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J&J Wins Dismissal of Pennsylvania's Risperdal Case

Johnson & Johnson won dismissal of Pennsylvania’s suit alleging that the drugmaker hid health risks of its Risperdal antipsychotic drug and duped officials into paying millions more than they should have for the medicine.

Judge Frederica Massiah-Jackson in Philadelphia today granted the company’s request to throw out the suit after finding the state hadn’t produced enough evidence the company improperly marketed Risperdal to continue the trial. State lawyers had presented a week’s testimony to jurors.

“Any time you get something like this dismissed, it’s a positive,” Les Funtleyder, an analyst with Miller Tabak & Co. in New York, said in a telephone interview. He recommends buying J&J shares and doesn’t own any. “J&J’s reputation has been hit a little bit recently, so I guess this helps somewhat.”

The Pennsylvania case was the first of 10 states’ suits over J&J’s Risperdal marketing practices to go before a jury. A West Virginia judge last year ordered J&J and Janssen to pay that state $3.95 million on a similar claim.

Pennsylvania officials sought to recover $289 million in alleged overcharges tied to prescriptions covered by state- sponsored health plans.

“We are pleased with the judge’s decision that the evidence presented failed to show” a unit of J&J defrauded the state in connection with Risperdal sales, Greg Panico, a company spokesman, said in a telephone interview.

Appeal Likely

Attorneys for the state are studying Massiah-Jackson’s ruling, Camp Bailey, one of the lawyers representing Pennsylvania, said in an e-mailed statement. “It’s likely we will file an appeal,” he said.

Risperdal generated $3.4 billion in sales in 2008, or 5.4 percent of sales for New Brunswick, New Jersey-based J&J. The drug, made by its Janssen Pharmaceutica unit, was one of J&J’s biggest sellers before its patent protection expired. Pennsylvania officials paid for Risperdal prescriptions written for patients covered by state-sponsored health programs.

J&J has faced criticism from lawmakers about a unit’s decision to recall children’s medicines because of manufacturing defects without notifying regulators or consumers.

The company faces hundreds of lawsuits by former Risperdal users alleging the company downplayed the medicine’s diabetes risk and overstated its benefits. Consumers contend the drugmaker boosted sales by marketing the drug for unapproved uses, such as treating dementia patients.

Justice Department Probe

The Justice Department is investigating such practices by Janssen and other drugmakers. States including Louisiana and Utah sued claiming J&J violated federal prohibitions against off-label marketing or misled doctors and consumers, according to company regulatory filings.

Judge Martin Gaughan in Wellsburg, West Virginia found in 2009 that J&J and the Janssen unit misled doctors about the risks and benefits of Risperdal. The state alleged the companies violated consumer protection law by claiming Risperdal was safer than similar medications. J&J has appealed the decision.

Under U.S. law, a doctor can prescribe a medicine for any condition, as long as the U.S. Food and Drug Administration found it safe and effective for at least one ailment.

Drugmakers aren’t allowed to promote a drug for uses other than those approved by the FDA. Until 2003, Risperdal was approved only for psychotic disorders such as schizophrenia. It was never approved for dementia.

Pennsylvania’s Arguments

Pennsylvania’s lawyers argued in the Philadelphia Common Pleas Court case that J&J artificially inflated Risperdal’s price by wrongfully touting the drug as safer than competitors such as Eli Lilly & Co.’s Zyprexa and AstraZeneca Plc’s Seroquel. Researchers have concluded the drugs all pose the same diabetes risk, Pennsylvania officials said.

J&J ignored repeated admonitions from the FDA to stop claiming Risperdal was superior to other antipsychotics and justified the drug’s premium price by citing those false claims, the state’s lawyers told jurors.

The company countered that Risperdal’s benefits in treating mentally ill patients outweighed its diabetes risk. Pennsylvania regulators appeared to agree with that assessment by keeping the medicine on the state’s preferred-drug list, a J&J lawyer told the jury when the trial opened.

After the state finished presenting evidence last week, Johnson & Johnson asked Massiah-Jackson to find Pennsylvania officials hadn’t made a legitimate fraud case.

Case Dismissed

The judge agreed, dismissing the case before Johnson & Johnson had to begin presenting its defense.

Fletch Trammell, a lawyer who represented Pennsylvania, said Massiah-Jackson’s ruling means state law might not provide a basis for recovering damages for defrauded public programs.

“If this ruling stands, it would mean that the state could be the victim of the largest of frauds and have no means of recovery,” Trammell said in a telephone interview.

The next state trial on Risperdal overcharge allegations is set for September in South Carolina, Trammell said. He and his law firm represent the state in that case as well.

The potential damages in the South Carolina case “run into the billions,” Trammell said.

The Pennsylvania case is Commonwealth of Pennsylvania v. Janssen Pharmaceutica Inc., 002181, Philadelphia Court of Common Pleas (Philadelphia).

To contact the reporters on this story: Jef Feeley in Philadelphia at jfeeley@bloomberg.net; Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.

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