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Johnson & Johnson Reserves $600M To Settle Risperdal, Invega, Natrecor Civil Cases

NEW BRUNSWICK, N.J. - (Mealey's) Johnson & Johnson (J&J) expects to incur a special charge against earnings of about $600 million in the second quarter for the potential settlement of civil litigation related to Risperdal, Invega, Natrecor and Omnicare Inc., according to a Form 8-K report filed June 8 with the U.S. Securities and Exchange Commission (SEC).

(Form 8-K report available.  Document #28-120621-006X.)

The company said the charge will "increase its accrual" for the potential settlement.  The company did not indicate what civil investigations or lawsuits the charge will be used to settle.  It did not return a request for clarification.

Risperdal brand risperidone is an atypical antipsychotic.  According to the company's May 7 Form 10-Q quarterly report filed with the SEC, the company faces 425 Risperdal injury lawsuits as of April 1.

Individual plaintiffs allege that J&J failed to warn them and their doctors that Risperdal can cause severe weight gain, hyperglycemia and diabetes.

Risperdal Probes, FCA Lawsuits

In addition, J&J said it faces several civil and criminal investigations by several federal agencies, False Claims Act lawsuits and lawsuits by at least 10 state attorneys general, and possibly 40 more attorneys general, involving the marketing of Risperdal.

In 2004, the company said, its Janssen Pharmaceuticals Inc. subsidiary received a subpoena from the Office of Inspector General for the U.S. Office of Personnel Management seeking documents concerning the sales and marketing of Risperdal and "all payments to physicians in connection with sales and marketing of, and clinical trials for, Risperdal from 1997 to 2002."  It said the U.S. Justice Department has asked for documents subsequent to 2002.

The company said that in 2005, the U.S. attorney for the Eastern District of Pennsylvania served a subpoena for information about the marketing of and adverse reactions to Risperdal.  J&J said it received numerous subpoenas for grand jury testimony.

In 2010, J&J said the federal government filed a civil investigative demand for additional information about the sales and marketing of Risperdal for off-label uses.  It said the federal government notified the company about a pending qui tam lawsuit alleging off-label promotion of the drug and said the government intends to intervene in the actions through a superseding complaint.

Settlement Discussions Ongoing 

The company said in its May 7 report that it is in discussions with the state and federal governments to resolve civil claims relating to the marketing of Risperdal, including the whistle-blower lawsuits, but said it "remains unclear" whether a settlement can be reached.

Attorneys general from 10 states have sued Janssen, seeking reimbursement for public funds used to pay for off-label uses of Risperdal, for compensation for state-paid treatment of adverse reactions to the drug, for civil fines or penalties, for overpayments, for violations of state consumer fraud laws punitive damages and for unfair business practices, the company said. 

In January, Janssen settled similar allegations by the Texas attorney general for $158 million (See 2/2/12, Page 6).  In April, an Arkansas jury found Janssen and J&J violated state law and a judge imposed $1.2 billion in penalties (See 4/18/12, Page 4).

Attorneys general for about 40 other states have "indicated a potential interest" in suing Janssen and have obtained tolling agreements for the statutes of limitations, J&J said.  It said that in 2011 it established an accrual for state claims.

Invega, Natrecor Probes

Invega brand paliperidone is approved to treat schizophrenia and bipolar mania.  J&J said that the 2010 civil investigative demands included information about the off-label marketing of Invega.

Settlement of civil claims involving Invega are part of the Risperdal negotiations, J&J said. 

Natrecor brand nesiritide is approved to treat congestive heart failure.  J&J said a subpoena relating to the sales and marketing of the drug was received in 2005 and the investigation is now being handled by the U.S. Attorney for the Northern District of California.

False Claims Suits

In 2009, the company said two False Claims Act complaints were unsealed in the U.S. District Court for the Northern District of California alleging the improper promotion of Natrecor.  It said the government intervened in one of the qui tam lawsuits and sought relief under the False Claims Act and for unjust enrichment.

J&J said discovery in the civil case is proceeding.

In October, Johnson & Johnson subsidiary Scios Inc. pleaded guilty to a misdemeanor charge for off-label marketing of Natrecor, paid an $85 million penalty and was placed on three years' probation (See 10/9/11, Page 11).

Omnicare Kickback Allegations

Omnicare is an institutional pharmacy, providing prescription drugs to long-term care facilities.  J&J said that in 2005, the U.S. Attorney for the District of Massachusetts subpoenaed documents relating to the sales and marketing of eight J&J drugs to Omnicare.

J&J said it and subsidiaries Janssen Pharmaceuticals Inc. and Johnson & Johnson Health Care Systems Inc. are defendants in a qui tam lawsuit filed by the federal government and four state governments alleging violation of federal and state false claims laws and the payment of alleged kickbacks.

In 2009, Omnicare paid $98 million to settle federal allegations that it took kickbacks from J&J to provide Risperdal to customers (See 11/19/09, Page 14).

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