J&J to Pay $2.2 Billion To End Long-Standing Investigations By Feds

Charges of off-label marketing and kickback payments to physicians and long-term care pharmacy provider Omnicare are behind a $2.2 billion settlement agreement between Johnson & Johnson (“J&J”) and the U.S. Department of Justice (DOJ), in which the global health care giant finally resolves criminal and civil liability involving Risperdal and two other prescription drugs.  The eye-popping figure makes this the third largest health care fraud settlement in U.S. history.

The Settlement

The global resolution of various qui tam cases under provisions of the False Claims Act (“FCA”) includes criminal fines and forfeitures totaling $485 million and civil settlements with the Federal Government and States totaling $1.72 billion.  For the relators and their lawyers, the settlement will mean a big pay day:  according to the DOJ press release, the whistleblowers are from Pennsylvania, Massachusetts, and California will receive $112 million, $27.7 million, and $28 million respectively . . . not too shabby.  Although J&J didn’t admit to liability as part of the settlement, two of its subsidiaries — Janssen Pharmaceuticals, Inc. (“Janssen”) and Scios, Inc. –  did admit to off-label marketing.  Moreover, according to the Government, J&J agreed to a five year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (“OIG”), in order to increase accountability and prevent future fraud.

The Charges

*   Risperdal

Janssen entered into a misdemeanor criminal plea agreement, resolving charges that it promoted Risperdal, an anti-psychotic drug that was restricted by the FDA for the treatment of  schizophrenia in March, 2002, for psychotic symptoms and associated disturbances exhibited by elderly, non-schizophrenic patients.  As recounted in the Government’s Plea and Sentencing Memorandum, Janssen’s off-label marketing occurred between March 3, 2002 and Dec. 31, 2003.  In a related civil complaint, the Government further charged that Janssen marketed Risperdal to control the behaviors and conduct of elderly nursing home residents, as well as children and individuals with mental disabilities, such as autism.  Specifically, the Government charged that:

  • J&J and Janssen caused false claims to be submitted to federal health care programs by promoting Risperdal for off-label uses that federal health care programs did not cover, made false and misleading statements about the safety and efficacy of Risperdal, and paid kickbacks to physicians to prescribe Risperdal; and
  • J&J and Janssen were aware that Risperdal posed serious health risks for the elderly, including increased risks for stroke and developing diabetes, but that the companies downplayed these risks.

*   Invega

The settlement further resolves allegations relating to Invega, another antipsychotic drug sold by Janssen.  According to the Government, although Invega had only been approved for the treatment of schizophrenia and “schizoaffective” disorder, from 1999 to 2005 J&J and Janssen marketed the drug for other psychotic indications and made false and misleading statements about its safety and efficacy.

*   Natrecor

The settlement also resolves allegations that J&J and Scios violated the FCA through the off-label promotion of heart failure drug Natrecor.  According to the Government, the FDA approved Natrecor in August 2001 to treat patients with advanced congestive heart failure who experienced shortness of breath with minimal or no activity.  However, despite the narrowly defined patient population, Scios allegedly launched an aggressive campaign to market the drug for serial outpatient infusions for patients with less severe heart failure – a use that was not included in the FDA-approved label and that was not covered by federal health care programs.  These infusions generally involved visits to an outpatient clinic or doctor’s office for four- to six-hour infusions one or two times per week for several weeks or months, whereas the recommended treatment for healthier patients involved only weekly visits to doctors or clinics over a course of four to six months.  The Government charged that, although there was no sound scientific basis for the aggressive in-depth treatment, Scios nonetheless used a small pilot study to encourage the serial outpatient use of the drug.   Among other things, Scios supposedly sponsored an extensive speaker program through which it paid doctors to promote the serial outpatient use of Natrecor for the off-label population and further urged doctors and hospitals to set up outpatient clinics to administer the serial outpatient infusions, in some cases providing funds to defray the costs of setting up the clinics and supplying providers with extensive resources and support for billing Medicare for the outpatient infusions.

As part of the settlement, J&J and Scios agreed to pay the federal government $184 million in civil penalties related to the off-label promotion of Natrecor, which follows an October 2011, misdemeanor plea by Scios that resulted in a $85 million fine related to off-label marketing of Natrecor.  Despite the charges against Scios, the bulk of the settlement fines — $1.39 billion — related to off-label promotions and kickbacks involving Risperdal and Invega by Janssen and J&J.

“Kickbacks” to Omnicare

A long-standing investigation into allegations that J&J and Janssen paid kickbacks to Omnicare Inc., the nation’s largest long-term care pharmacy, was also resolved as part of the settlement.  Specifically, the Government charged that J&J paid millions of dollars in kickbacks to Omnicare in the form of rebates, data-purchase agreements, “grants” and “educational funding.”  The Government further charged that these purported kickbacks encouraged Omnicare and its network of consultant pharmacists to engage in “active intervention programs” to expand the use of Risperdal and other J&J drugs in nursing homes.  Rather than treating Omnicare pharmacists independently, J&J reportedly viewed them as a part of its sales force.


The J&J settlement is noteworthy in several respects.  First and foremost, there’s the sheer size of the settlement.  Only two other pharmaceutical companies have agreed to pay the Government larger settlements — GlaxoSmithKline, which paid $3 billion in 2012, and Pfizer, which paid $2.3 billion in 2009.  Second, although many within and outside of Government have been hinting for sometime that big pharmaceutical FCA settlements are or shortly will be a thing of the past, the J&J settlement shows that the Government isn’t quite done yet and will press for big settlements, even if it means addressing conduct going back as far as the late 90′s, as was the case here.  Third, as I have noted in previous posts, the Government cares little if the off-label promotion it says was illegal, later becomes legal through an expanded drug label with additional indications (think Allergan and Botox), or as in this case, if promotion that was on-label and legal is made illegal through a labeling restriction.  As the Government noted in its own Plea and Sentencing Memorandum, when Risperdal was approved in late 1993, the FDA’s approved indication was for “the management of the manifestations of psychotic disorders.”  A pretty broad label that gave J&J and Janssen a lot of leeway in their promotional activities.  It wasn’t until March, 2002, when the FDA restricted Rispedal’s use to the treatment of schizophrenia because it “more accurately reflected the patient population which was the subject of Riperdal’s clinical trials upon which the FDA originally approved Risperdal in 1993,” that Janssen’s previously permissible promotional activities became illegal.  In effect, the Government has always taken (and always will take) the strict liability approach to off-label promotion that the former U.S. Attorney for Massachusetts so eloquently described: “if it’s not on the label, it’s off-label.”

One nugget of information in the Government’s Memorandum that I found particularly interesting was the apparent need by the Feds to tell the Court that off-label promotion “can be — and here is — evidence of an unapproved intended use,” citing Wisconsin v. Mitchell, 508 U.S. 476, 489 (1993) and Whitaker v. Thompson, 353 F.3d 947, 953 (D.C. Cir. 2004).  Pharmarisc readers know well that these are the same cases the Government always cites in defending against charges that its prosecution of off-label promotion violates the First Amendment.  Indeed, it was these very cases that the Government repeatedly referenced in its effort to convince the Second Circuit to affirm Alfred Caronia’s off-label misbranding conviction:  an effort which a majority of the panel rejected in vacating the conviction and finding that truthful, accurate and non-misleading promotional activities — whether on or off-label — are constitutionally protected speech.  Given that the Supreme Court is considering taking up an appeal that could open up a can of worms for the Government in this regard — more on this possibility in a future post — one can understand the Government’s desire to address the First Amendment question and to wrap things up in this and other cases (there have to be some others out there) as quickly as possible.




About José P Sierra

José Sierra is a partner at Laredo & Smith, LLP, in Boston, which provides respected advice and creative representation in business litigation, white collar criminal defense, government investigations, corporate compliance, and business and employment law. Prior to joining the Firm, Mr. Sierra was a principal at Fish & Richardson. Previously, Mr. Sierra was senior vice president, chief compliance and ethics officer for Sepracor Inc., and Kos Pharmaceuticals, and was legal director at Schering-Plough Corporation, and an assistant U.S. attorney in the Newark, NJ U.S. Attorney's Office.

Mr. Sierra's practice focuses on white collar criminal defense, government investigations and corporate compliance. Contact him at 617-443-1100 or via .

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