Arkansas High Court Reverses $1.2B Risperdal Verdict For State Law Violations

Arkansas High Court Reverses $1.2B Risperdal Verdict For State Law Violations

LITTLE ROCK, Ark. — (Mealey’s) In a 4-3 decision, the Arkansas Supreme Court on March 20 reversed a $1.2 billion verdict against Janssen Pharmaceuticals for violating state law in its marketing of the antipsychotic drug Risperdal (Ortho-McNeil-Janssen Pharmaceuticals, Inc., et al. v. State of Arkansas, No. CV-12-1058, Ark. Sup.; 2014 U.S. Dist. LEXIS 35382). 

(Opinion available.  Document #28-140403-001Z.

The majority held that the Arkansas Medicaid Fraud False Claims Act (MFFCA) does not apply to the drug company and that a Food and Drug Administration warning letter to Janssen was inadmissible hearsay to support a claim of violations of the Arkansas Deceptive Trade Practices Act (DTPA).  The MFFCA verdict was reversed and dismissed, and the DTPA verdict was reversed and remanded. 

The court also vacated a $181.1 million award of attorney fees and costs against Janssen. 

In 2007, Arkansas sued Johnson & Johnson subsidiary Ortho-McNeil-Janssen Pharmaceuticals Inc. (now Janssen Pharmaceuticals) in the Pulaski County Circuit Court.  The state alleged that the defendant violated the MFFCA and the DTPA by misrepresenting the safety of Risperdal and causing the state Medicaid program to pay for Risperdal prescriptions based on misrepresentations. 

‘Largest Arkansas Verdict’ 

A jury found that Janssen violated the state laws, and Judge Timothy Davis Fox imposed a fine of $1.2 billion based on the statutory fine per violation over more than three years.  The judge called it “the largest verdict in the history of the State of Arkansas.” 

Later, Judge Fox ordered Janssen to pay $181.1 million to the state for attorney fees and costs. 

Janssen appealed.  It first argued that the trial court misinterpreted the MFFCA, that the federal Food, Drug and Cosmetic Act preempts the MFFCA claims, that Arkansas failed to prove the core elements of MFFCA liability and that the MFFCA and the special verdict forms do not support liability claims. 

Law Applies To Facilities

 The majority noted that the Arkansas Code Revision Commission erred when it codified the language of the legislation as enacted by the Arkansas Legislature.  Disregarding the codified law, the majority held that the MFFCA applies to health care facilities and facilities applying for certification or recertification as such a facility. 

The majority reversed the trial court’s denial of Janssen’s motion for a directed verdict on the MFFCA claim and dismissed the state’s claims.  

Janssen also argued that that as to the DTPA claim, the trial court erred in admitting into evidence a 2004 warning letter to Janssen by the FDA’s Division of Drug Marketing, Advertising and Communications (DDMAC).  The letter told Janssen that a 2003 letter that was supposed to tell doctors about new diabetes warnings on Risperdal’s label failed to disclose the added warning and minimized the drug’s risk of hyperglycemia. 

DDMAC also said Janssen’s letter failed to recommend regular blood glucose monitoring and misleadingly claimed that Risperdal was safer than other atypical antipsychotics. 

Investigation Exception 

Janssen argued that the DDMAC letter is inadmissible hearsay under Arkansas Rule of Evidence 801 and falls within the exception for something that resulted from a special investigation of a particular complaint, as opposed to a routine record. 

The majority found that the DDMAC letter stemmed from an investigation into the 2003 Janssen letter and, thus, was not part of routine record-keeping that is admissible under Arkansas law. 

In addition, the majority found that the DDMAC letter was highly prejudicial and not probative.  The majority interpreted Rule 803(8)(iv) to exclude the warning letter as inadmissible and prejudicial. 

The majority reversed and remanded the DTPA claim. 

Fine, Constitutionality Undecided 

The majority said that because its rulings on the two issues were dispositive, it did not have to consider Janssen’s arguments that the fines were excessive and violated the due process clauses of the Arkansas and U.S. constitutions and that the judgment violated the company’s free speech rights under the two constitutions.

 The majority opinion was written by Justice Karen R. Baker.  The other majority members were Justices Courtney Hudson Goodson, Josephine L. Hart and Cliff Hoofman. 

Justice Paul E. Danielson concurred in part and dissented in part.  He was joined by Chief Justice Jim Hannah and Justice Donald L. Corbin.

 Dissent:  Public Records Exemption

 Justice Danielson said he concurred with the majority about the MFFCA claim but disagreed with it decision on the DTPA claim.  He said the DDMAC letter clearly falls within the public records exemption in Rule 803(8). 

“Nothing at all in the record before us evidences that the letter resulted from any special investigation of a ‘particular complaint, case or incident,’” he wrote.  “To the contrary, it appears that the warning letter was merely the result of the agency’s routine duties of reviewing and regulating the information on, and advertising of, drugs such as Risperdal.” 

“If it is the DDMAC’s responsibility to monitor or surveil prescription-drug advertising or information, then I think it can hardly be said to conduct a ‘special investigation’ each time it fulfills its routine duty,” Justice Danielson said. 

Fees, Costs Reversed, Remanded 

In a separate opinion, the court reversed and remanded the attorney fees and costs awarded to the state.  “Since the judgment in favor of the State is reversed and dismissed in part on the MFFCA claim and reversed and remanded on the ADTPA claim, the award of attorney’s fee is reversed and remanded,” Justice Goodson wrote. 

(Fee order available.  Document #28-140403-002Z.

Janssen is represented by Charles C. Lifland of O’Melveny & Myers in Los Angeles, Stephen D. Brody and

Walter Dellinger of O’Melveny & Myers in Washington, D.C.; Thomas F. Campion of Drinker, Biddle & Reath in Florham Park, N.J.; Edward M. Posner and Gregg W. Makuse of Drinker Biddle in Philadelphia; and James M. Simpson, Laura H. Smith, Robert S. Shafer and Martin A. Kasten of Friday, Eldredge & Clark in Little Rock. 

Arkansas is represented by Attorney General Dustin McDaniel and Bradford J. Phelps of the Attorney General’s Office in Little Rock, David C. Frederick, Derek T. Ho and Caitlin S. Hall of Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington, D.C., and Fletcher V. Trammell, Robert W. Cowan, Justin C. Jenson and Elizabeth W. Dwyer of Bailey Perrin Bailey in Houston. 

Amicus Counsel 

Amicus curiae Arkansas State Chamber of Commerce is represented by Sherry P. Bartley and Brian A. Pipkin of Mitchell, Williams, Selig, Gates & Woodyard in Little Rock.  Amicus Washington Legal Foundation is represented by Richard A. Samp and Brett D. Watson of the Foundation in Washington. 

Sixty-five Arkansas legislators acting as amici are represented by Robert F. Thomson and Michael Gottlieb of Branch, Thompson, Warmath & Dale in Paragould, Ark.  Amicus Pharmaceutical Research and Manufacturers of America is represented by Robert N. Weiner, Jeffrey L. Handwerker and Sarah M. Harris of Arnold & Porter in Washington. 

Amici South Carolina, Alaska, Arizona, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont and Washington are represented by South Carolina Attorney General Alan Wilson and Solicitor General Robert Cook of the Attorney General’s Office in Columbia, S.C., and Edward A. Gordon of Gordon, Caruth & Virden in Morrilton, Ariz. 

Amicus former FDA Commissioner Dr. Donald Kennedy is represented by Jonathan S. Massey of Massey & Gail in Washington and Charles R. Hicks of Health Law Associates in Little Rock.  Amicus Public Citizen Litigation Group is represented by Scott L. Nelson and Allison M. Zieve of the Public Citizen Litigation Group in Washington and John L. Burnett and Annabelle Imber Tuck of Lavey & Burnett in Little Rock.

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