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In one of the largest health care fraud settlements in U.S. history, the Department of Justice announced last week http://www.justice.gov/opa/pr/2013/November/13-ag-1170.html that global health care giant Johnson and Johnson (“J&J”) and its subsidiaries will pay more than $2.2 billion to resolve criminal and civil liability arising from allegations relating to three of its prescription drugs, including promotion of these drugs for uses not approved as safe and effective by the FDA and payment of kickbacks to doctors and the nation’s largest long-term care pharmacy provider.  The resolution requires Johnson and Johnson to pay $485 million in criminal fines and forfeiture for violations of the law and$1.72 billion in civil settlements based on the False Claims Act and is one of the largest health care fraud settlements in U.S. history.  Additionally, J&J will be subjected to stringent requirements under a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General.  

 

The cases against J&J involved an extensive, coordinated investigation by federal and state law enforcement partners pursuant to the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which fosters government collaborations to fight fraud.  Since January 2009, the Justice Department has recovered a total of more than $16.7 billion through False Claims Act cases, with more than $11.9 billion of that amount recovered in cases involving fraud against federal health care programs.

 

The highlights of J&J’s criminal and civil violations and penalties imposed are set forth below:

  • A J&J subsidiary, Janssen Pharmaceuticals, Inc., pled guilty to misbranding the antipsychotic drug Risperdal.  In a criminal information filed last week in the Eastern District of Pennsylvania, the government charges that a Janssen introduced Risperdal into interstate commerce for an unapproved use from March 3, 2002 through December 31, 2003, rendering the product misbranded.   Although Risperdal was approved only to treat schizophrenia during most of this time period, the information alleges that Janssen’s sales representatives promoted Risperdal to physicians who treated elderly, non-schizophrenic dementia patients by urging prescribers to use Risperdal to treat symptoms such as anxiety, agitation, depression, hostility and confusion.  Janssen admits in a plea agreement that it promoted Risperdal in this manner and under the plea agreement will pay $400 million, including a criminal fine of $334 million and forfeiture of $66 million. 
  • In a related civil complaint filed last week in the Eastern District of Pennsylvania, the government alleges that 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, making false and misleading statements about the safety and efficacy of Risperdal and paying kickbacks to physicians to prescribe Risperdal.  The complaint alleges that Janssen improperly marketed Risperdal to elderly nursing home residents, children and individuals with mental disabilities.  Specifically, the complaint alleges that J&J and Janssen were aware that Risperdal posed serious health risks for the elderly, including an increased risk of strokes and diabetes, but that the companies downplayed these risks.  Additionally, even though Risperdal was not approved for use in children for any purpose and the FDA repeatedly warned the company against promoting it for use in children, Janssen allegedly promoted Risperdal to children, instructing its sales representatives to call on child psychiatrists and mental health facilities that primarily treated children and to market Risperdal as safe and effective for symptoms of various childhood disorders, such as attention deficit hyperactivity disorder, oppositional defiant disorder, obsessive-compulsive disorder and autism. The government’s complaint also contains allegations that Janssen paid speaker fees to doctors to influence them to write prescriptions for Risperdal.  Sales representatives allegedly told these doctors that if they wanted to receive payments for speaking, they needed to increase their Risperdal prescriptions. As part of the global resolution, J&J and Janssen have agreed to pay a total of $1.391 billion to resolve the false claims allegedly resulting from their off-label marketing and kickbacks for Risperdal and another drug, Invega, to the federal government and the state of Texas.  Because Medicaid is a joint federal-state program, J&J’s conduct caused losses to both the federal and state governments.
  • The civil settlement also resolves allegations that J&J and Janssen paid kickbacks to Omnicare Inc., the nation’s largest pharmacy specializing in dispensing drugs to nursing home patients, in furtherance of their efforts to target elderly dementia patients in nursing homes.  In a complaint filed in the District of Massachusetts in January 2010, the United States alleged that J&J paid millions of dollars in kickbacks to Omnicare under the guise of market share rebate payments, data-purchase agreements, “grants” and “educational funding.”  These kickbacks were intended to induce Omnicare and its hundreds of consultant pharmacists to engage in “active intervention programs” to promote the use of Risperdal and other J&J drugs in nursing homes.  Omnicare’s consultant pharmacists regularly reviewed nursing home patients’ medical charts and made recommendations to physicians on what drugs should be prescribed for those patients.  Although consultant pharmacists purported to provide “independent” recommendations based on their clinical judgment, J&J viewed the pharmacists as an “extension of [J&J’s] sales force.” J&J and Janssen have agreed to pay $149 million to resolve the government’s contention that these kickbacks caused Omnicare to submit false claims to federal health care programs.  The federal share of this settlement is $132 million, and the five participating states’ total share is $17 million.  In 2009, Omnicare paid $98 million to resolve its civil liability for claims that it accepted kickbacks from J&J and Janssen, along with certain other conduct.
  • The civil settlement announced also resolves allegations that J&J and another of its subsidiaries, Scios Inc., caused false and fraudulent claims to be submitted to federal health care programs for the heart failure drug Natrecor.  In August 2001, the FDA approved Natrecor to treat patients with acutely decompensated congestive heart failure who have shortness of breath at rest or with minimal activity.  This approval was based on a study involving hospitalized patients experiencing severe heart failure who received infusions of Natrecor over an average 36-hour period. In a civil complaint filed in 2009 in the Northern District of California, the government alleged that, shortly after Natrecor was approved, Scios launched an aggressive campaign to market the drug for scheduled, serial outpatient infusions for patients with less severe heart failure – a use not included in the FDA-approved label and 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. The government’s complaint alleged that Scios had no sound scientific evidence supporting the medical necessity of these outpatient infusions and misleadingly used a small pilot study to encourage the serial outpatient use of the drug.  As part of today’s resolution, J&J and Scios have agreed to pay the federal government $184 million to resolve their civil liability for the alleged false claims to federal health care programs resulting from their off-label marketing of Natrecor.  In October 2011, Scios pleaded guilty to a misdemeanor FDCA violation and paid a criminal fine of $85 million for introducing Natrecor into interstate commerce for an off-label use.
  • In addition to the criminal and civil resolutions, J&J executed a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG).  The CIA includes provisions requiring J&J to implement major changes to the way its pharmaceutical affiliates do business.  Among other things, the CIA requires J&J to change its executive compensation program to permit the company to recoup annual bonuses and other long-term incentives from covered executives if they, or their subordinates, engage in significant misconduct.  J&J may recoup monies from executives who are current employees and from those who have left the company.  The CIA also requires J&J’s pharmaceutical businesses to implement and maintain transparency regarding their research practices, publication policies and payments to physicians.  On an annual basis, management employees, including senior executives and certain members of J&J’s independent board of directors, must certify compliance with provisions of the CIA.  J&J must submit detailed annual reports to HHS-OIG about its compliance program and its business operations.
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