(CN) – GlaxoSmithKline must defend itself against racketeering and consumer fraud claims that it falsely marketed its diabetes drug Avandia as reducing heart problems when the drug actually increased the risk of heart attack, the Third Circuit ruled Tuesday.

At one point, the drug Avandia was GlaxoSmithKline’s top money maker, with sales peaking at $3 billion in 2006.

But a year later, research came out linking the drug with an increased risk of heart attack and in 2010, a Senate Finance Committee investigation found that “the totality of evidence suggests that GSK was aware of the possible cardiac risks associated with Avandia years before such evidence became public.”

Avandia sales plummeted to $680 million in 2010, when an FDA advisory committee recommended a recall of the drug and placed severe restrictions on its prescription.

In the wake of these revelations, GSK entered into the largest health care fraud settlement in U.S history with a $3 billion settlement for criminal and civil liabilities related to three of its drugs, including Avandia, which makes up $242 million of the settlement.

However, in 2013, the FDA reevaluated a key clinical trial and concluded that the evidence did not support a finding of increased risk of heart attacks. The agency removed the restrictions from the drug but at this point, it was subject to generic competition and was no longer a blockbuster drug.

In a class action under federal anti-racketeering law, several health plans, led by UFCW Local 1776, sued GSK claiming that they would not have covered Avandia if the drugmaker had disclosed the cardiovascular risks associated with the diabetes drug.

A federal judge tossed the suit on pre-emption grounds, but the Third Circuit reversed on Tuesday.

“GSK has failed to demonstrate that the plans’ state-law consumer-protection claims are preempted by the FDCA,” wrote U.S. Circuit Judge Felipe Restrepo, an Obama appointee, using an abbreviation for the Food, Drug, and Cosmetics Act.

The drugmaker’s own evidence shows that it could have added a warning to Avandia’s label regarding the drug’s cardiovascular health risks in 2005 but never made a formal application to make a label change, according to the 24-page opinion, despite GSK’s assertions at oral arguments.

“The plans never received discovery related to their RICO claims, including with respect to whether an ‘enterprise’ existed for purposes of RICO,” Restrepo said. “This was an abuse of discretion.”

U.S. Circuit Judges Brooks Smith, a George W. Bush appointee, and Thomas Ambro, a Clinton appointee, joined the opinion.

“On remand, the District Court must consider the plans’ arguments that GSK marketed Avandia as providing cardiovascular benefits,” Restrepo added (emphasis in original). “The plans have never argued that GSK promoted Avandia as capable of actually improving patients’ cardiovascular health, but rather as capable of lowering cardiovascular risk when compared to cheaper alternatives, which indeed is a ‘benefit.’”

A GSK spokesperson said in a statement, “We are disappointed with the decision from the Third Circuit and are evaluating our options, including a request for review by the full Third Circuit.“