• by Thom Forbes  @tforbes, November 5, 2013

In yet another settlement with the federal government over charges of unlawful marketing of prescription drugs, Johnson & Johnson and the Department of Justice announced a $2.2 billion deal yesterday following a longstanding investigation and negotiations about the promotion of Risperdal and Invega, which primarily are used to treat symptoms of schizophrenia, and the heart drug Natrecor. It is the third-largest settlement with a drug maker in U.S. history, the Associated Press reports.

The government said J&J and its affiliates marketed the drugs for uses that were “never approved as safe and effective” and paid kickbacks to physicians and pharmacies for prescribing and promoting them. Under the terms of the settlement, Johnson & Johnson will pay $1.7 billion to settle civil cases with the federal government and 45 states, Ricardo Lopez reports in the Los Angeles Times.

The deal also includes a single guilty plea to a misdemeanor charge of misbranding Risperdal in interstate commerce that will cost J&J about $485 million in fines and forfeitures but “preserves J&J's ability to sell its products to Medicare and other government health programs,” Jonathan D. Rockoff, Devlin Barrett and Joann S. Lublin report in the Wall Street Journal. That deal is subject to the approval of U.S. District Court.

In a statement, J&J said that its Janssen subsidiary accepted “accountability for the actions described in the misdemeanor plea” but stated that “settlement of the civil allegations is not an admission of any liability or wrongdoing, and the company expressly denies the government’s civil allegations.” 

“Prosecutors alleged that J&J's Janssen Pharmaceuticals unit promoted Risperdal to elderly patients suffering from dementia, despite no approval for that use,” Rockoff, Barrett and Lublin write. “Prosecutors also alleged that J&J's ‘ElderCare’ sales force pushed Risperdal for use in these elderly patients, and sales representatives' bonus awards failed to distinguish prescriptions for schizophrenia or the unapproved dementia use.”

“Much of the conduct highlighted in the case, which for Risperdal extends from 1999 through 2005, occurred while Alex Gorsky was vice president for sales and marketing and later president of the company’s pharmaceutical unit, Janssen,” Katie Thomas points out in the New York Times. “Mr. Gorsky became chief executive of Johnson & Johnson last year.”

Patrick Burns, co-director of advocacy group Taxpayers Against Fraud, charges that “stockholders and patients will pay the price for the fraud,” Thomas reports, while Gorsky “gets to keep his job.” A J&J spokesman responded that no individuals are charged with wrongdoing and that “Mr. Gorsky has been an outstanding Johnson & Johnson leader for more than 20 years.”

The deal includes a $167.7 million award that will be divided among an unspecified number of whistleblowers in three states, CNNMoney’s Gregory Wallace reports. “The sum includes $112 million for whistleblowers in Pennsylvania, nearly $28 million in Massachusetts, and $28 million in California, the Justice Department said.” 

Wallace writes about Joe Strom, a former employee of J&J  subsidiary Scios, who is getting the entire amount awarded in California. The Buffalo News’ Phil Fairbanks profiles another whistleblower, former J&J sales rep Judith Doetterl. And the Chicago Sun-Times’ Monifa Thomas reports that Bernard Lisitza, a former Omnicare pharmacist in Chicago, will also share in the settlement — “the fifth time that Lisitza has helped bring to light alleged misconduct at three other companies that he allegedly observed while at Omnicare.” He reportedly has donated most of the $25 million in previous proceeds to his synagogue.

“Put simply, this alleged conduct is shameful and it is unacceptable,” attorney general Eric Holder charged at a press conference in Washington, D.C., yesterday that laid out the details of the settlement. “It displayed a reckless indifference to the safety of the American people. And it constituted a clear abuse of the public trust, showing a blatant disregard for systems and laws designed to protect public health.

The company “has been allocating funds to pay for a settlement,” writes FoxBusiness’ Matthew Rocco. “The [Wall Street] Journal had reported a deal was delayed amid disagreements between prosecutors in Washington, D.C., and Philadelphia” over the size of the penalties. “Meanwhile, J&J was hoping to avoid wording that would open up the possibility of personal-injury lawsuits.”

J&J also signed a five-year Corporate Integrity Agreement with the Department of Health and Human Services that requires it “to change its executive compensation program so it can recoup money from employees who engage in misconduct,” Brady Dennis and Sari Horwitz report in the Washington Post. “The agreement requires the company to submit detailed reports to federal officials about its business operations and any payments to physicians.”

Associate attorney general Tony West said the government wants “to change corporate behavior” through “deterrents.”

“This resolution allows us to move forward,” J&J said in its statement. 

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