J&J Legal Strategy Questioned After $1 Billion Debacle

J&J Legal Strategy Questioned After $1 Billion Debacle

April 12th, 2012 // 1:49 pm @

An Arkansas judge’s $1.1 billion verdict against a Johnson & Johnson subsidiary on Wednesday for defrauding the state’s Medicaid program had consumer advocates and lawyers wondering: Why didn’t the New Brunswick-based pharmaceutical giant simply settle the case before it reached a jury?

It marked the third jury trial Janssen Pharmaceuticals Inc. has lost over its Risperdal antipsychotic drug. And the penalties are getting more expensive.

“Johnson & Johnson needs to wake up and realize they are playing a losing game,” said Patrick Burns, spokesman for Taxpayers Against Fraud, a Washington consumer group. “This is a company that has failed to see the light. It has felt a lot of heat. And it’s going to feel a lot more.”

Janssen, based in Hopewell Township, has been fighting several government lawsuits over the marketing tactics it used for Risperdal, which was approved by the Food and Drug Administration to treat schizophrenia and bipolar disorder.

The drug was one of a new generation of antipsychotics, and it was a blockbuster, generating upward of $25 billion for J&J before its patent expired in 2007, court records showed. But a dozen states have said the company illegally marketed the drug, in part by telling doctors that Risperdal was more effective than its competitors.

Doctors who prescribed Risperdal cost taxpayers millions, states have said, because the drug often was paid for by Medicare and Medicaid.
Mixed results

Janssen’s legal strategy to take the case to trial has been more aggressive — and some experts said riskier — than its competitors facing similar lawsuits.

Eli Lilly and Co. in 2009 agreed to pay $1.4 billion to federal and state governments to settle claims that it illegally marketed Zyprexa. And AstraZeneca in 2010 agreed to pay $520 million to the federal and state governments to resolve claims that it illegally marketed Seroquel.

“The theory is, if they try some of these cases and happen to be successful, it will somehow mitigate or reduce future settlements,” said Michael Fitzgerald, a Brielle attorney who specializes in health care fraud. Of course, the flip side is true, too: “You roll the dice,” he said.

Janssen’s results have been mixed. It was successful in Pennsylvania and West Virginia. But its losses — $327 million in South Carolina, $258 million in Louisiana and now $1.1 billion in Arkansas — will add up if they withstand appeal. Still pending: J&J has said it is negotiating a settlement with the U.S. Justice Department to end a federal lawsuit.

On Wednesday, Arkansas Circuit Judge Tim Fox found nearly 240,000 violations under Arkansas’ Medicaid fraud law over Risperdal. Each violation came with a $5,000 fine. He issued an additional $11 million fine for more than 4,500 violations under the state’s deceptive practices act.

Johnson & Johnson’s stock price slipped immediately after the verdict and closed at $64.13, down 7 cents, or 0.1 percent. The Dow Jones industrial average by comparison rose 0.7 percent.

A Janssen spokeswoman said the company was disappointed by the judge’s decision and will appeal if its motion for a new trial is denied. The company denied that Arkansas physicians were misled.

“During the nearly three-week trial, Janssen presented abundant evidence showing the company acted responsibly and fully complied with all laws and regulations regarding its antipsychotic prescription medication Risperdal,” spokeswoman Teresa Mueller said in a statement.

Christopher Placitella, a Red Bank attorney who represents plaintiffs in health care lawsuits, noted that Arkansas addresses not only consumer fraud but also specifically targets Medicaid fraud, making its law one of the nation’s strongest.

“The judge did the math,” he said.

It left some of J&J’s adversaries questioning the company’s decision to take the case to a jury.

“They’ve gotten hit in Louisiana, South Carolina and Arkansas, and it’s not going to stop,” said Stephen Sheller, a Philadelphia attorney who represents several Risperdal patients. “To me, they should have done what their competitors did and resolved these things before it got out of hand.”

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