U.S. Government Receives Historic Settlement From Johnson & Johnson

In November 2013, medical supply giant Johnson & Johnson paid a $2.2 billion settlement over claims of off-label marketing and unlawful kickbacks. Additionally, the settlement results in the largest whistleblower payout ever: $167 million. Johnson & Johnson entered into the agreement after widespread allegations it marketed its mental health drugs for uses other than those approved by the FDA, as well as engaged pharmacists as part of its “widespread sales network.” Of course, kickbacks to medical professionals like doctors and pharmacists are prohibited under federal and most state laws.

With regard to off-label marketing, drugs are only to be sold to consumers for their intended use, which is outlined by the FDA following stringent clinical trials. It is considered a violation of the FCA for a company to collect income from government healthcare entities as reimbursement for drugs offered to patients to treat conditions not approved by the FDA. This is known as “off-label marketing” and serves as the basis of the expansive claims against Johnson and Johnson.

Off-Label Marketing Allegation Details

The root of the allegations against Johnson and Johnson stem from the government’s desire to curtail recent trends in over-medicating difficult dementia patients and behaviorally-challenging children. In this case, Johnson and Johnson was caught marketing the drug Risperdal for uses beyond that contemplated by the FDA, which was limited to the treatment of schizophrenia.

More specifically, J&J had implemented a sales force known as ElderCare designed to specifically target long-term care facilities housing those with dementia and Alzheimer’s. Physicians were sold on the drug’s ability to diminish agitation, outbursts, hostility and impulsiveness. At the same time, the company diminished the adverse effects of Risperadal in older patients, namely the increased risk of stroke.

As part of the settlement agreement, Johnson & Johnson agreed to plead guilty to misdemeanor charges of improperly marketing Risperdal to older patients for unapproved uses. It is set to pay criminal fines amounting to $485 million.

Civil Allegations

Along with Johnson & Johnson’s routine off-label marketing of the drug Risperadal, it settled (but did not admit wrongdoing) allegations that the drug was improperly marketed to treat behavioral issues in children and developmentally disabled adults. The FCA claims also included allegations that Johnson & Johnson systematically enticed doctors to write prescriptions for this drug. In total, Johnson & Johnson will remit $1.72 billion in civil penalties.

Concern Over Corporate Leadership

We have reported on proposed changes to the FCA, including those that would allow companies to skirt past whistleblower lawsuits by maintaining compliance mechanisms and self-reporting regulations. This case portrays an interesting dichotomy between the helpfulness of those proposed “solutions” to the FCA and the manner in which many companies will continue to operate regardless of internal controls.

In a statement by whistleblower education group Taxpayers Against Fraud, co-director Patrick Burns remarked “Stockholders and patients will pay the price for the fraud….[CEO] Gorsky, however, gets to keep his job at Johnson & Johnson and all his bonuses.”

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