Company stock dropped less than 1% in the hours following the news Monday morning, losing about a dollar of value and hovering at $92.50 a share around 1 p.m. as public officials and whistleblowers' lawyers launched broadsides on the global maker of pharmaceuticals, medical equipment and consumer health supplies.
“This alleged conduct is shameful and it is unacceptable,” U.S. Attorney General Eric Holder said in a news conference about the case Monday in Washington. “It displayed a reckless indifference to the safety of the American people. And it constituted a clear abuse of the public trust, showing a blatant disregard for systems and laws designed to protect public health.”
Specifically, J&J is pleading guilty to a misdemeanor count of introducing a misbranded drug into interstate commerce. The company is also paying fines and forfeitures of $400 million to resolve the criminal charge, unsealed Monday morning in U.S. District Court, that it encouraged healthcare providers to give Risperdal to elderly, non-schizophrenic dementia patients in 2002 and 2003, even though the Food and Drug Administration did not approve of that use.
Separately, the company is agreeing to pay $1.7 billion to resolve civil allegations that between 1999 and 2005 it marketed Risperdal and another schizophrenia drug called Invega for multiple groups of patients for which it lacked FDA clearance, including elderly dementia patients in nursing homes who were at increased risks of a stroke from taking the drug, according to clinical trial data.
The drug also was allegedly marketed without FDA approval to children, who were at risk of developing elevated hormone levels from it. The FDA didn't approve of using Risperdal for children for any purpose until late 2006, which the FDA “repeatedly” warned the company about, prosecutors said in a statement about the case.
The company also is paying $149 million to resolve allegations that it paid kickbacks to long-term care pharmacy company Omnicare to encourage the company's pharmacists to recommend prescribing J&J-made drugs instead of critically assessing whether off-label uses were appropriate. Omnicare was not a party to the settlement.
Finally, J&J agreed to have a five-year corporate integrity agreement placed on the company that will include what government officials called “stringent requirements … to increase accountability and transparency” at the company. The agreement allows the company to take back bonuses and compensation from executives who engage in wrongdoing, including those who have left the company.
FDA Commissioner Dr. Margaret A. Hamburg said in an e-mailed statement Monday that companies disregarding FDA decisions create major risks for themselves and the public. “When pharmaceutical companies ignore the FDA's requirements, they not only risk endangering the public's health but also damaging the trust that patients have in their doctors and their medications,” she said.
J&J officials said the civil agreements were not admissions of wrongdoing beyond the criminal conduct to which the company was pleading guilty. Lawyers for the company are scheduled to appear in U.S. District Court in Philadelphia and plead guilty on behalf of the corporation.
“Today we reached closure on complex legal matters spanning almost a decade,” said Johnson & Johnson Vice President and General Counsel Michael Ullmann in a written statement. “This resolution allows us to move forward and continue to focus on delivering innovative solutions that improve and enhance the health and well-being of patients around the world.”
The company has previously set aside money to cover the settlement costs, and no further charges are expected to hit the company's earnings as a result of Monday's announcement.
Johnson & Johnson posted net earnings of $10.5 billion on sales of $67 billion during 2012, according to the company's annual filings with the Securities and Exchange Commission.
The company statement stressed that settlement and plea do not affect the FDA's longstanding approval of Risperdal for its approved indications, nor do they affect the drug's coverage under Medicare and state Medicaid programs.
The agreements resolve four separate whistleblower lawsuits pending against J&J, in which the U.S. Justice Department and 45 states also joined as plaintiffs. It's not yet clear how the states, the federal government, and the whistleblowers will split up the settlement proceeds.
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