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Abbott Laboratories (ABT) is facing enormous costs for its decisions in marketing Depakote, its anti-seizure drug. The company marketed Depakote for uses it had not been approved for, and it downplayed the potential risks involved with taking the drug. As a result of its poor marketing decisions, the pharmaceutical company will have to pay $1.5 billion to the Department of Justice. Several states have "benefited" from the settlement, as Abbott has had to pay them as well. For example, New York, will receive $50 million in the settlement, and Connecticut, will receive $3.9 million. In total, the company had been sued by 44 states and the District of Columbia. Abbott's false marketing led to false Medicaid claims in these states, and Abbott must now pay that money back.

The company engaged in "off-label" promotion of Depakote. This means that Abbott chose to market the drug for the treatment of schizophrenia, agitated dementia, and autism, even though it had not been approved for these uses. The drug had only been approved for treating epileptic seizures, manic episodes in bipolar disorder, and migraines. Abbott also aimed the drug at elderly citizens suffering from dementia, however, and downplayed the risks of the drug despite being well aware of those risks. In my opinion, this seems to indicate that the company is more concerned with its own well-being than with the well-being of others, which is far from being good news for its investors and stockholders.

Abbott has managed to make the news, but only because it had to pay out the second largest settlement for a pharmaceutical company on record. Financially, this is not a good sign for the future of the company. You have to wonder why the company decided to do this in the first place. It must have known that it could not falsely market a drug for long without getting caught. At best, it shows shoddy planning and strategizing. I doubt that most people will see it this way though. As a result, the company may begin developing a reputation of being corrupt or dishonest.

Making the situation even worse, it appears that the marketing strategy was systematically carried out by those in top levels of management at the company. This was not the result of the actions of a few isolated salespeople, therefore, and one can hardly fail to see this as corruption at the very top of the company. The blatant disregard for the well being of the state or the state-funded Medicaid program is something that is sure to push away a large number of key investors. In its marketing strategy, the company also promoted the drug for purposes that may not have been safe. The company is not only disregarding the state, therefore, but it is showing a lack of care for patients. Furthermore, I am not sure the fines are enough to stop Abbott from doing this again and embarrassing all those who have an investment in the stock. No matter what, this will have a hugely-negative effect in terms of both the company's image and the financial repercussions.

While companies such as Pfizer (PFE) and Abbott have decided to deal with their problems by splitting up their companies and selling off certain divisions, Merck (MRK) says that it will not follow suit and conform to the trend of the day. The company plans to "fix what is broke," rather than getting rid of potentially valuable assets. This seems sensible. For example, the company's animal health business is doing really well. Even if it is not a core asset, therefore, it would not be wise to sell this off now. I believe this will have a neutral effect on the company for now, but after some positive results come from Merck's plan, the stock will likely begin to go up.

We all know that in the future, the leading stocks in the pharmaceutical industry will be those that found a way to deal with cancer. This is good news for Sanofi Aventis (SNY) which will soon begin testing a new drug aimed at the treatment of liver cancer. The drug is novel and has never been seen before, which is one of the reasons I think it will work. Clearly, the attempts that have been made so far have yielded less-than-ideal results, so a new approach could be what makes all the difference. This may have only a slightly positive effect on the stock for now. If results from the test are positive, however, this would have a strong impact on the stock.

Eli Lilly (LLY) may be on to something with its new radioactive drug Amyvid, which can help physicians determine the cause of cognitive decline. The drug is specifically aimed at identifying Alzheimer's disease, something that can usually only be definitely diagnosed postmortem. Although this is an important breakthrough, the drug still falls short of giving a definitive diagnosis of the presence or absence of Alzheimer's. In addition, it will not be widely available to everyone who wants it. Consequently, the effect that this will have on Eli Lilly stock will be negligible at best.

GlaxoSmithKline (GSK) is continuing to move forward by focusing on creating treatments for skin cancer that are more attractive than chemotherapy options, as that they have fewer side effects. This will make the two drugs - trametinib and dabrafenib - quite popular, as the side effects of chemotherapy make up a major problem that people with cancer face. In addition to fewer side effects, the drugs also seem to be able to prevent skin cancer from getting worse for longer than what chemotherapy is able to achieve. This is an even more important result, and this could be the break that GlaxoSmithKline has been waiting for. I predict that GlaxoSmithKline stock will be doing well as a result of this.

The four competitors I have mentioned in a little depth, therefore, are all in better places than Abbott. While Abbott must deal with a bad image and huge financial consequences, other companies in the industry are moving forward. They are all in the news for things that will have neutral or positive effects on them. I would strongly discourage people from investing in Abbott at the moment, as other stocks hold more promise. Abbott stock will likely be dropping in the near future as it deals with the negative effects of its marketing strategy.

Source: Avoid Abbott's $1.5 Billion Mess