein. 

202. Plaintiff will adequately and fairly represent the interests of Abbott and its 

shareholders in enforcing and prosecuting its rights. 

203. Plaintiff incorporates by reference all preceding and subsequent paragraphs as 

though they were fully set forth herein. 

204. Current Director Defendants White, Fuller, Austin, Farrell, Scott, Tilton, Osborn, 

and Alpern sit on the Abbott Board, and participated in the wrongful conduct described herein. 

In fact, only two of the ten current Abbott directors—directors Edward Liddy and Phebe 

Novakovic—did not join the Board until after the Relevant Period. Plaintiff has not made a 

demand on the Board to institute this action because such a demand would be a futile, wasteful 

and useless act for the following reasons: 

a) Each of the Current Director Defendants intentionally overlooked 

numerous warning signs concerning the Company’s unlawful marketing practices. In particular, 

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the Company’s drug-marketing practices have resulted in Abbott and/or its subsidiaries paying 

hundreds of millions of dollars in fines over the past decade, and have caused the Company to 

enter into several “corporate integrity” agreements during the same time period. Rather than 

comply with the obligations imposed upon them by these corporate integrity agreements, the 

Current Director Defendants consciously disregarded their fiduciary duties to Abbott by willfully 

turning a blind eye to the company-wide, fraudulent “off-label” marketing scheme; 

b) Every member of the Board is required to comply with Abbott’s 

Governance Guidelines and Code. Abbott’s Governance Guidelines require each of the 

Company’s directors to “comply with all laws, rules and regulations applicable to their capacity 

as directors of Abbott,” and to “report violations of laws, rules, regulations or the Code of 

Business Conduct to the Chairman of the Board and Chief Executive Officer, the Vice President 

and Chief Ethics and Compliance Officer, or any other appropriate Abbott personnel.” The Code 

requires directors to “deal honestly and ethically with Abbott and with Abbott’s customers, 

suppliers, competitors, employees and other stakeholders.” The Code also requires directors to 

comply with: (i) “all applicable laws, rules, regulations, consent decrees and other orders of the 

United States Food and Drug Administration and any other similar governmental authorities”; 

and, (ii) “the laws relating to government health care programs in each country where Abbott 

does business.” Each of the Current Director Defendants permitted individuals at all levels of 

the Company to engage in the illegal conduct described herein, thereby abdicating their fiduciary 

duties to, and severely damaging, the Company. As a result, each of the Current Director 

Defendants faces a substantial likelihood of liability for their breaches of fiduciary duties and 

any demand upon them is futile; 

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c) During the Relevant Period, Defendants Austin, Scott, and Tilton, served 

as members of the Audit Committee. Abbott’s Audit Committee charter charges the members of 

the Audit Committee with reviewing the Company’s compliance with laws, regulations, and 

internal procedures. Defendants Austin, Scott, and Tilton breached their fiduciary duties of due 

care, loyalty, and good faith, because the Audit Committee permitted the Company to repeatedly 

violate the laws and regulations discussed above. The members of the Audit Committee 

permitted the Company to so act notwithstanding the fact that they were on notice of the 

Company’s illicit marketing activities. Therefore, Defendants Austin, Scott, and Tilton face a 

substantial likelihood of liability for their breach of fiduciary duties and any demand upon them 

is futile; 

d) During the Relevant Period, Defendants Fuller and Farrell served as 

members of Abbott’s Nominations and Governance Committee. Abbott’s Nominations and 

Governance Committee charter charges the members of the Nominations and Governance 

Committee with reviewing and assessing the adequacy of the Company’s corporate governance 

guidelines. Had the members of Abbott’s Nominations and Governance Committee attempted 

even the most cursory form of such assessment, the gross failure of the Company’s corporate 

governance guidelines would have been unmistakable. They did not. As a result of Defendants 

Fuller’s and Farrell’s breaches of due care, loyalty, and good faith, Abbott faces the substantial 

likelihood of paying well over $1 billion in fines, as well as the possibility of exclusion from 

participation in Federal Health Care Programs. Therefore, Defendants Fuller and Farrell face a 

substantial likelihood of liability for their breach of fiduciary duties and any demand on them is 

futile; 

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e) During the Relevant Period, Defendant Austin served as a member of 

Abbott’s Public Policy Committee. Pursuant to Abbott’s Public Policy Committee charter, the 

members of the Public Policy Committee are charged with reviewing Abbott’s policies and 

practices with respect to maintaining legal, regulatory and healthcare compliance. Defendant 

Austin breached her fiduciary duty of due care, loyalty, and good faith, as the rampant 

Fraudulent Marketing Scheme undoubtedly evidences that the Public Policy Committee failed to 

ensure that the Company adhere to the law. As such, Defendant Austin faces a substantial 

likelihood of liability for her breach of fiduciary duties and any demand upon her is futile; 

f) The principal occupation of Defendant White is his employment with 

Abbott as its CEO, pursuant to which he has received and continues to receive substantial 

monetary compensation and other valuable benefits Accordingly, Defendant White lacks 

independence, rendering him incapable of impartially considering a demand to commence and 

prosecute this action. 

COUNT I

DERIVATIVE CLAIM FOR BREACH OF FIDUCIARY DUTY FOR CAUSING THE 

COMPANY TO ENGAGE IN UNLAWFUL CONDUCT AND/OR CONSCIOUSLY 

DISREGARDING WIDESPREAD VIOLATIONS OF LAW 

(Against all Defendants) 

205. Plaintiff repeats and realleges the foregoing paragraphs as set forth herein. 

206. The Defendants all owed and owe fiduciary duties to Abbott and its shareholders. 

By reason of their fiduciary relationships, Defendants specifically owed and owe Abbott the 

highest obligation of good faith and loyalty in the administration of the affairs of Abbott, 

including the oversight of Abbott’s compliance with federal laws governing the marketing of 

pharmaceuticals. Moreover, Defendants had specific fiduciary duties as defined by the 

Company’s key corporate governance documents and principles that, had they been discharged 

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in accordance with the Board’s obligations, would have necessarily prevented the misconduct 

and consequent harm to the Company alleged herein. 

207. Defendants were also duty-bound to abide by the CIAs—which caused the 

Defendants until 2008 to be regularly informed concerning the Company’s compliance or 

noncompliance with the drug marketing laws—and expressly agreed to abide by the Code of 

Business Conduct requiring compliance with federal laws against improper promotion and sales 

practices, and against improper payment of kickbacks to healthcare professionals to induce the 

prescription of Abbott’s drugs. 

208. The actual or permissive practice of allowing a corporate business plan of 

artificially increasing sales by engaging in unlawful sales and promotion practices by numerous 

Abbott employees for such a prolonged period of time in violation of FDA requirements, Federal 

healthcare program requirements and/or the Federal anti-kickback statute also violates the 

Defendants’ fiduciary duties. 

209. As a direct and proximate result of the Defendants’ conscious failure to perform 

their fiduciary obligations, Abbott has sustained significant damages, not only monetarily, but 

also to its corporate image and goodwill. Such damage included, among other things, the 

substantial penalties, fines, liabilities and expenses described herein. 

210. As a result of the misconduct alleged herein, the Defendants are liable to the 

Company. 

COUNT II

DERIVATIVE CLAIM FOR BREACH OF FIDUCIARY DUTY 

FOR WASTE OF CORPORATE ASSETS 

(Against all Defendants) 

211. Plaintiff repeats and realleges the foregoing paragraphs as set forth herein. 

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212. By virtue of their ultra vires actions in violation of law, the Defendants 

caused Abbott to incur and will incur hundreds of million in charges and expense as a result of 

Abbott’s illegal conduct in the sale and marketing of off-label Depakote. Thereby, the 

Defendants wasted Abbott’s assets. 

213. As a direct and proximate result of the Defendants’ breaches of fiduciary 

duty, the Company has sustained, and will continue to sustain, substantial harm, including the 

damages set forth herein. 

214. Abbott and its shareholders have been damaged by reason of the Defendants’ 

waste of corporate assets. 

215. As a result of the misconduct alleged herein, the Defendants are liable to 

the Company. 

RELIEF REQUESTED

WHEREFORE, Plaintiff demands judgment as follows: 

(a) Determining that this action is a proper derivative action maintainable 

under law and demand is excused; 

(b) Awarding, against all Defendants, and in favor of Abbott, the damages 

sustained by the Company as a result of the Defendants’ breaches of fiduciary and contractual 

duties; 

(c) Directing Abbott to take all necessary actions to reform and improve its 

corporate governance and internal procedures to comply with the Company’s existing 

governance obligations and all applicable laws and to protect the Company and its shareholders 

from a recurrence of the damaging events described herein; 

(d) Awarding to Plaintiff the costs and disbursements of the action, including 

reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses; and 

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(e) Granting such other and further relief as the Court deems just and proper. 

DEMAND FOR JURY TRIAL

Plaintiff demands a trial by jury. 

Dated: January 17, 2012 

Christopher J. Keller 

Eric J. Belfi 

Michael W. Stocker 

LABATON SUCHAROW LLP 

140 Broadway 

New York, New York 10005 

Telephone: (212) 907-0700 

Facsimile: (212) 818-0477 

Christine S. Azar 

Charles B. Vincent 

Peter C. Wood, Jr. 

LABATON SUCHAROW LLP 

300 Delaware Avenue, Suite 1225 

Wilmington, Delaware 19801 

Telephone: (302) 573-2530 

Facsimile: (302) 573-25290 

Counsel for Plaintiff 

/s/ Richard A. Saldinger 

Richard A. Saldinger (ARDC # 6209930) 

Jeffrey L. Widman (ARDC # 6226367) 

SHAW GUSSIS FISHMAN GLANTZ 

WOLFSON & TOWBIN LLC 

321 N. Clark, Suite 800 

Chicago, Illinois 60654 

Telephone: (312) 276-1321 

Facsimile: (312) 980-3888 

Email: rsaldinger@shawgussis.com 

Counsel for Plaintiff

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