Should AbbVie Be More Concerned About Its California Case for Humira?

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AbbVie Inc. (NYSE: ABBV) shares took a dip on Wednesday after it was announced that the pharmaceutical giant would be facing a lawsuit from the California Department of Insurance in regards to alleged kickbacks given to health care providers for prescribing more of the arthritis drug Humira. The ramifications from this case could prove to be devastating on a much larger scale.

According to the lawsuit, AbbVie allegedly provided cash, trips and other gifts to health-care providers as incentives to prescribe the drug. Additionally, the company is alleged to have also provided professional services, such as free insurance processing and marketing assistance.

This was executed by a group of registered nurses known as AbbVie Nurse Ambassadors, who are sent into patients’ homes after they are prescribed Humira. And according to the suit, these ambassadors were trained to downplay the potential risks of the drug.

The California Department of Insurance went on to say that AbbVie only provides the ambassadors as long as physicians continue to prescribe AbbVie’s drug instead of selecting another course of treatment.

Adelle Infante, AbbVie’s spokeswoman, commented:

AbbVie provides a number of support services for patients, once they are prescribed Humira, that both educate and assist patients with their therapy, including nursing support, and these resources are beneficial to patients dealing with a chronic condition. They in no way replace or interfere with interactions between patients and their healthcare providers.

In this case, private insurers have allegedly paid out $1.2 billion in pharmacy claims for Humira, which would make this the largest instance of insurance fraud in the history of the California regulator.

The ramifications from this trial could be especially devastating. What if other states in which AbbVie does business decide to jump on board with this lawsuit? Or even if this is a common practice by AbbVie, are there other major pharma companies doing the same but just haven’t been caught yet?

Shares of AbbVie were last seen down about 2% at $90.75 on Wednesday, with a consensus analyst price target of $109.42 and a 52-week trading range of $83.19 to $125.86.