J&J Must Defend U.S. Kickback Lawsuit Claims, Judge Rules

Johnson & Johnson must defend a lawsuit by the U.S. Justice Department claiming the company paid kickbacks to influence sales of its antipsychotic drug Risperdal to nursing home patients, a judge ruled today.

J&J asked the judge to dismiss the complaint, arguing that payments it made to Omnicare Inc., the largest U.S. pharmacy for nursing home patients, were allowable rebates and not illegal kickbacks. U.S. District Judge Richard Stearns ruled in federal court in Boston that the case may proceed against J&J, the world’s largest maker of health-care products.

The Justice Department joined complaints by whistleblowers Bernard Lisitza and David Kammerer, who sued under the False Claims Act. Stearns dismissed claims by Kammerer, as well as several U.S. states that sought to join the case. Lisitza, a former Omnicare pharmacist, first sued in 2003.

“This decision is a huge victory against corporate influence over taxpayer-funded health care,” said attorney Michael Behn, who represents Lisitza.

Carol Goodrich, a spokeswoman for New Brunswick, New Jersey-based J&J, said in an e-mail, “We will defend the case in court.”

The judge dismissed claims by Nevada, Texas and Illinois, while allowing those by Kentucky, Indiana and Virginia to proceed.

Millions of Dollars

The U.S. sued J&J and two units in January 2010, claiming they paid millions of dollars to induce Omnicare to buy and recommend J&J drugs including its antipsychotic Risperdal. J&J said in court papers that it didn’t violate the False Claims Act or Anti-Kickback Statute, as the government claims.

“This case is a remarkable attempt to attack common discounting arrangements that are expressly protected under federal and state law,” J&J’s lawyers wrote in a 53-page memorandum filed in court last June.

Two industry groups, the Pharmaceutical Research Manufacturers of America and the Biotechnology Industry Organization, had filed a friend-of-the court brief supporting J&J in the case.

Omnicare, based in Covington, Kentucky, agreed in November 2009 to pay $98 million to settle civil claims by the U.S. and several states that it took kickbacks from J&J. Omnicare didn’t admit liability in settling the case.

‘Masked’ Rebates

The government claims that J&J paid Omnicare millions of dollars of kickbacks, much in the form of interest-free loans. It claims that J&J also masked rebates as grants, educational funding, or meeting sponsorship fees. Those fees covered the cost of junkets by Omnicare managers to the Amelia Island Resort in Florida, according to the government.

J&J argued it engaged in common commercial practices such as giving customers higher rebates based on the “share” of a manufacturer’s product used and trying to get its drugs on formularies, which are lists of medications that an insurer, public health-care program or other payer will reimburse.

“Today, rebates remain standard industry practice and are absolutely essential to our health care system,” J&J lawyers wrote in court papers last June.

The case is U.S. ex re. Lisitza and Kammerer v. Johnson & Johnson, 07-10288, 05-11518, U.S. District Court, District of Massachusetts (Boston).

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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