Abbott forced to pay $384 million over contaminated baby formula claims
Abbott Laboratories is about to lose $384 million over allegations that powdered infant formula was made in conditions that could have put babies at risk. The healthcare giant has agreed to pay more than $384 million to settle allegations that it caused false claims to be submitted to federal and state programs over certain powdered infant formula and nutritional therapy products.
The settlement includes $348.7 million to the federal government and about $35.5 million to participating states. New Jersey joined 39 other states and the federal government in the deal.
What happened at Abbott's facilities?
Federal and state authorities say certain formula and nutritional therapy products were manufactured between January 2018 and December 2022 at Abbott facilities in Sturgis, Michigan and Casa Grande, Arizona.
According to authorities, Abbott allegedly failed to manufacture some products in compliance with required safety, regulatory and contractual standards. The allegations include manufacturing products in conditions that created an unacceptable risk of microorganism contamination. Investigators also pointed to problems with maintaining manufacturing equipment and controlling water in the facilities, both of which could increase contamination risks.
Abbott allegedly failed, in some instances, to disclose test results showing microorganism contamination when the FDA requested information during inspections of the Sturgis facility in 2019 and 2022. Those allegations ultimately affected more than Abbott's own operations.
Federal and state authorities say the issues resulted in taxpayer-funded programs, including WIC and state Medicaid programs, purchasing products that didn't meet applicable requirements.
Tied to the 2022 formula crisis
If Abbott's name sounds familiar here, it's because the company was at the center of the 2022 Similac recall. Contamination concerns at Abbott's Sturgis facility led to the plant being shut down and contributed to a nationwide infant-formula shortage. The company has maintained that no unopened, distributed formula tested positive for contamination.
The latest settlement stems from a 2022 whistleblower lawsuit filed in federal court in Michigan under the False Claims Act and various state false claims laws. To be clear, Abbott settling the allegations does not mean the company has been found liable or admitted wrongdoing. The related criminal investigation has also been closed.
What does $384 million mean for Abbott?
For a company as large as Abbott, $384 million isn't exactly pocket change, but it also isn't likely to bring the business crashing down. Abbott reported $12.6 billion in sales in the second quarter of 2026 and raised its full-year adjusted earnings-per-share outlook to between $5.45 and $5.60.
So rather than whether the company can write the check, the question becomes if the settlement finally puts one of it's biggest formula controversies in the rearview mirror. If not, more legal trouble is still waiting around the corner.
Abbott has already faced other litigation involving its specialty formulas for premature infants. The company disclosed in June 2026 that numerous lawsuits related to necrotizing enterocolitis, or NEC, remained outstanding. That means the $384 million settlement closes this particular civil case, but it does not necessarily close the entire chapter on Abbott's infant-nutrition legal battles.
Sources: WRNJ, Yahoo Finance
