The manufacturer, whose factory closure in 2022 led to a nationwide infant formula shortage, revealed in a United States Securities and Exchange Commission filing that the company is under criminal investigation over its infant formula manufacture.
Abbott says it received in December 2022 a subpoena from the enforcement division of the SEC, ‘requesting information relating to Abbott’s powder infant formula business and related public disclosures’. A spokesperson for the agency told us: “The SEC does not comment on the existence or nonexistence of a possible investigation.”
In the filing, which is publicly available via the SEC’s EDGAR, Abbott details that it had also received a ‘civil investigative demand’ from the US Federal Trade Commission (FTC) ‘seeking information in connection with its investigation of companies who participate in bids for women, infants, and children infant formula contracts’.
In May 2022, the FTC launched an inquiry seeking information ‘about the nature and prevalence of any deceptive, fraudulent, or otherwise unfair business practices aimed at taking advantage of families during this shortage’. As part of the investigation, the body said it would examine M&A patterns in a bid to inform a ‘future merger review’.
Abbott explains in the filing that ‘multiple civil lawsuits’ had been lodged against the company. “As of January 31, 2023, there were 399 lawsuits pending in federal and state courts in which Abbott is a party,” the filing reads. “The plaintiffs seek various damages, including punitive damages.”
This includes class action filed in Tel Aviv and one filed in British Columbia, in October 2022 and December 2021 respectively, ‘both of which make similar allegations’ to those claims filed in the US against the firm.
Abbott, which was contacted for comment but has not provided one, reflected in the document: “While it is not feasible to predict the outcome of such pending claims, proceedings, and investigations with certainty, management is of the opinion that their ultimate resolution should not have a material adverse effect on Abbott’s financial position, cash flows, or results of operations.”
More than $20bn in COVID-19 testing sales
The SEC filing also revealed the infant formula maker cashed in on the COVID-19 pandemic crisis, bagging a combined total of more than $20bn in sales of various COVID-19-related products, such as antigen self-tests and PCR tests. In 2020, the company developed and launched ‘various lab-based serology blood tests’.
Sales of such products totaled around $8.4bn in 2022, $7.7bn in 2021, and $3.9bn in 2020. One of the best-selling products, the BinaxNOW antigen self-test, is currently sold for $19.88 at Walmart online for a pack of two tests.
Demand for the company’s rapid tests is said to have been a key factor in Abbott’s 1.3% total net sales growth in 2022 vs 2021, despite a -10.1% slump in the company’s nutritional products segment.