The Arkansas Supreme Court on Thursday denied the state’s request to reconsider its ruling throwing out a $1.2 billion Medicaid-fraud fine against Johnson & Johnson and a subsidiary.
In a 4-3 ruling, the court rejected the state’s petition. The court’s March 20 decision reversed and dismissed a lower court’s decision to fine the company - through its Janssen Pharmaceuticals subsidiary - $5,000 for each of the 238,874 prescriptions filled for the anti-psychotic drug Risperdal and reimbursed by the state Medicaid program.
The high court unanimously found that the state Medicaid fraud statute was misapplied in the case. It noted that when the statute was prepared for the state’s law books, the language was “substantially altered” by the Code Revision Commission in such a way that it was no longer reflective of the law as passed by the Legislature.
Justices Courtney Hudson Goodson, Karen Baker, Jo Hart and Cliff Hoofman opposed granting a rehearing. Chief Justice Jim Hannah and Justices Donald Corbin and Paul Danielson would have granted the petition, according to a one page notice to the attorneys filed by the clerk of the courts.
The court did not issue an opinion on the petition.
Attorney General Dustin McDaniel said in a statement that he was “extremely disappointed” in the court’s ruling, “considering the basis for the court’s original decision was never addressed until oral argument.”
“That parted with longstanding precedent, and it was impossible for either party to adequately respond to the concerns raised at that time. It also establishes a precedent that creates imbalance and uncertainty for our business community and all laws if the court can simply undo the work of the Code Revision Commission spontaneously, at any time,” McDaniel said in a written statement.
McDaniel said the Legislature created the commission to ensure that the acts lawmakers passed were properly prepared for the state’s law books. He said “the public should be able to rely on the laws that are published in every law book in Arkansas.”
The state filed a lawsuit against the company in November 2007 and argued that it benefited from sales of Risperdal while downplaying its side effects, which included an increased risk of stroke and diabetes.
A Pulaski County jury found the company violated the Medicaid-fraud statute, which led to the billion-dollar fine, as well as the state’s Deceptive Trade Practices Act. The Circuit Court fined the company $11.4 million on the second claim.
Justice Karen Baker wrote in the court’s March opinion that the Medicaid-fraud statute did not apply in the Johnson & Johnson case because it only applies to health-care facilities seeking certification of a “nursing home or similar facility.”
The court split 4-3 to reverse and remand the state’s claim that was made under the Deceptive Trade Practices Act and pursued in court with the presentation of a 2004 “ warning letter” from the U.S. Food and Drug Administration that instructed the company to stop using misleading promotional materials. The majority found the letter was “hearsay” according to the Rules of Evidence and was “highly prejudicial.”
Hearsay is defined by the court as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” It is generally not admissible unless it meets one of about two dozen exceptions defined by court rules.
McDaniel previously said that the high court’s ruling strips his office of a mechanism to protect the integrity of the state’s Medicaid program.
“The decision means that Arkansas Medicaid cannot fulfill its federal mandate to counsel patients and inform doctors and pharmacists about serious health risks because the source of that information - the drug companies themselves - cannot be sanctioned when they lie to Medicaid, its enrollees, and their doctors about those risks,” McDaniel wrote in the petition for rehearing.
On Thursday, McDaniel said in his statement that the state had “no choice but to respect the court’s opinion and move on.” He said his office will move forward with its claim against the company under the Deceptive Trade Practices Act and pursue the maximum penalties.
Robyn Frenze, a spokesman for Janssen Pharmaceuticals, said in a statement that the company was pleased with the ruling.
“This case was thoroughly reviewed by the Supreme Court in its original decision, and we are pleased the court has decided not to grant a rehearing of the matter. Janssen is committed to delivering medicines and services that offer hope and a healthier life to people throughout the world and to complying with the laws and regulations which govern our business activities,” Frenze said.
Front Section, Pages 1 on 04/25/2014