Once upon a time, a pharmaceutical company gave free rein to its sales force to market a product in order to recoup money spent on research and discovery without any fear from governmental interference. Those times no longer end in happily ever after—or do they? With the rise of healthcare fraud, the Food and Drug Administration (FDA) and Department of Justice (DOJ) have scrutinized the health and safety of patients starting from a manufacturer’s development of a drug through its marketing scheme.
In November 2013, the pharmaceutical goliath Johnson & Johnson agreed to pay $2.2 billion in civil and criminal fines to “settle accusations that it improperly promoted the antipsychotic drug Risperdal to elderly, children, and people with developmental disabilities.” The settlement was the result of whistleblowers’ actions that brought Johnson & Johnson’s conduct to light. It represents the third largest U.S. settlement by a drug maker. In 2012, GlaxoSmithKline paid $3 billion to settle criminal and civil violations for misbranding Paxil and Wellbutrin, while Pfizer settled allegations for $2.3 billion in 2009 for improperly marketing Bextra, which is no longer on the market.
The DOJ’s criminal complaint alleged that between 2002 and 2003, Johnson & Johnson’s subsidiary, Janssen Pharmaceuticals, offered incentives to its sales representatives for promoting Risperdal for off-label use.
The FDA first approved Risperdal in 1993 for the treatment of schizophrenia in adults and was later approved for the short-term treatment of bipolar disorder in adults. On August 22, 2007, Risperdal became the first drug to be approved for the treatment of schizophrenia in children ages thirteen to seventeen and for the short-term treatment of manic or mixed episodes of bipolar disorder in children and adolescents ages ten to seventeen.
The DOJ’s criminal complaint over Risperdal alleged that between 2002 and 2003, Johnson & Johnson’s subsidiary, Janssen Pharmaceuticals, offered incentives to its sales representatives for promoting Risperdal for off-label use. Janssen’s sales representatives urged physicians to prescribe Risperdal to elderly dementia patients to treat symptoms of anxiety, depression, agitation, and confusion, despite the drug only being approved to treat schizophrenia at the time.
Despite the FDA’s warnings, Janssen continued to promote Risperdal via marketing materials targeting nursing homes and doctors who treated elderly patients.
In a separate civil complaint (pdf), the government alleged that Johnson & Johnson and Janssen promoted Risperdal and a similar anti-psychotic drug, Invega, off-label to control behavioral problems in children, seniors, and the mentally disabled between 1999 and 2005. The complaint additionally alleged that Janssen was aware of the increased risk of diabetes from taking Risperdal but continued to promote it to elderly patients as uncompromised by safety concerns. In 1999, the FDA issued a warning letter to Janssen stating that promotion of the drugs as safe and effective in the elderly population would be misleading. In April 2005, the FDA also required Risperdal be sold with a black box warning stating that elderly dementia patients were at an increased risk of death from taking Risperdal.
Despite the FDA’s warnings, Janssen continued to promote Risperdal via marketing materials targeting nursing homes and doctors who treated elderly patients, finally leading the FDA to initiate legal action against the drug maker. Consequently, Janssen agreed to plead guilty and pay $400 million in fines, but explicitly denied that the settlement was an admission of any liability or wrongdoing on the part of the company.
The settlement with Janssen also resolved allegations involving tens of millions of dollars in kickbacks to Omnicare, Inc., one of the largest pharmacies dispensing drugs to elderly patients. A whistleblower pharmacist, Bernard Lisitza, who was fired from Omnicare after challenging the Risperdal kickbacks, brought the allegations to light. The government alleged that Johnson & Johnson was aware that Omnicare pharmacists reviewed nursing home charts at least monthly and then made prescribing recommendations to the physicians. Johnson & Johnson was also aware that physicians were eighty percent likely to accept those recommendations. As a result, the giant drug maker persuaded Omnicare pharmacists to recommend that physicians prescribe Risperdal to nursing home patients.
“This multibillion-dollar resolution demonstrates the Justice Department’s firm commitment to preventing and combating all forms of health care fraud.”
In addition to the anti-psychotic drug, Risperdal, the government also alleged that Johnson & Johnson’s subsidiary, Scios Inc., aggressively marketed Natrecor, a drug used to treat heart failure, “with no sound scientific evidence supporting the medical necessity.” Johnson & Johnson and Scios agreed to pay $184 million to settle the civil allegations.
The government action against Johnson & Johnson is part of a decade-long effort to crack down on aggressive pharmaceutical marketing tactics to increase sales by promoting off-label uses of drugs. Although doctors may prescribe drugs for off-label uses, pharmaceutical manufacturers may not promote them for off-label uses under FDA regulations.
“The conduct at issue in this case jeopardized the health and safety of patients and damaged the public trust,” Attorney General Eric Holder said in a statement announcing the settlement. “This multibillion-dollar resolution demonstrates the Justice Department’s firm commitment to preventing and combating all forms of health care fraud. Every time pharmaceutical companies engage in this type of conduct, they corrupt medical decisions by health care providers, jeopardize the public health, and take money out of taxpayers’ pockets.” Johnson & Johnson’s practices “recklessly put at risk the health of some of the most vulnerable members of our society – including young children, the elderly, and the disabled.”
The $168 million payout to the whistleblowers represented the largest whistleblower payout in U.S. history.
It is no surprise that the sources that brought these practices to light were none other than employees of Johnson & Johnson. The $168 million payout to the whistleblowers across three states represented the largest whistleblower payout in U.S. history. Among the whistleblowers include Judy Doetterl, a sales representative, who served as a government informant by wearing a wire during a meeting in order to prove that the company increased its Risperdal sales by promoting off-label use of the drug. Four other employees filed similar cases. The five whistleblowers each received $29 million.
The sixth whistleblower, Allen Jones, received $20.3 million when Johnson & Johnson settled for $158 million with Texas over Risperdal. Additionally, two other whistleblowers, Joseph Strom and Bernard Lisitza, who brought allegations over Natrecor and kickbacks to Omnicare, Inc., each received $28 million. Lawyers for whistleblowers typically receive approximately one-third of their award.
“I think one could conclude that Johnson & Johnson made out very well.”
In addition to monetary fines, Johnson & Johnson also entered into a five-year corporate integrity agreement with the Federal Government requiring the company to submit detailed reports about any payments to physicians. Despite the $2.2 billion settlement and the scrutiny under the corporate integrity agreement, some consumer advocacy groups such as Public Citizen consider this a “slap on the wrist.” Sam Almashat, a member of Public Citizen, stated that between 2003 and 2010, Risperdal generated $24 billion in sales for Johnson & Johnson—roughly ten times the settlement amount paid.
So, does the story end in happily ever after for Johnson & Johnson? “I think one could conclude that Johnson & Johnson made out very well,” said Bonnie Patten, Executive Director of Truth in Advertising, a consumer advocacy group. The $2.2 billion settlement may then just be considered a part of doing business.