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United States v. Abbott Laboratories

decided: July 5, 1979.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
ABBOTT LABORATORIES, A CORPORATION, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 75 C 2345 -- John Powers Crowley, Judge.

Before Pell, Sprecher and Wood, Circuit Judges.

Author: Sprecher

The issue raised by this case is solely whether it is controlled by this circuit's prior decision in Eli Lilly & Co. v. Staats, 574 F.2d 904 (7th Cir. 1978). We reject the appellant's contention that Lilly is distinguishable and affirm the district court.

In 1973 defendant Abbott Laboratories entered into four contracts to supply pharmaceutical products to the government. The contracts, pursuant to procurement statutes, contained the following access-to-records provision:

(b) This Contractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under this contract or such lesser time specified in either Appendix M of the Armed Services Procurement Regulations or the Federal Procurement Regulations Part 1-20, as appropriate, have access to and the right to examine any directly pertinent books, documents, papers, and records of the Contractor involving transactions related to this contract.

(c) The Contractor further agrees to include in all his subcontracts hereinunder a provision to the effect that the subcontractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under the subcontract or such lesser time specified in either Appendix M of the Armed Services Procurement Regulations Part 1-20, as appropriate, have access to and the right to examine any directly pertinent books, documents, papers, and records of such subcontractor involving transactions related to the subcontract.

See 10 U.S.C. § 2313(b) and 41 U.S.C. § 254(c).

In reliance on these provisions the Comptroller General made a formal demand, by a letter dated August 26, 1974, for access to

The demand was repeated by letter dated March 7, 1975, requesting access to

Records relating to those costs assigned by the firm to the products purchased under the cited contracts. Discussions with your representatives have indicated that such assigned costs are limited essentially to direct manufacturing costs.

Records relating to those costs which although they are incurred during the course of the firm's activities relating to the supply of ethical pharmaceuticals (including those purchased under cited contracts), are not assigned by the firm to individual products. Such costs would include those incurred for activities such as research and development, marketing and promotion, distribution and administration.

Records relating to the methodology, and decisions involved in the firm's establishment of prices for the products purchased under the cited contracts.

Abbott refused these demands, and, as a result, the Comptroller General brought suit in district court to establish the right of the Government to gain access to the requested materials. The district court granted summary judgment on behalf of the government, concluding that this case was "identical" with the facts confronted by our opinion in Eli Lilly & Co. v. Staats, 574 F.2d 904 (7th Cir. 1978).

Indeed, these cases are identical. The contracts contained identical access-to-records provisions. See 574 F.2d at 906-07. The initial demand for information by the Comptroller General was phrased in exactly the same words as in this case, Id. at 906, and was approved by this court in Lilly as consistent with the statutory and contractual provisions. Id. at 912-14. Specifically, we construed the language "directly pertinent . . . to the contract" to permit government access to information that "is a significant input in the cost of the product purchased in the contract." Id. at 914-15. In so doing, we rejected contentions that this language limited the government's inquiry to only those items specifically assigned by the company as costs of the contract or to information relating to possible ...


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