$2 billion settlement is the largest for one drug

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In one of the biggest settlements of its kind, subsidiaries of Johnson & Johnson have agreed to pay $2.2 billion to resolve a decade-long case involving the marketing for "off-label" use of the antipsychotic drug Risperdal.

It is the biggest settlement yet for a single drug, said Zane Memeger, U.S. attorney for the Eastern District of Pennsylvania, where the case was handled. And it's the government's third-largest with a pharmaceutical company.

Janssen Pharmaceuticals, based in New Jersey, pleaded guilty Thursday to a charge related to its marketing of Risperdal, which had been approved by the U.S. Food and Drug Administration for treatment of schizophrenia -- but was also marketed being for elderly patients with dementia and mentally ill children.

That's known as "off-label" marketing: selling, branding or marketing a drug to treat conditions beyond what's been explicitly approved by the FDA.

"The Department of Justice takes the FDA procedure seriously," Mr. Memeger said following a formal announcement of the deal in Washington, D.C. "Companies that decide to put profit over patients will be prosecuted."

At the hearing before U.S. District Judge Timothy Savage, the judge asked, "Did Janssen do what the government said it did?"

"Yes, your honor," Joseph Braunreuther, J&J's deputy general counsel, replied before entering the plea on Janssen's behalf, according to Bloomberg news service.

Janssen will pay $334 million as a criminal fine and $66 million as a substitute for forfeiture of the drugs. It has agreed to a separate civil settlement with the federal government and several states for about $1.3 billion, according to the plea and sentencing agreement.

Johnson & Johnson also will pay $149 million to settle claims related to kickbacks it allegedly paid to a long-term care pharmacy, according to Attorney General Eric Holder Jr., who gave a prepared statement at a news conference.

"In addition to these claims, we allege that Johnson & Johnson and its subsidiary, Scios Inc., promoted the heart failure drug Natrecor for off-label uses that caused patients to submit to costly infusions of the drug -- without credible scientific evidence that it would have any health benefit for those patients," Mr. Holder said.

"In a separate matter that was resolved in 2009, Scios pleaded guilty to misbranding Natrecor and paid a criminal fine of $85 million. To resolve current allegations associated with the settlement we announce today, the companies have agreed to pay an additional $184 million."

In March 2012, Johnson & Johnson paid $118 million to resolve similar claims about Risperdal in Texas -- that amount is included in the $2.2 billion total.

Whistleblowers from the Eastern District of Pennsylvania will be awarded $112 million -- Victoria Starr, the first to file, will get $110 million from the federal government's share of the Risperdal settlement, and Kurtis Barry will get $2 million from the federal government's share of the Invega settlement, according to the U.S. attorney's office in Philadelphia.

Regarding the conduct of the drug companies, Stephen Sheller of Sheller P.C. said, "They targeted children and the elderly."

Mr. Sheller represents Ms. Starr and has separate cases related to Risperdal's effects on children, allegedly causing boys to develop breasts, currently pending.

Thomas Sheridan of Sheridan & Murray, who represented Mr. Barry, said the size of the settlement was possible largely because of the volume of sales for Risperdal, which, he said, was at one point the leading antipsychotic drug on the market.

Sales for the drug approached $2 billion in one year, he said, explaining that companies typically get limited approval for their drugs -- like the FDA's approval for Risperdal in the relatively small schizophrenia market -- so they try to capture pieces of other drug markets through promotion of off-label uses.

Mr. Barry had contributed evidence that the sales goals set by the company for the drugs went beyond what would be possible from the schizophrenia market share, according to Mr. Sheridan.

What was striking about this case, he said, was that the pharmaceutical company marketed the off-label uses for its drug to the "most vulnerable members of society."

Johnson & Johnson also has agreed to go into a corporate integrity agreement with the U.S. Department of Health and Human Services.

"Among other things, the [corporate integrity agreement] requires J&J to change its executive compensation program to permit the company to recoup annual bonuses and other long-term incentives from covered executives if they, or their subordinates, engage in significant misconduct," according to a release from the Department of Justice.

The company acted in a "calculated manner" with intent to "maximize profits with no regard to risk," Judge Savage said before approving the terms of the plea agreement, according to Bloomberg news.


Saranac Hale Spencer: sspencer@alm.com or 215-557-2449. Read more articles like this at www.thelegalintelligencer.com.

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