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Johnson & Johnson Fined $2.2 Billion for Reckless Drug Distribution

Defective Drugs

One has to wonder how this will play with stockholders. Johnson & Johnson, the healthcare giant, has agreed to pay more than $2.2 billion to settle criminal charges over the marketing of its antipsychotic drug, Risperdal. The company’s Janssen Pharmaceuticals division is accused of marketing the drug to treat elderly patients with dementia, children and the disabled.


This case, brought by the Department of Justice, is a big win for American patients.

Risperdal was approved 20 years ago by the U.S. Food and Drug Administration (FDA) for managing psychotic disorders, not to keep the elderly subdued or children quiet.

In announcing the settlement this week, U.S. Attorney General Eric Holder called it among the largest healthcare fraud settlements in U.S. history.

J&J marketed Risperdal for unapproved uses from 1999 through 2005. And it had help. Omnicare, which dispenses drugs to nursing homes, billed the government for the unapproved drugs, and received kickbacks from Risperdal sales reps to prescribe the drug as well as another antipsychotic, Invega (for the treatment of schizophrenia) and Natrecor, a heart drug, according to a report in Bloomberg.

In announcing the plea and fine, Holder said Johnson & Johnson “recklessly put at risk” the elderly and children. The sales force was offered additional incentives to sell the drug for unapproved uses. Bonuses were based on overall sales, not just the sale of an FDA-approved drug, according to the DOJ.

The government does not like to overpay hundreds of millions of dollars for drugs used in a way not approved by the FDA and at the heart of the conviction is not just the danger presented to the most vulnerable members of society, but in having U.S. taxpayers pick up the tab for the elderly, through Medicare, or the disabled, through Medicaid.

The civil complaint was filed in federal court for the Eastern District of Pennsylvania. J&J says the settlement is not an admission of fault, even though the settlement was filed along with a corporate guilty plea. Specifically, Janssen pled guilty to introducing Risperdal into interstate commerce, a violation of the Food Drug and Cosmetic Act. Besides the fine, the punishment includes pleading guilty to a single misdemeanor for the illegal promotion of Risperdal.

In this case, the civil settlement involved 45 states along with the Department of Justice. Other states, including South Carolina and Louisiana, will file actions separately with fines expected to total into the billions of dollars.

Janssen also agreed to a five-year Corporate Integrity Agreement with the Inspector General of Health and Human Services (HHS), according to the plea.

You have to love corporate integrity. Despite record fines, drug companies do not seem to learn from their mistakes.

Other large settlements include one paid by Pfizer Inc. in 2010 which amounted to $2.3 billion for the improper marketing of 13 drugs. GlaxoSmithKline Plc paid $3 billion amid criminal charges it targeted the depression drug Paxil to children, antidepressant Wellbutrin for unapproved uses and failed to provide a warning of the Avandia diabetes drug.

At the end of the day, even after paying a hefty fine, the balance sheet still generally tilts in the favor of the drug manufacturer, so these examples could be called the cost of doing business, very big business.

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Posted By: Michael Geoffroy