May 13th, 2011

Prosecutors Seek $1 Billion From J&J in Marketing Probe

The Wall Street Journal

Federal prosecutors are seeking roughly $1 billion to resolve a long-running probe into Johnson & Johnson’s marketing of the antipsychotic drug Risperdal, according to people familiar with the matter.

A settlement of around $1 billion would be among the largest in a string of settlements related to off-label marketing of drugs in recent years, and would likely have a material impact on J&J’s quarterly financial results.

Since 2004, the federal government has been investigating whether J&J’s Janssen Pharmaceutica unit improperly promoted Risperdal for unapproved uses, J&J has said in filings with the Securities and Exchange Commission. In a filing Tuesday, the New Brunswick, N.J., company said it set aside an unspecified amount for a potential settlement, and said it would “likely” face civil and criminal litigation if it didn’t settle.

J&J said a resolution to the Risperdal investigation “could have a material impact” on the company’s quarterly performance, though it didn’t estimate the amount. Risperdal had been one of J&J’s best-selling drugs, with more than $2.2 billion in U.S. sales in 2007, before the U.S. patent on the pill expired. J&J had $61.6 billion in sales last year.

The $1 billion settlement could shrink, or talks could break down, the people familiar with the matter said. Prosecutors are pushing J&J to settle, one person said.

J&J said its discussions with the government “are ongoing and it is inappropriate to speculate.” Spokespeople for federal prosecutors in Philadelphia and Washington, D.C., said they don’t comment on such matters.

Officials at J&J were surprised at the size of the sum that prosecutors are seeking, according to the people familiar with the matter. Prosecutors have been citing as a benchmark a $1.4 billion settlement that Eli Lilly & Co. reached in 2009 to resolve a probe into alleged improper marketing of its antipsychotic drug Zyprexa, according to one of the people. Lilly’s alleged misconduct took place over a longer period of time, this person said.

Under federal law, companies can’t market medicines for uses other than those approved by the Food and Drug Administration, though doctors can prescribe drugs for unapproved uses.

Drug marketing probes have been a priority of state and federal prosecutors seeking to curb unnecessary health-care spending, and have resulted in substantial settlements with pharmaceutical makers.

Prosecutors argue that Medicaid and other government programs are wasting tens of millions of dollars paying for medicines that drug makers encourage physicians to prescribe for uses that the FDA hasn’t determined are safe and effective.

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