Johnson & Johnson (JNJ) agreed to pay as much as $2.2 billion to settle U.S. probes of the marketing of its Risperdal antipsychotic drug and other medications, two people familiar with the negotiations said.
The settlement, which might be announced this week, will include a misdemeanor plea and criminal penalty of as much as $600 million, said the people, who didn’t want to be identified because they weren’t authorized to speak publicly about the agreement. The accord also would resolve civil claims that J&J paid kickbacks to Omnicare Inc. (OCR), a company that dispenses drugs at nursing homes, the people said.
The agreement, which wouldn’t end claims by some states, would be the government’s second-biggest settlement with a pharmaceutical company, behind a $2.3 billion accord that Pfizer Inc. (PFE) entered in 2009 to resolve U.S. investigations of improper marketing of its painkiller Bextra and other drugs.
“This is a gigantic settlement that reflects the seriousness of the criminal and civil allegations against J&J over Risperdal and the other drugs,” Carl Tobias, who teaches product-liability law at the University of Richmond law school, said in a phone interview.
The accord covers Risperdal claims by whistle-blowers and the U.S. and those by most of the states, and it resolves claims that J&J illegally marketed the heart-failure drug Natrecor and the antipsychotic medication Invega, the people said.
$600 Million Reserve
J&J officials said June 8 the company was setting aside $600 million to increase its reserves for potential settlements of lawsuits over its marketing campaigns for Risperdal and other drugs. J&J officials added in an e-mailed statement that the reserve also covered a possible settlement of the Omnicare kickback claims.
“We can’t comment on this matter,” Bill Price, a J&J spokesman, said yesterday.
Charles Miller, a Justice Department spokesman, said in an e-mail that he had no comment.
The U.S. government has been probing Risperdal sales practices since 2004, including allegations the company marketed the drug for unapproved uses, J&J has said in U.S. Securities and Exchange Commission filings. The company also has said in securities filings that it is negotiating with the U.S. to resolve the investigation.
J&J, based in New Brunswick, New Jersey, disclosed in August 2011 that it reached an agreement to settle a misdemeanor criminal charge related to Risperdal marketing.
$600 Million Fine
The criminal fine of as much as $600 million comes in connection with that agreement, the people said. It wasn’t clear whether J&J or one of its units would be criminally charged.
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 Food and Drug Administration approved Risperdal in 1993 for psychotic disorders including schizophrenia. That market is limited, and J&J’s Janssen unit sought to sell Risperdal for bipolar disorder, dementia, mood and anxiety disorders and other unapproved uses, according to court filings. It was later approved for other uses.
The $2.2 billion settlement won’t resolve suits brought by attorneys general in Arkansas, Louisiana and South Carolina, where the company appealed or said it will appeal judgments over Risperdal sales, the people said.
Judges or juries in those states have ordered J&J to pay a total of about $1.8 billion in damages and fines over Risperdal marketing campaigns that were found to have misled doctors and patients about the drug’s health risks and effectiveness.
In April, a judge in Arkansas ordered the drugmaker to pay $1.2 billion in fines over Risperdal marketing. That verdict came three months after J&J decided to end a trial in Texas over the drug’s sales with a $158 million settlement.
In June 2011, a judge in South Carolina ordered J&J to pay $327 million in penalties for deceptively marketing the medicine. Ten months earlier, jurors in Louisiana ordered the drugmaker to pay almost $258 million to state officials over J&J’s Risperdal marketing campaign in the state. A Louisiana judge later ordered the drugmaker to pay an additional $73.3 million in attorneys’ fees and costs.
The settlement will cover whistle-blower claims that J&J officials paid kickbacks to executives of Omnicare, based in Covington, Kentucky, to spur sales of Risperdal and other drugs including Levaquin and Procrit. The government intervened in these cases in 2010 and has been pressing claims against the drugmaker in federal court in Boston.
The agreement will also cover civil claims brought in a whistle-blower suit in San Francisco in 2005 that J&J and its Scios Inc. unit promoted Natrecor for unapproved uses. The government joined the suit in 2009, and a trial was scheduled for October 2012, according to court records.
J&J pleaded guilty to misbranding Natrecor in September and agreed to pay an $85 million fine. The plea agreement didn’t release J&J from the civil suit, the Justice Department said in court papers in September.
In April, Justice Department lawyers asked U.S. District Judge Richard Stearns in Boston to force Alex Gorsky, J&J’s new chief executive officer, to testify about the Omnicare kickback allegations.
Omnicare agreed in 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 that case.
Gorsky, who had been vice president of sales and later president of J&J’s Janssen unit, has “relevant knowledge” about the division’s marketing practices in connection with Omnicare, the government’s lawyers said in court filings.
Gorsky was tapped in February to succeed Bill Weldon as J&J’s top executive.
Lilly, AstraZeneca and two other J&J competitors making antipsychotic drugs have paid a total of $2.7 billion to resolve government marketing claims, particularly 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 paid $301 million for its drug Geodon.
The Omnicare case is U.S. ex re. Lisitza v. Johnson & Johnson, 07-10288, U.S. District Court, District of Massachusetts (Boston). The Natrecor case is Strom v. Scios, 05- 03004, U.S. District Court, Northern District of California (San Francisco).
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