(Updates with penalty sought by state in 11th paragraph.)
Sept. 14 (Bloomberg) -- Johnson & Johnson must face a trial over Arkansas officials’ claims the drugmaker hid the risks of its anti-psychotic drug Risperdal when selling it to residents covered by the state’s Medicaid program, a judge ruled.
J&J, the second-biggest maker of health products, will face a March 2012 trial of a lawsuit filed by Arkansas Attorney General Dustin McDaniel over the company’s Risperdal marketing campaign, Circuit Judge Tim Fox in Little Rock said today. Fox rejected the company’s bid to have the state’s case thrown out.
Arkansas officials contend J&J and one of its units defrauded the state’s Medicaid program by failing to properly outline the anti-psychotic medicine’s risks in its warning label. They also allege J&J officials deceptively marketed the drug as safer and better than competing medicines.
The U.S. has been investigating Risperdal sales practices since 2004, including allegations the company marketed the drug for unapproved uses, J&J executives said in an Aug. 9 filing with the U.S. Securities and Exchange Commission. In May, company officials said in another regulatory filing that they had reserved funds to resolve the government’s Risperdal claims. J&J didn’t say how much had been set aside.
J&J officials said a little more than a month ago that the drugmaker had reached an agreement with federal prosecutors to resolve a criminal charge over its Risperdal marketing practices.
Greg Panico, a spokesman for New Brunswick, New Jersey- based J&J, didn’t immediately return calls seeking comment after regular business hours today.
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, according to company filings.
Arkansas officials contend J&J and its Ortho-McNeil-Janssen Pharmaceuticals unit violated the state’s trade-practices laws and defrauded its Medicaid program by failing to include a proper warning about the drug’s links to diabetes on its label.
The state’s lawyers also argue the companies marketed the drugs for “unapproved uses, including various symptoms in children and the elderly” after being warned by federal to halt such sales, according to the state’s suit.
The state seeks a penalty of as much as $10,000 for each Risperdal prescription written in Arkansas over a 13-year period starting in 1994 in connection with the Medicaid fraud claim, Robert Cowan, one of the state’s lawyers, said in an interview in August.
J&J’s lawyers countered J&J and Janssen officials provided proper warnings about Risperdal’s diabetes risks on the drug’s label and that federal regulators had approved that label.
The state’s efforts to tie its labeling claims to Medicare fraud should fail because “compliance with federal drug labeling statutes and regulations is not a condition of payment or participating in a” state Medicaid program, the companies’ lawyers said in a July 29 court filing.
J&J and the Janssen unit have been sued by 11 states seeking reimbursement for Medicaid or other public funds paid on Risperdal prescriptions, the company said. The lawsuits allege that J&J promoted the drug for dementia, mood and anxiety disorders and other unapproved uses, or downplayed risks.
Last year, jurors in Louisiana ordered the drugmaker to pay almost $258 million to state officials for making misleading claims about the anti-psychotic medicine’s safety. J&J has appealed.
In June, a South Carolina judge ordered J&J officials to pay $327 million in penalties for deceptively marketing the medicine. J&J has asked the judge to throw that verdict out.
The Arkansas case is State of Arkansas v. Ortho-McNeil- Janssen Pharmaceuticals Inc., CV07-15345, Pulaski County Circuit Court (Little Rock).
--With assistance from David Voreacos in Newark, New Jersey, and Margaret Cronin Fisk in Southfield, Michigan. Editors: Michael Hytha, Peter Blumberg
To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at email@example.com; Eric Frances in Little Rock, Arkansas, at firstname.lastname@example.org
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