Abbott Laboratories agreed last week to pay $100 million to the U.S. government in a blockbuster settlement with the Food and Drug Administration over alleged problems in the company's manufacture of clinical assays.
The Abbott Park, Ill.-based maker of drugs and medical devices agreed to halt the manufacture and shipment of about 125 types of diagnostic tests until its diagnostics division passes muster with the FDA. A 30-day grace period will allow hospitals to buy affected tests through the beginning of next month and to arrange for alternate suppliers and test methods.
Under the agreement, which does not represent an admission of wrongdoing, Abbott said it would abide by FDA manufacturing quality regulations.
Abbott has a long record of problems with the FDA.
Over the past six years, Abbott has failed to comply with the FDA's manufacturing and quality regulations, the agency said, as documented in numerous factory inspections. Despite three formal warning letters and no less than 10 meetings between company management and the FDA, Abbott failed to correct the problems, the FDA said.
Abbott had hoped to avoid a confrontation. "We thought we had been making significant progress," company spokeswoman Rhonda Luniak said. "Obviously, that was not the case."
Abbott officials said they are committed to resolving the issues quickly and completely. The cost of compliance will be high. Abbott said it would take a $168 million pretax charge to cover the cost of the settlement and manufacturing changes.
The amount charged to Abbott is noteworthy, said George Burditt, a regulatory lawyer at Bell, Boyd & Lloyd, Chicago. "It's surprising," he said. Such a hefty payment sends a "really clear message" about the FDA's intent to strictly enforce certain manufacturing requirements, he said.
Abbott's diagnostics division makes more than 300 laboratory tests, also called in-vitro diagnostic tests, and is the largest supplier of these products to U.S. hospitals.
The FDA agreed to allow medically necessary tests, including those used to screen blood donors for HIV and hepatitis B and hepatitis C, to remain on the market. Some other tests used in hospital laboratories, such as those to monitor levels of certain drugs and to diagnose heart attacks and tumors, can also be marketed without interruption.
Abbott emphasized that no products will be recalled and that those on the market continue to provide accurate results.
"A majority of our products are considered of medical necessity by the consent decree," Abbott's Luniak said. "The products our customers depend on the most, they will still be able to get."
Abbott was quick to reassure key customers. The day the decree was announced, company representatives called on 1,700-hospital alliance Premier, a major Abbott customer. Premier immediately began analyzing which contracts would be affected and has yet to determine whether it will need contingency plans, said a spokeswoman.
In a risible legalism, the fine print of the consent decree stipulates that the $100 million payment is not a fine. Instead, the money is the government's "equitable relief" for allowing Abbott to ship medically necessary tests that allegedly did not comply with FDA quality regulations.
Whatever the definition, the FDA said the payment is the largest a company has ever made for a civil violation of FDA regulations. If Abbott fails to comply with the decree's terms within one year, it will have to pay the government still more-16% of the gross sales intake for noncompliant products.