J&J Loses Appeal of $257.7 Million Risperdal Verdict

Johnson & Johnson (JNJ) lost a bid to have a Louisiana appeals court throw out an award of almost $258 million that a jury ordered it to pay state officials over the marketing of its Risperdal antipsychotic drug.

A state appeals court in Lake Charles, Louisiana, today rejected J&J’s claims that it was unfairly barred from defending itself against allegations that its Janssen unit defrauded the state’s Medicaid program by misleading regulators and residents about Risperdal’s health risks.

“We find that the trial court was not manifestly erroneous in casting Janssen with civil monetary penalties, attorney fees, and costs for its violations” of Louisiana’s Medicaid fraud laws, the appellate court said in a 32-page ruling.

The ruling comes a day after New Brunswick, New Jersey- based J&J and Janssen agreed to pay $181 million to resolve claims by 36 states that they improperly marketed and advertised Risperdal and Invega, another antipsychotic medicine.

Janssen intends to appeal the decision to the Louisiana Supreme Court, Teresa Mueller, a J&J spokeswoman, said in an e- mailed statement.

“The lower court proceedings in this case were rife with serious, prejudicial errors, such as lack of evidence that a false or fraudulent claim was submitted to the Medicaid program for reimbursement,” she said in the statement. Janssen “acted responsibly” and didn’t violate state medical assistance law, she said.

Pending Judgments

The Louisiana penalty is one of three pending judgments against J&J over claims that the second-biggest maker of health products hid Risperdal’s risks and tricked state Medicaid programs into paying inflated prices for it. The company faces suits from at least seven other states over Risperdal marketing.

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.

The drug’s global sales peaked at $4.5 billion in 2007 and declined after the company lost patent protection. It generated $3.4 billion in sales in 2008, or 5.4 percent of J&J’s revenue, according to company filings. Sales of the drug fell to $527 million in 2010, according to earnings reports.

The U.S. has been investigating Risperdal sales practices since 2004, including allegations that the company marketed the drug for unapproved uses, J&J executives said in a regulatory filing.

Justice Department

J&J officials have reached an agreement with the U.S. Justice Department to pay as much as $2.2 billion to resolve probes of its sales of drugs, including Risperdal, according to people familiar with the matter, Bloomberg News reported earlier this year.

In the Louisiana case, lawyers argued J&J and Janssen defrauded the state’s Medicaid program by wrongfully marketing the drug to doctors as safer and better than competing medicines so they could sell it at an artificially inflated price.

Jurors found J&J officials violated the state’s Medicaid fraud laws 35,542 times over Risperdal. The panel imposed a penalty of $7,250 for each violation. Judge Donald Hebert later added $70 million in legal fees and $3.3 million in expenses to cover Louisiana’s cost of suing.

J&J and Janssen argued in court filings with Louisiana’s Third Circuit Court of Appeal that Hebert’s miscues during the trial warranted having the verdict and penalties thrown out.

Evidence Barred

Hebert’s decision to bar evidence that Louisiana officials placed Risperdal on the state’s preferred drug list and covered prescription costs without complaint hamstrung J&J’s defense, the company argued.

The judge “made numerous erroneous evidentiary rulings that prevented appellants from mounting any real defense,” the company wrote.

Hebert also let lawyers for the state make “inflammatory and improper” arguments that whipped up the jury’s emotions and paved the way for an award of hundreds of millions of dollars in penalties, the company said.

The appeals court rebuffed those arguments, finding Hebert properly construed the state’s Medicaid fraud laws and insured jury arguments didn’t improperly influence the verdict.

“We find the trial court’s instruction to the jury that arguments by counsel have no evidentiary value to be sufficient to preclude any potentially improper statements from influencing the jury or contributing to its verdict,” the appeals court judges wrote.

The case is Caldwell ex rel. State of Louisiana v. Janssen Pharmaceutical, 04-C-3967, 27th Judicial Court, St. Landry Parish, Louisiana (Opelousas).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

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

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