(Updates with damages demand in third paragraph.)
Jan. 9 (Bloomberg) -- Johnson & Johnson, which has lost judgments of almost $660 million over the marketing of its antipsychotic drug Risperdal, began a trial today in which Texas is seeking damages of more than $1 billion.
State Attorney General Greg Abbott accused J&J of paying officials to get Risperdal on approved drug lists, marketing it for unapproved uses to children and the elderly, and lying about its effects. The case in state court in Austin was filed by a whistle-blower and joined by the state, which is seeking repayment of Medicaid payments.
Texas is asking for reimbursement of $579 million, said Tom Melsheimer, a lawyer for the whistle-blower. The amount could be tripled by jurors under state law. In addition, jurors will decide the number of violations and set a penalty of up to $10,000 apiece, if the state wins.
“It’s going to be massive,” said Patrick Burns of the advocacy group Taxpayers Against Fraud. “They’ll lose in Texas, and then they’re going to face litigation from stockholders for failing to settle this.”
The result may be a record false-claims verdict, Burns said by phone from Washington.
A jury weighing only the claim that the company downplayed the drug’s risks awarded Louisiana $257.7 million in 2010. A judge in South Carolina last year ordered J&J to pay $327 million over Risperdal sold in the state.
J&J and its Janssen unit, which sold Risperdal, deny any wrongdoing.
“We are committed to ethical business practices, and have policies in place to ensure that our products are only promoted for their FDA-approved indication,” Teresa Mueller, a J&J spokeswoman, said in an e-mail. The company will fight the allegations, she said.
When questions are raised about adherence to the company’s marketing and promotion policies, “we act quickly to investigate the situation and take appropriate disciplinary action,” she said.
The Texas case goes to trial two weeks after J&J agreed to a $1 billion civil settlement with the U.S. government and some states over Risperdal sales practices, people familiar with the matter said. Texas won’t participate in the federal settlement, one of the people said. Mueller declined to comment on “rumor or speculation” about a settlement.
The company reached a tentative agreement with federal prosecutors to plead guilty to a misdemeanor criminal charge related to Risperdal marketing, J&J, based in New Brunswick, New Jersey, said in an August regulatory filing.
$400 Million More
The company is discussing a payment of about $400 million more to resolve that part of the investigation, according to one of the people familiar with the civil-suit accord.
J&J, the world’s largest health products company, and its Janssen unit have also been sued over marketing practices by Alaska, Arkansas, Louisiana, Montana, New Mexico, Pennsylvania and Utah. The Arkansas case is set for trial in March.
A suit filed by West Virginia was dropped after an appeals court set aside a nonjury trial judgment against the company. J&J won dismissal of the Pennsylvania case.
That decision and the jury’s verdict against the company in Louisiana, since enhanced to $330 million, are on appeal.
The company also has about 500 claims pending alleging injuries caused by Risperdal, it said in regulatory filings in November.
Risperdal, once J&J’s best-selling drug, generated worldwide sales of $24.2 billion from 2003 to 2010, peaking at $4.5 billion in 2007. After that, J&J lost patent protection and sales declined.
Risperdal profit was 97 percent of its sales, or $28.9 billion, from 1994 to 2010, Judge Roger L. Couch of South Carolina Circuit Court in Spartanburg said in his June 3 decision on damages, citing trial testimony.
Risperdal is in a class of drugs, known as atypical, or second-generation, antipsychotics. They include Eli Lilly & Co.’s Zyprexa and AstraZeneca Plc’s Seroquel. The drugs have been linked to weight gain and a risk of diabetes.
Lilly, AstraZeneca and two other J&J competitors making these drugs have paid a total of $2.66 billion to resolve government marketing claims, including allegations that the companies pushed the drugs for unapproved uses.
Indianapolis-based Lilly paid more than $1.7 billion to resolve state and federal investigations over Zyprexa. AstraZeneca, based in London, paid almost $590 million. Pfizer paid $301 million for its drug Geodon.
The Texas suit was filed by a whistle-blower, Allen Jones, an ex-investigator for the Pennsylvania Office of Inspector General.
Jones probed allegations that the chief pharmacist for the state’s mental health office had received payments from pharmaceutical companies. He sued Texas in 2004, his last year in the Pennsylvania job.
Jones determined in his probe that Janssen had “engaged in a fraudulent scheme that included payments to at least one Texas state official” to ensure that Risperdal was included as a preferred drug in the state’s Texas Medication Algorithm Project, known as TMAP, he said in court papers.
“Janssen had made payments to Texas and other state officials to facilitate the exportation of TMAP to other states, including Pennsylvania,” Jones said. He sued under a Medicaid- fraud law similar to the federal False Claims Act. It allows a whistle-blower to share in any settlement money or damages.
Texas claims that Janssen and J&J paid four state health officials $340,000 to promote Risperdal, inducing them to breach their duties to the state.
“J&J sent the four leaders of TMAP around the country to promote TMAP, and, in the process, Risperdal,” David Rothman, a state expert, said in a pretrial report.
“They each had to sign consulting agreements with the defendants in which they pledged their fealty to the defendants, to the exclusion of all others, including their employer, the state of Texas,” Tommy Jacks, a lawyer for the state, said at a hearing in February.
One official, the medical director of the Department of Mental Health and Mental Retardation, at one point “was spending more than half of his time with a state employee traveling around the country” at J&J’s expense “to promote the TMAP algorithm which favored their product in other states,” Jacks said at the hearing.
The officials weren’t influenced by any payments, John Schwartz, a defense lawyer, said at the hearing. About 90 percent of the money paid went to the state, not the individuals, and their actions were approved by their superiors, Schwartz said.
“There’s no evidence from anybody that any Texas Medicaid decision-maker did anything differently as a result of anything we said or did,” John McDonald, another J&J lawyer, said at the hearing.
Texas hasn’t removed Risperdal from its list of approved drugs for Medicaid patients or restricted its use, McDonald said.
Jacks said Texas was counting only the money kept by the individuals, and didn’t include any that was turned over to the state.
The Texas attorney general joined Jones’s suit in 2006. The state government’s decision to intervene limits J&J’s chances of winning at trial, said Burns, of Taxpayers Against Fraud.
“If the government intervenes, these suits almost never go to trial, and if they go to trial, the government always wins,” Burns said.
The defendants will face a jury of Texas taxpayers hearing allegations that J&J’s actions cost them money.
“If I’m the rustler, I don’t want the cow sitting in judgment,” Burns said.
The state also claims the company marketed Risperdal for so-called off-label uses, treatment of medical conditions for which it hadn’t received regulatory approval after clinical trials. It was sold for use by children and the elderly, the state says.
The Texas claims against J&J over off-label marketing mirrors those against other makers of antipsychotics, powerful medications which are sometimes prescribed for less-serious conditions than psychosis, such as depression.
Texas alleged that Janssen began promoting prescriptions for children as soon as the drug was being sold without any approvals by the U.S. Food and Drug Administration for such use.
“They had their sales people out calling upon doctors as early as 1994 who saw no adult patients, who saw only children,” Jacks said at the February hearing. “They trained their people to sell aggressively to promote Risperdal to children and adolescents.”
One psychiatrist in north Texas who treated only children was called by Janssen sales people 96 times, Jacks said.
There was no FDA-approved indication for any use in the child and adolescent population from December 1993 to October 2006, Texas said in its complaint.
“In October 2006, Risperdal received a very narrow indication for use in a limited population of children and adolescents (age 5-17) for irritability associated with a diagnosis of autism,” the state said.
The state also will pursue its claim that the company downplayed the risks of Risperdal, despite FDA admonishments.
Texas alleged that J&J and Janssen improperly touted Risperdal as safer than competing antipsychotics in November 2003 correspondence to doctors after the FDA told the companies to enhance warnings about the drugs. This allegation was at the heart of the Louisiana and South Carolina cases.
Jury selection in Austin started today. The trial is scheduled to last about three weeks.
The case is State of Texas ex rel. Jones v. Janssen LP, D- 1GV-04-001288, District Court, Travis County, Texas (Austin).
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