Prevacid Suit Means Pain at Abbott Unit

In its most recent quarterly report, Abbott listed $1.23 billion in total cash and equivalents on its balance sheet. Burns questions whether TAP will even survive the ordeal.

"This is not a corporation that the world cannot live without," he says. "I think there's a real place here to get rid of them."

LaCorte claims that TAP improperly engaged in a "promotional pricing scheme" that led Medicaid patients to use significantly overpriced Prevacid. He says that TAP offered hospitals Prevacid for as little as 24 cents a tablet so the hospitals would favor the drug over similar treatments. He says that hospitals then switched patients to Prevacid without proper physician approval. Afterward, he says, the patients left the hospitals with instructions to continue taking Prevacid -- which was costing Medicaid as much as $3.20 a dose.

"This pricing scheme and practice is a marketing strategy TAP knowingly, deliberately intended to result in unnecessarily high outpatient prices for Prevacid charged to Medicaid and other federal programs, as well as private-pay patients and those with private insurance benefits," the complaint states. "TAP has devised and executed a scheme to defraud the United States government by ... evading payment to the government of hundreds of millions of dollars in rebates due from sales of Prevacid to Medicaid providers by depriving the Medicaid program of its 'best price' for Prevacid."

LaCorte says that TAP engaged in such practices on a national basis during every quarter of every year since 1991. Medicaid, a major industry customer, pays for 17% of all drugs sold in the U.S.

Last year, TAP depended on Prevacid for $3.2 billion of its nearly $4 billion in total sales. The drug generated $728 million in revenue during the most recent quarter alone. In comparison, Abbott's No. 2 drug -- the bipolar treatment Depakote -- brought in $243 million in the same period.

Because Abbott shares ownership of TAP with Japanese-based Takeda, however, it excludes TAP revenue from its total sales and pockets only its portion of the profits. Still, Abbott is counting on TAP to generate $500 million of its anticipated $3.5 billion in total profits this year.