Even after paying more than $2.2 billion last month to settle federal criminal and civil investigations into its marketing of the antipsychotic drug Risperdal, Johnson & Johnson still faces hefty fines in state courts, including Arkansas.
The drugmaker is appealing to the Arkansas Supreme Court a $1.2 billion fine - the state’s largest - imposed in a Medicaid-fraud lawsuit brought by Attorney General Dustin McDaniel over the labeling and some direct-marketing of Risperdal.
State lawyers say Johnson & Johnson deliberately deceived doctors and patients for years because the company knew that properly disclosing Risperdal’s links to dangerous and potentially deadly side effects could cost it as much as $150 million a year in lost revenue.
The company “ systematically deceived the public and the medical community over a four-year period, between 2002 and 2006, by knowingly misrepresenting the risks of severe side effects on Risperdal’s label and by providing false reassurances and inadequate warnings about Risperdal’s link to diabetes in a November 2003 … letter mailed to thousands of Arkansas health-care providers,” according to the filing by attorney Jay Shue on behalf of the state.
Seeking to have the “grossly excessive” fine and verdict overturned or at least receivea new trial, manufacturer Johnson & Johnson denies wrongdoing, claiming in its appeal that the April 2012 jury verdict has the effect of empowering “untrained jurors to overrule expert [federal Food and Drug Administration] regulators on how medical risks should be labeled on FDA-approved prescription drugs under the FDA’s own regulations.”
“Substituting the inexpert views of a lay jury for the expert views of the FDA, the trial court imposed a billion-dollar penalty for selling an FDA-approved drug under an FDA-approved label, without showing or claiming that defendants defrauded Medicaid by even one penny,” defense attorney Martin Kasten wrote on behalf of the drug manufacturer. “This is not only unwise, but contrary to federal law, rendering the [state law] unconstitutional as applied.”
The Pulaski County jury’s decision, reached after three hours of deliberations, found that Johnson & Johnson, through subsidiary Janssen Pharmaceutica, deliberately downplayed the side effects of the medication during a 3½-year period, from December 2002 to June 2006. If upheld on appeal, the fine, accruing interest at 10 percent a year, would go to state funds for Medicaid and consumer-protection efforts.
The jury finding was that Risperdal labeling violated the state fraud law by not properly disclosing the medication’s risks of causing diabetes, a hormonal disorder affecting sexual development in children, excessive weight gain in all users and a propensity to cause stroke in elderly patients with dementia.
State lawyers contended the drugmaker had actually known about the potential for some side effects since as early as 1997, but the statute of limitations restricted Arkansas from pursuing claims before December 2002, about five years before the lawsuit was filed in November 2007. The labeling was only corrected when federal regulators intervened in 2006 and required a label change, according to the state’s filings.
Based on the jury verdict, state lawyers asked that Johnson & Johnson be fined for each of the 238,874 prescriptions paid for by Arkansas Medicaid during the five-year period.
The resulting penalty, imposed by Circuit Judge Tim Fox, was the lowest amount available to the judge under the fraud law at $5,000 per prescription, which added up to $1,194,370,000. It’s an amount the drug company argues is constitutionally excessive, but Fox could have imposed up to twice that amount under the law.
With the jury’s finding that 4,569 letters to Arkansas doctors sent out by the company in November 2003 wrongly downplayed Risperdal’s link to diabetes, the judge added another $11.4 million in penalties - at $2,500 per letter - under the state Deceptive Trade Practices Act.
The case likely won’t come before the state’s eight justices for oral arguments until at least February, court filings show.
LARGEST PENALTY FOR FRAUD
The $2.2 billion paid by Johnson & Johnson in November is one of the largest U.S. penalties for health-care fraud.
The drugmaker’s Janssen subsidiary pleaded guilty to a misdemeanor charge of misbranding, U.S. Attorney General Eric Holder announced at a Nov. 4 news conference in Washington. Holder said that the company admitted to promoting the medication to health-care providers to treat dementia in elderly patients even though Risperdal is only federally approved for the treatment of schizophrenia.
Holder said the payout would also resolve federal civil litigation under the federal False Claims Act accusing Johnson & Johnson of promoting the drug as a method of controlling behavioral problems in the elderly, children and people with disabilities while downplaying the same health risks that Arkansas’ attorneys had complained about.
The $2.2 billion fine didn’t resolve lawsuits brought by state attorneys general in Arkansas, Louisiana and South Carolina.
The drugmaker still is awaiting a decision from the Louisiana Supreme Court on whether it violated that state’s Medicaid Fraud Act over the November 2003 mailing. A jury awarded the state $257.7 million in damages plus $73 million in legal fees in an October 2010 trial, but Johnson & Johnson has told stockholders the company “believes it has strong arguments supporting the appeal,” its corporate financial disclosures show.
And a decision is pending with the South Carolina Supreme Court as to whether a June 2011 $327.1 million fine for that November 2003 mailing will stand.
1ST MEDICAID FRAUD CASE
The lawsuit brought by McDaniel’s office represents the first time a civil Medicaid fraud accusation has gone to trial in an Arkansas state court.
Since the fraud statute has never been tested before this case, that lack of judicial guidance allowed state lawyers to twist the statute from its true purpose of punishing fraud into a method of policing federal drug-labeling violations, the defense argues. The state law is aimed at prohibiting false claims for payment, stealing benefits, accepting kickbacks or overcharging patients, the drug company’s lawyers argue. The state law can’t be extended into matters regulated by the federal Food, Drug & Cosmetic Act, according to the defense.
“Contrary to the [fraud law’s] express purpose to combat Medicaid fraud, the interpretation applied here allowed the state effectively to declare hundreds of thousands of medical prescriptions and refills retroactively unlawful, imposing a $5,000 penalty for each one, without any showing that any doctor was deceived, any patient was harmed, any prescription was medically inappropriate or unnecessary, any false claim was presented for payment, or any such claim was paid,” the defense argues. “Using the [fraud law] to punish what the state contends to be violations of FDA labeling regulations impermissibly overrides the FDA’s repeated approval of Risperdal’s label, disrupts theFDA’s calibrated judgment about the best way to convey Risperdal’s benefits and risks in nationally uniform labeling, and impedes the FDA’s ability to set and maintain regulatory policy for the labeling of antipsychotic drugs as a class. The State’s claim punishes Janssen for using, in Arkansas, the FDA-approved label that federal law required Janssen to use nationwide.”
But the claim that federal regulation bars Arkansas from acting is wrong, because the state is suing to enforce its own laws, not attempting to apply federal law, lawyers for the state counter. The state law complements the federal regulation, both sharing the purpose to protect consumers from dangerous products, the state’s brief states.
The defense argument that the company is not bound by state law “is untenable, because the Medicaid program depends exclusively on the disclosures contained in manufacturer labels to provide critical health and safety information to providers and beneficiaries. The state has the authority to penalize knowing misrepresentations about drug side-effects because they obstruct efforts to provide critical safety information to pharmacists and patients, hinder educational and interventional efforts by the state Medicaid office, and inhibit doctors’ ability to monitor their patients for deadly or debilitating side effects,” attorneys for the state warn Arkansas’ highest court.
Front Section, Pages 1 on 12/02/2013