More than one year after Abbott Laboratories offered $5.8 billion for Alere, the stormy romance of the diagnostic testing company, punctuated by lawsuits, has reached a conclusion with Abbott agreeing to acquire the business for the reduced price tag of $5.3 billion. But this week Abbott Labs also received a warning letter from the U.S. Food and Drug Administration over
The revised terms of the deal seem to reflect the suspicions of Divyaa Ravishankar, a diagnostics market expert at Frost & Sullivan, that the lower priced deal could well have been Abbott’s goal all along. She made that observation soon after Abbott filed a complaint with a Delaware court to force a termination of the proposed $5.8 billion deal to buy Alere. In a press release regarding the December complaint, Abbott cited some of the factors that motivated the complaint such as the permanent recall of an important product platform and the government’s elimination of billing privileges for an Alere division.
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In December, Ravishankar commented on those notes in an email:
“I have a feeling Abbott is hinting at the fact that they overpriced this company.”
The revised terms of the deal mean that Abbott and Alere will drop their lawsuits against each other. The deal is expected to close in the third quarter of 2017.
Despite the week ending on a high note for Abbott, a warning letter from the U.S. Food and Drug Administration drew attention to issues at another Abbott acquisition — its $25 billion purchase of St. Jude Medical. The letter is addressed to Michael Rousseau, the president of Abbott’s cardiovascular device division and a former CEO of St. Jude. The letter took issue with St. Jude’s handling of faulty batteries for its Fortify, Unify and Assura defibrillator lines, and a subsequent recall of the devices. The FDA also took issue with the company for failing to notify its management and advisory board that the battery failures led to one death:
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Your firm completed its returned device analysis, related to this death, on August 27, 2014. The analysis concluded the cause of premature battery depletion “could not be determined” despite evidence of lithium bridges, provided by your supplier. This death was not disclosed in these presentations for management or MAB review.
The letter also cited cybersecurity issues with the company’s Merlin@home device. Although St. Jude has said it had developed a patch to fix a cybersecurity vulnerability, the FDA contended in the letter that there was inadequate documentation to show that St. Jude had validated that the patch actually fixed the problem. The regulator gave the company 15 days to address the issues cited in the letter.
A New York Times article cited a cardiologist who was critical of St. Jude Medical and with the FDA’s handling of the issue.
“What bothers me most about this is that the doctors and the patients weren’t told about the potential” for failure, said Dr. Robert G. Hauser, a retired cardiologist who campaigns for improved safety of medical devices. “And clearly this is for St. Jude’s benefit. They can sell products rather than scrapping it.”
He also faulted the F.D.A. for not having investigated St. Jude earlier. “They should have been in there years ago, looking at all the raw data in order to determine if the incidence was low enough to allow these devices to be shipped and implanted,” he said.
Abbott is due to release its first quarter earnings on April 19. Wells Fargo Senior Analyst Larry Biegelsen highlighted some concerns that the earning call with analysts could address, according to a Standard & Poors article. Negative publicity and pre-market approval delay for upcoming Abbott devices. Abbott’s MRI-safe ICD/CRT-D, was expected to be approved by the FDA in the fourth quarter of this year but now, that may not happen until sometime in 2018.
Although Abbott didn’t immediately respond to calls before this article was published, the company did comment in an emailed statement to The Star Tribune, according to the paper.
A spokesman for Abbott Laboratories said in an e-mailed statement that patient safety comes first, and that Abbott has a strong history of product safety and quality. “We take these matters seriously, continue to make progress on our corrective actions, will closely review FDA’s warning letter, and are committed to fully addressing FDA’s concerns,” spokesman Jonathon Hamilton wrote.
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