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J&J Will Pay $2.2 Billion and Enter 5-Year CIA to Settle Off-Label and Kickback Charges

Written by: Rachel M. Irving

This week, the DOJ announced that J&J has agreed to pay over $2.2 billion in civil and criminal fines in one of the nation’s largest ever health care fraud settlements. As part of the resolution, J&J subsidiary Jannsen will plead guilty to criminal misbranding charges relating to the off-label promotion of its drug Risperdal. This settlement closes the last of the DOJ's cases investigating off-label promotion of antipsychotic drugs by major pharmaceutical companies -- investigations that resulted in settlements over Astrazeneca’s Seroquel, Bristol Myers Squibb’s Abilify, Eli Lilly’s Zyprexa, and Pfizer’s Geodon, as well as a settlement with long-term care pharmacy Omnicare.

Off-Label Promotion and Kickback Allegations

J&J’s settlements resolve allegations in two separate false claims act cases alleging that J&J and Jannsen promoted the antipsychotics Risperdal and Invega for off-label uses, and another false claims act case alleging that J&J and its subsidiary Scios promoted the heart failure drug Natrecor for off-label use. The settlements also address allegations that J&J paid physicians and nursing home pharmacies kickbacks to prescribe and supply these drugs to patients. In its Civil Settlement Agreement, J&J denies the government’s allegations and does not admit any wrongdoing, except for the limited admissions made in the plea agreement for the Pennsylvania criminal charges. To settle those charges, Jannsen admitted that it promoted Risperdal to providers for use in elderly, non-schizophrenic dementia patients to treat certain psychotic symptoms and related behavioral disturbances, even though Risperdal was approved only to treat schizophrenia at the time.

The government alleged that J&J and its subsidiaries conducted much broader off-label promotion for the drugs by minimizing drug risks and side-effects, targeting children, and using an "ElderCare sales force" to target nursing homes and physicians treating elderly patients. The government alleged in one complaint, that Jannsen sales reps conditioned paid speaking engagements on a physician’s increase in Risperdal prescriptions, and paid stipends to physician attendees based on their ability to prescribe Risperdal. In the Massachusetts settlement, the government alleged that Jannsen paid tens of millions of dollars in kickbacks to the nation’s largest long-term care pharmacy, Omnicare, to increase the use of these drugs in nursing home patients. These alleged kickbacks included market share rebate payments conditioned on Omnicare’s participation in "active intervention programs" to increase the use of J&J drugs, and other "grants" and payments which J&J allegedly made to induce Omnicare to purchase and recommend J&J drugs. Omnicare separately paid $98 million in 2009 to resolve its civil liability relating to this and other alleged conduct.

Steep Financial Penalties

The settlement amount includes $485 million in criminal fines and forfeitures, and $1.72 billion in civil settlements to the states and federal government in what is characterized as a "global resolution."  These civil settlement amounts relate only to Medicaid damages and do not include consumer damages, damages experienced by private plans, or any consequential damages that may be found separately.  There are also other judgments against J&J not included in this "global resolution" announcement.  For example, in Arkansas a jury levied a $1.2 billion fine, finding that J&J and Jannsen engaged in "false or deceptive acts" while marketing Risperdal in that state.  J&J has appealed the amount of that fine.

Ongoing Oversight and Potential for Future Liability

J&J and its subsidiaries are now subject to a 5-year Corporate Integrity Agreement with the OIG which will require significant changes to its pharmaceutical business, including changes to compensation structures, additional compliance reporting, and specific compliance training requirements. Although no individual liability or criminal responsibility was found in the settlements announced yesterday, the CIA includes management accountability requirements. Certain covered employees must annually certify that the applicable business unit is compliant with Federal health care program and FDA requirements and with the obligations of the CIA. If the employee cannot provide the required certification, he or she must explain why, and outline the steps being taken to address the issues.

Continued Fraud Enforcement

Attorney General Eric Holder used the settlement as an opportunity to promote the effectiveness of the HEAT program, which was launched in 2009. This $2.2 billion settlement required multi-jurisdictional cooperation between federal and state governments, and involved multiple qui tam lawsuits filed under the FCA. Even though these cases pre-date the creation of HEAT, the AG’s remarks indicate that the government will continue to pursue nation-wide allegations of fraud or wrongdoing. And there is plenty of incentive for whistleblowers to continue bringing qui tam lawsuits – from the federal government’s share of this settlement, the whistleblowers will receive $167.7 million.

Related documents can be found online here.

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Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.