On April 11, Arkansas State Court Judge Tim Fox entered judgment on fines totaling $1.2 billion against pharmaceutical giant Johnson & Johnson and its subsidiary Janssen Pharmaceuticals (collectively “J&J”) for wrongdoing surrounding their prescription antipsychotic medication, Risperdal® (risperidone). (No. CV07-15345.) FDA originally approved Risperdal® in 1993 for the treatment of psychotic disorders like schizophrenia.
Arkansas Attorney General Dustin McDaniel alleged, among other things, that J&J violated Arkansas’ false claims act and deceptive trade practices act in marketing and selling Risperdal®. In particular, he alleged that J&J caused improper reimbursement for prescriptions covered by Medicaid by falsely asserting that Risperdal® was safer and more effective than comparable medications and not adequately warning about serious side effects, including diabetes and neurological complications. According to the complaint, J&J sold and marketed Risperdal® for off-label uses, including the treatment of bipolar disorder, dementia, and mood, and anxiety disorders.
After a jury determined that J&J violated the Arkansas False Claims Act and Arkansas Deceptive Trade Practices Act, Fox evaluated damages. He found nearly a quarter million instances in which J&J violated the Arkansas False Claims Act, based on the number of Risperdal® prescriptions written in the state. He also found nearly 5,000 instances in which J&J violated the Arkansas Deceptive Trade Practices Act, based on the number of Risperdal® direct mailings to Arkansas physicians. As a result, he held that J&J improperly induced the state to spend Medicaid funds for Risperdal® prescriptions. The statutory minimum penalties–ranging from $2500 to $5000 per violation–resulted in a judgment of $1.2 billion. J&J has moved for a new trial, contending that the fines dwarf actual Medicaid payments for Risperdal®, which J&J argues are no more than $8.1 million. J&J further contends that the state showed no evidence that any patient suffered actual harm, that any doctor was misled into writing a prescription that was not warranted, or that any prescription did not warrant reimbursement. The Arkansas False Claims Act, however, requires only that a person “[k]nowingly makes or causes to be made any false statement or representation of a material fact in any application for any benefit or payment under the Arkansas Medicaid program.” J&J may be better off trying the Eighth-Amendment route. See United States ex rel. Bunk v. Birkart Globistics GmbH & Co., Nos. 1:02cv1168 & 1:07cv1198, 2012 U.S. Dist. LEXIS 18445 (E.D. Va. Feb. 14, 2012).
Attorneys general in several other states have similarly found success in bringing false-claims and deceptive-trade-practice complaints against J&J. Courts in South Carolina (No. 2007 CP421348) and Louisiana (No. CA-11-1184) have fined J&J $327 million and $258 million, respectively. J&J has appealed both judgments, but no final ruling has issued. If unsuccessful on appeal, J&J faces a total of nearly $1.8 billion in adverse judgments. Texas settled with J&J for $158 million after seeking as much as $579 million (No. D-1-GV-04-001288) and suits pending in at least five additional jurisdictions could further increase J&J’s liability. Moreover, prior to Fox’s ruling in Arkansas, the Department of Justice had sought as much as $1.8 billion to settle federal false-claims allegations; that figure could now increase. The statutory minimum penalty for federal false claims is $5,500.
Courts in other jurisdictions had previously provided more favorable outcomes for J&J. Pennsylvania dismissed a $289-million suit (No. 2:05-cv-05010), while the West Virginia Supreme Court vacated a $4.5-million judgment on appeal (No. 35500). Last month, the District of Massachusetts declined to exercise jurisdiction over state false-claims allegations arising under the laws of California, Delaware, the District of Columbia, Florida, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, New Hampshire, New Mexico, Nevada, Tennessee, Texas, and Virginia. (No. 1:11-cv-10316.) The court dismissed the state-law claims because they predominated over the sole remaining federal false-claims allegation. Based on Arkansas’ success, however, it is possible that J&J could face renewed litigation efforts in these states.