J&J Ordered to Pay $327 Million Over Deceptive-Marketing Claims

Photographer: JB Reed/Bloomberg News.

Johnson & Johnson's schizophrenia drug Risperdal. Close

Johnson & Johnson's schizophrenia drug Risperdal.

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Photographer: JB Reed/Bloomberg News.

Johnson & Johnson's schizophrenia drug Risperdal.

A Johnson & Johnson (JNJ) unit was ordered by a South Carolina judge to pay more than $327 million in penalties for deceptively marketing the antipsychotic drug Risperdal as safer and better than competing medicines.

J&J’s Ortho-McNeil-Janssen Pharmaceuticals unit repeatedly violated the state’s consumer-protection laws by sending a 2003 letter to doctors touting Risperdal as superior to rival drugs and including deceptive information in the product’s warning label, Judge Roger Couch in Spartanburg, South Carolina, concluded.

The drugmaker’s executives “allowed the profit-at-all- costs mentality to cloud” their judgment in connection with the drug’s marketing campaign and its labeling, Couch said in his 17-page ruling.

Janssen official said yesterday they’ll appeal Couch’s order and maintained the company fully disclosed Risperdal’s health risks and properly marketed the antipsychotic medicine.

“We don’t believe that the dissemination of an FDA- approved package insert constitutes a violation of the South Carolina Trade Practices Act,” Kara Russell, a spokeswoman for Janssen said in an e-mailed statement. “We do not believe the ruling can be upheld on appeal.”

South Carolina’s lawyers, who originally sued the J&J unit in 2007 for making misleading claims about Risperdal, sought billions of dollars in penalties over the targeted marketing and labeling material.

Sales Decline

Risperdal’s global sales peaked at $4.5 billion in 2007 and declined after the company lost patent protection. The drug generated $3.4 billion in sales in 2008, or 5.4 percent of New Brunswick, New Jersey-based J&J’s total revenue, according to company filings. Sales of the drug fell to $527 million last year, according to a January earnings report.

Risperdal Consta, the long-acting version of the antipsychotic drug, generated $1.5 billion in sales last year for J&J.

The state’s case centered on drug-safety claims that J&J and Janssen made in November 2003 correspondence to about 700,000 doctors across the U.S., including more than 7,000 in South Carolina.

The U.S. Food and Drug Administration responded with a warning letter saying J&J made false and misleading claims that minimized the potentially fatal risks of diabetes and overstated the drug’s superiority to competing products.

South Carolina’s lawyers argued during a two-week trial of the state’s suit that Risperdal’s safety label also downplayed diabetes and other health risks.

‘Clever Effort’

The faulty labels were included in as many as 722,000 Risperdal prescriptions written in South Carolina from 1994 to 2007, the state’s lawyers told Couch at an April hearing. The deceptive information also was presented in 183,144 sales calls on doctors by Janssen drug representatives, and 496,565 sample boxes distributed over that 13-year period, South Carolina’s lawyers argued.

In his ruling, Couch found the Risperdal letter to South Carolina doctors was a “clever effort” to “manipulate the message” about the drug.

He concluded penalties were warranted for 7,180 letters Janssen officials mailed to physicians in the state along with another 36,372 instances in which the drugmaker’s salespeople used the missive to market Risperdal in person, according to court records.

$4,000 per Violation

Couch awarded South Carolina a total of $174.2 million in penalties over the letter based on a rate of $4,000 per violation of the state’s consumer-protection laws, according to his ruling.

He also found 509,499 sample boxes of Risperdal distributed in the state contained labels with deceptive materials that warranted penalties. The judge awarded the state $152.8 million in penalties over the label at a rate of $300 per violation.

J&J’s lawyers claimed in court papers that the state engaged in “triple counting” by seeking to have prescriptions, marketing letters and sales calls on individual doctors included as violations.

Penalizing the drugmaker for multiple contacts with doctors who were allegedly “misled or deceived each time he or she had been exposed to” the targeted information would be unfair, Steven Pugh, one of the company’s attorneys, said in May 3 filing.

Hold Them Accountable

The award puts drugmakers on notice that if they “try to spin information or try to see what they can get away with,” state officials will hold them accountable, Donald Coggins, a Spartanburg-based lawyer who represented the state, said in an interview yesterday.

The case is the third of about 10 state lawsuits to be considered by jurors over J&J’s Risperdal marketing campaigns. In June, J&J won dismissal of Pennsylvania’s suit alleging the company hid the drug’s diabetes risk and tricked regulators into paying millions more than they should have for the medicine.

A Louisiana jury in October ordered the drugmaker to pay $257.7 million in damages to that state for making misleading claims about Risperdal’s safety. A judge later added $73 million in legal fees to the award.

A West Virginia judge in a 2009 non-jury trial awarded $3.95 million, finding the company misled doctors about the risks and benefits of Risperdal. The state dropped its Risperdal claim after J&J won an appeal, company officials said in February.

J&J fell 39 cents to $66.09 in New York Stock Exchange composite trading yesterday. J&J’s 4.95 percent bonds due in 2033 fell 1.36 percent to 102.3 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The case is State of South Carolina v. Janssen Pharmaceuticals, 2007-CP-42-1438, Circuit Court for Spartanburg County, South Carolina (Spartanburg).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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