Abbott Sues Alere for Breach of Contract

The medtech giant is also offering E.U. concessions in its proposed acquisition of St. Jude Medical.

Nancy Crotti

Abbott Laboratories has reportedly filed a lawsuit against diagnostics company Alere, claiming breach of contract in the troubled $6 billion takeover case.

The latest volley in the legal battle between the two companies has Abbott seeking documentation and other information about some of Alere's business practices, according to a report in The Street. U.S. criminal and civil investigators are looking into possible breaches of federal anti-corruption and anti-kickback laws.

Abbott is not seeking to break off the deal, but to obtain important information before it closes, an Abbott spokesman told The Street's affiliated publication, The Deal, in an email.

"Abbott has reluctantly sought court intervention only after months of repeatedly and unsuccessfully attempting to get Alere to honor the agreement and provide information about business practices that are the focus of criminal and civil investigations that came to light after the merger agreement around federal anti-corruption, anti-kickback and U.S. healthcare laws," the site quoted Stoffel as writing. "Abbott would be responsible for the company upon close and has the right to understand these issues so that it can prepare to address them immediately."

Alere declined to comment on the latest litigation.

In more bad news disclosed Friday, Alere said its Arriva Medical mail order diabetes testing supplies business has had its Medicare enrollment revoked by CMS. Alere allegedly submitted claims for 211 dead people, though the products may have been ordered before the people in the claims died. 

Illinois-based Abbott announced its plans to acquire Alere in January for $6 billion. Three months later, Abbott said it planned to buy St. Jude Medical for $25 billion. Alere sued Abbott in Delaware Chancery Court in August, seeking to compel Abbott to complete its planned $6 billion merger.

In other news, Reuters reported that Abbott has offered concessions to the European Commission in an attempt to secure E.U. antitrust approval for the St. Jude deal.

The filing did not describe the nature of the concessions, but the commission said Thursday it would decide by November 23 on whether to allow the deal, according to a report by Law360.

Abbott officials have been lukewarm about the Alere deal ever since the Waltham, MA, company earlier this year disclosed a federal grand jury subpoena related to a U.S. Foreign Corrupt Practices Act investigation involving sales practices from 2013 to 2015 in Asia, Africa, and Latin America. Abbott even offered up to $50 million to walk away from the proposed merger, but Alere's board rejected the offer and approved the deal in October.

The U.S. Department of Justice subpoenaed Alere Toxicology Services Inc. on July 1, seeking records related to Medicare, Medicaid, and Tricare billings dating back to 2010 for patient samples tested at the company's Austin, TX, pain management laboratory.

In August, Alere brought a rather juicy lawsuit charging Abbott with covertly planning to sink the merger altogether and threatening to create a "living hell" for Alere executives if they "didn't take the walkaway fee," according to that lawsuit. Abbott dismissed those allegations as untrue.

In August, Alere also very belatedly released its financial reports for the fourth quarter and full year of 2015, concluding that accounting missteps in recent years had no material impact on previous reports.

Abbott and Alere have until April 30 to complete the transaction. Mediation efforts between the two fell apart in September, according to report by Bloomberg, with Delaware Chancery Court Judge Sam Glasscock III scheduling a preliminary injunction hearing for January 27.

A redacted version of the latest lawsuit by will probably not become public until next week, according to the story in The Street.

Nancy Crotti is a contributor to Qmed.

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[Image courtesy of Salvatore Vuono on FreeDigitalPhotos.net]