The $1 . 2 billion fine against Johnson & Johnson and a subsidiary for Medicaid fraud was not excessive, because the company continuously put patients in danger by improperly exposing them to the side effects of the antipsychotic drug Risperdal, an attorney for the state told the Arkansas Supreme Court on Thursday.
David Frederick, a Washington, D.C.-based lawyer who was hired to represent the state, said the company, through its Janssen Pharmaceuticals subsidiary, was aware of the risks of the drug - including an increased risk of stroke or diabetes in some cases - but failed to include the information on its labels. Each of the 238,874 Medicaid-related Risperdal prescriptions written between December 2002 and June 2006 represented a separate fraudulent count, he said.
Frederick said Pulaski County Circuit Judge Tim Fox was correct in his calculations of the Medicaid-fraud fine - $1,194,370,000, or$5,000 per Risperdal prescription written during that time. The money will go into the state Medicaid fund if the verdict stands.
The fine is allowed under the law and is designed to be a deterrent to other companies, Frederick said.
“If you’re not going to deter the kinds of actions [by the company] … we might as well all become guinea pigs for the drug industry,” Frederick said.
A Pulaski County jury ruled against the company in April 2012, finding it violated the Arkansas Medicaid Fraud False Claims Act and the Deceptive Trade Practices Act through its labeling of the drug and improper direct-marketing.
The state filed a lawsuit against the company in November 2007, arguing that it benefited from sales of the drug while downplaying its side effects.
The fine ordered by Fox was the lowest allowed under the law, which requires a $5,000 fine per violation.
The company was also fined $11.4 million for 4,569 letters it sent to Arkansas doctors in November 2003 that falsely stated Risperdal had no significant link to diabetes.
In February 2013, Fox ordered the company to cover the state’s $181 million in attorney’s fees - accrued by hiring outside counsel to represent the state.
Walter Dellinger, a Washington, D.C.-based attorney who represents the company, said the billion-dollar fine is excessive.
He said the trial judge’s calculation of violations should not have been based on the 238,874 number.
“It’s just a list of the number of prescriptions,” Dellinger said.
Dellinger said that the state failed to show that Medicaid ever wrongly paid for a Risperdal prescription or that any doctor was ever misled by the company.
In filings with the court, the company also argued that the attorney’s fees it was ordered to pay are “unreasonable.” If the issue is not sent back to the trial court, the company asked the Supreme Court to reduce the amount to $2.2 million.
A spokesman for the company said it would not have a statement beyond what was presented in court Thursday.
Attorney General Dustin McDaniel said after the hearing that the state’s Medicaid-fraud statute gives broad powers to the attorney general’s office to file lawsuits against companies that “steal tax dollars.”
McDaniel said 65 legislators signed on to an amicus - or friend of the court - supporting the 1993 law that was used to sue the pharmaceutical company.
“This is the exact kind of fraud that the Legislature envisioned when they enacted such a broad statute that gave powers to protect tax payer dollars and patients,” McDaniel said.
McDaniel said the state’s case is stronger than the one brought by Louisiana officials against the company, which was overturned by that state’s Supreme Court.
“It was a completely different statute in Louisiana. The Legislature did not write nearly as protective a law. I wouldn’t have brought this case in Louisiana if the Legislature had given me the same law that they had given the attorney general of Louisiana,” McDaniel said.
Arkansas, Pages 9 on 02/28/2014