Johnson & Johnson will pay more than $1 billion to the U.S. and most of the 50 states to settle a civil investigation into marketing of its antipsychotic Risperdal. J&J, the world’s largest health products company, reached the agreement with the U.S. Attorney in Philadelphia. Negotiations over a possible criminal plea were still under way at press time for this issue.
The U.S. government has been investigating Risperdal sales practices since 2004, including allegations the company marketed the drug for unapproved uses. The company had been in negotiations with the U.S. Justice Department to settle the investigation. As you may recall, J&J disclosed in August that it reached an agreement to settle a misdemeanor criminal charge related to Risperdal marketing. The company is discussing paying another $400 million to settle that portion of the investigation.
Risperdal, once J&J’s best-selling drug, generated worldwide sales of $24.2 billion from 2003 to 2010, reaching $4.5 billion in 2007. After that, J&J lost patent protection and sales declined. The settlement represents 31% of Risperdal’s peak sales in 2007, before generic versions of the medicine eroded revenue. It’s about 5.6% of the drug’s cumulative sales since 2003.
The Food and Drug Administration approved Risperdal in 1993 for psychotic disorders, including schizophrenia. Since that market is very limited, J&J’s Janssen unit set out, without approval, to sell Risperdal for bipolar disorder, dementia, mood and anxiety disorders and other unapproved uses. The drug was later approved by the FDA for other uses. Company officials said in an SEC filing in May that they had reserved funds to resolve the government’s claims over Risperdal marketing. The drugmaker, in an August filing, said that it had added an unspecified amount to the reserve to cover criminal penalties.
I understand that a majority of states will join with the federal government in this settlement. Each state will have to decide whether to join the federal government’s settlement or pursue its own case. Typically, states with cases in court continue to pursue their own. It has been our experience that states do much better they file their own claims.
J&J and Janssen have been sued by 12 states, including Texas, South Carolina and Louisiana, over Risperdal marketing. The Attorneys General of the other states “have indicated a potential interest in pursuing similar litigation against” Janssen, J&J said in its quarterly SEC filing in November. A jury in Louisiana, in a case involving claims that the company downplayed the drug’s risks, awarded that state $257.7 million in 2010. A South Carolina judge last year ordered J&J to pay $327 million over Risperdal sold in that state. There is an ongoing trial in Texas which started on January 9th. That case was filed by the State of Texas against J&J and Janssen.
Hundreds of Janssen salespeople sold Risperdal to doctors, nursing homes, Veteran’s Administration facilities and jails, according to documents produced in the Louisiana case. Marketers gave doctors materials about studies of unapproved uses for Risperdal. Janssen sponsored clinical trials of its effects on other illnesses. In 1994, 1999 and 2004, the FDA ordered Janssen to stop making false and misleading marketing claims about Risperdal’s superiority.
The FDA told J&J in 1999 that its marketing materials for geriatric patients overstated Risperdal’s benefits and minimized risks. A J&J business plan for the next year called for increasing the drug’s market share for elderly dementia sales, an unapproved use, according to the documents brought forward in the Louisiana suit. The FDA didn’t approve Risperdal for bipolar disorder until 2003. In 2006, the regulator approved it for symptoms related to autism in children and teens. The FDA approved the drug to treat bipolar children and teens the next year. The drug was never approved for dementia. J&J said in its August SEC filing:
Discussions have been ongoing in an effort to resolve criminal penalties under the Food Drug and Cosmetic Act related to the promotion of Risperdal. Certain issues remain open before a settlement can be finalized. The ultimate resolution of the above criminal and these civil matters is not expected to have a material adverse effect on the company’s financial position.
Risperdal is a member of a class of drugs, known as atypical antipsychotics, that includes Eli Lilly’s Zyprexa and AstraZeneca’s Seroquel. Lilly, AstraZeneca and two other J&J competitors making these drugs have paid $2.7 billion to resolve government claims that the companies pushed the drugs for unapproved uses. Lilly paid more than $1.7 billion to resolve state and federal investigations over Zyprexa, and AstraZeneca has paid almost $590 million. Pfizer Inc. paid $301 million for its drug Geodon.
Source: Bloomberg News
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