Settlement Over Risperdal Marketing Would Include $400 Million Criminal Fine
Johnson & Johnson JNJ +0.61% and federal prosecutors have reached a deal that would settle investigations into the company’s marketing practices for as much as $2.2 billion, including a roughly $400 million criminal fine for the illegal promotion of the antipsychotic Risperdal, according to people familiar with the matter.
The deal would preserve the health-care giant’s ability to sell its products to government health programs like Medicare and resolve other lingering investigations in addition to the Risperdal probe, while prosecutors could trumpet securing one of the biggest drug-marketing settlements.
The final sum will depend on which states suing J&J sign on to the agreement, according to the people familiar with the matter. J&J is expected to disclose the general outlines in a few weeks, perhaps when the company files its quarterly financial results with federal securities regulators early next month, one person familiar with the matter said.
To cover potential legal settlements, the New Brunswick, N.J., company took a $611 million after-tax charge in the second quarter, on top of a $1.1 billion charge taken in last year’s fourth quarter.
J&J and the Justice Department declined to comment.
Under federal law, drug makers can market medicines only for uses approved by the U.S. Food and Drug Administration, though doctors can prescribe drugs for unapproved, or off-label, uses. Companies settle investigations into illegal marketing to avoid losing the ability to sell drugs to government health programs like Medicare if found guilty.
Many of the cases are triggered by the complaints of whistleblowers, company insiders who can receive a share if the government recovers money.
GlaxoSmithKline GSK.LN +0.14% PLC had reached the largest illegal drug marketing settlement to date, agreeing this month to pay $3 billion and plead guilty to criminal charges involving the antidepressants Paxil and Wellbutrin and the diabetes drug Avandia. In 2009, Pfizer Inc. PFE +0.78% agreed to pay $2.3 billion to resolve an investigation into the promotion of now-withdrawn painkiller Bextra and other drugs. Also in 2009, Eli Lilly LLY -1.03% & Co. agreed to pay $1.4 billion to settle similar charges involving its antipsychotic medicine Zyprexa.
Risperdal had been J&J’s top-selling drug with $2.2 billion in sales in 2007, the year before it lost U.S. patent protection. The medicine treats the symptoms of mental illnesses such as schizophrenia, bipolar mania and irritability in autistic patients. Last year, J&J had $65 billion in world-wide sales.
The settlement would also resolve investigations into the promotion of Invega, another schizophrenia agent, and the heart-failure drug Natrecor, as well as a probe into whether the company paid tens of millions of dollars in kickbacks to nursing-home pharmacy operator Omnicare Inc. OCR -0.15% to boost sales of certain J&J medicines to nursing home patients, say some of the people familiar with the matter.
The medicines included Risperdal, which prosecutors alleged was prescribed to control anxiety among patients with dementia and Alzheimer’s disease, both unapproved uses.
Omnicare agreed to pay $98 million in 2009 to settle charges that it engaged in kickback schemes. The settlement didn’t contain any admission of wrongdoing.
The other investigations were wrapped into the deal after prosecutors in Washington, D.C., rejected as too low a tentative settlement of the Risperdal case for about $1 billion, The Wall Street Journal has reported. By resolving the other investigations, the Justice Department could trumpet obtaining a higher settlement sum and J&J could move past the legal issues.
A version of this article appeared July 20, 2012, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: J&J Penalty May Total $2.2 Billion.