Bloomberg News

J&J’s $158 Million Settlement With Texas Approved by Court

March 27, 2012

Johnson & Johnson (JNJ) and the state of Texas won court approval of the company’s agreement to pay $158 million to settle claims that the drugmaker fraudulently marketed its Risperdal anti-psychotic drug.

J&J reached the settlement in January to resolve claims it defrauded the state’s Medicaid program by promoting Risperdal for uses not approved by U.S. regulators, including for children with psychiatric disorders. The state also claimed the New Brunswick, New Jersey-based drugmaker downplayed the health risk of Risperdal.

Travis County District Judge John Dietz in Austin, Texas, approved the settlement today following a meeting in court with lawyers. J&J and its Janssen unit denied any wrongdoing in the final agreement.

“This settlement represents a resolution to claims brought by the State in 2004 for alleged Medicaid overpayment during the years 1994-2008, and will circumvent potentially lengthy and costly appellate activities,” Teresa Mueller, a company spokeswoman, said in an e-mail.

Under the agreement, J&J and Janssen will pay $158 million, with 40 percent going to the state, 31 percent to the U.S., 17 percent to whistle-blower Allen Jones, who brought the lawsuit, and the rest to his attorneys, Tommy Jacks, one of Jones’s lawyers, said in an interview. Both sides agreed on final allocation last night, Jacks said.

Tom Kelley, spokesman for the Texas attorney general, declined to comment on the breakdown. The state is getting a larger share than initially expected, he said.

‘Getting More’

“We know the Texas taxpayers are getting more,” he said. The settlement is the largest in a Texas case under the state’s Medicaid fraud act, Kelley said.

The settlement, reached during trial, was the first time J&J and its Janssen unit settled a state’s claims over Risperdal. The company lost jury trials in South Carolina and Louisiana over Risperdal marketing. Opening statements in a trial in Arkansas began today.

The settlement “provides for full payment within 10 days,” Tom Melsheimer, another Jones attorney, said today. “Allen is very pleased to put this all to rest.”

Sales’ Practices Probe

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 last year in a U.S. Securities and Exchange Commission filing. J&J said in an August filing that it reached an agreement with federal prosecutors to settle a misdemeanor criminal charge related to Risperdal marketing.

The U.S. Justice Department is demanding that J&J pay about $1.8 billion to resolve the civil claims by federal regulators and some state attorneys generals, people familiar with the settlement talks said earlier this month.

Officials in Louisiana and South Carolina sued J&J partly over marketing letters the company sent to doctors in those states touting Risperdal as superior to rival drugs. Those states’ attorneys general alleged the company falsely claimed Risperdal didn’t cause diabetes to charge a premium for the drug.

Liable for Damages

In June, a South Carolina judge ordered J&J to pay $327 million after a jury found the drugmaker liable for damages over Risperdal marketing. A Louisiana jury in October 2010 ordered the company to pay $257.7 million over Risperdal sales. The judge later added $73.3 million in attorneys’ fees and costs. J&J is appealing both judgments.

A Pennsylvania judge threw out the state’s case against J&J and Janssen in June 2010 during trial. An appeal of that ruling is set to be heard next month.

J&J and Janssen also have been sued over Risperdal marketing by Alaska, Arkansas, Louisiana, Montana, New Mexico, Pennsylvania and Utah. The state of West Virginia dropped its Risperdal suit after a judge’s $3.95 million verdict in 2009 against the company was reversed on appeal.

Texas joined a lawsuit filed in 2004 by Jones, an ex- investigator for the Pennsylvania Office of Inspector General. Jones said he was fired after probing company payments to a top pharmacist in Pennsylvania’s government who hid the money.

Jurors in Austin, Texas, began hearing evidence on Jan. 10 about Janssen’s efforts to promote Risperdal, which the Food and Drug Administration approved in 1993 for uses including schizophrenia. The suit was settled Jan. 19.

The Texas case is Texas v. Janssen LP, D-1GV-04-001288, District Court, Travis County, Texas (Austin).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Kelley Shannon in Austin, Texas, at Kelley@kelleyshannon.com.

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


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