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Securities Regulation, Keyed to Choi
Gallagher v. Abbott Laboratories
Citation:
269 F.3d 806 (2001)Facts
The FDA repeatedly inspected Abbott Laboratories’ Diagnostic Division over multiple years, consistently finding manufacturing quality control deficiencies and issuing warnings. Abbott made remedial efforts but never fully satisfied the FDA. On March 17, 1999, the FDA sent Abbott another warning letter demanding compliance and threatening severe consequences. Bloomberg News revealed this letter in June 1999, but Abbott’s stock price remained stable. By September 1999, the FDA demanded substantial penalties and business practice changes. On September 29, 1999, after market close, Abbott issued a press release describing the FDA’s position, asserting substantial compliance, and revealing ongoing settlement negotiations. Abbott’s stock fell over six percent the next business day. On November 2, 1999, a consent decree required Abbott to remove 125 diagnostic products from the market, improve quality control, and pay a $100 million civil fine. Abbott took a $168 million accounting charge, and its stock dropped an additional $3.50, representing over $5 billion in total shareholder losses.
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