Image caption The drug was marketed for the treatment of dementia, despite lack of evidence that it was effective

A US drug company has agreed to pay out $1.6bn (£1bn) after improperly marketing a mood-stabilising drug in a settlement thought to be the largest of its kind involving a single drug.

Abbott Laboratories encouraged its sales teams to market Depakote for uses that were not approved by regulators, the US justice department said.

The drug should be used in epilepsy and bipolar disorder cases.

However, it was sold to treat conditions such as dementia and autism.

According to a US justice department statement, Abbott maintained a specialised sales force to market the drug in nursing homes.

It said the drug could be used for the control of agitation in elderly dementia patients, despite the absence of any credible scientific evidence that Depakote was safe and effective for that use.

The illegal conduct was not the product of "some rogue sales representatives," US Attorney Timothy Heaphy said. The company engaged in the strategy from 1998 to at least 2006, he said.

Reuben Guttman, a lawyer who represented some of the company whistle-blowers, said that Abbott had preyed on two vulnerable categories of patient - the elderly and children.

The company "violated basic norms of health care and ethics", he said.

The company also marketed Depakote to treat schizophrenia, but clinical trials failed to demonstrate that the drug was any more effective than anti-psychotic drugs in treating the condition, according to court papers.

Abbott Laboratories will now pay $800m to federal and state governments, $700m in criminal penalties and a further $100m to resolve consumer protection issues.

The company has also agreed to a five-year probationary period to ensure that there is no repeat of the misconduct.