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Johnson & Johnson to pay $2.2 billion to end U.S. drug probes

By David Ingram and Ros Krasny

WASHINGTON (Reuters) - In one of the largest health care fraud settlements in U.S. history, Johnson & Johnson will pay $2.2 billion to end civil and criminal investigations into kickbacks to pharmacists and the marketing of pharmaceuticals for off-label uses, U.S. Attorney General Eric Holder said on Monday.

The resolution of the long-running case covers the marketing of the anti-psychotic drugs Risperdal and Invega and the heart drug Natrecor over several years.

From 1999 through 2005, J&J and its subsidiary Janssen Pharmaceuticals Inc promoted Risperdal for unapproved uses, including controlling aggression and anxiety in elderly dementia patients and treating behavioral disturbances in children and in individuals with disabilities, according to the complaint.

The off-label marketing cost U.S. government insurance programs hundreds of millions of dollars in uncovered claims, the complaint said.

Under the settlement, Janssen will plead guilty to a single misdemeanor violation for its promotion of Rispersdal.

Meanwhile, the company paid millions of dollars in kickbacks to Omnicare Inc, the nation's largest pharmacy specializing in dispensing drugs to nursing home patients, under various guises including "educational funding."

Johnson & Johnson's conduct "recklessly put at risk" the health of children, dementia patients and others to whom the drug was prescribed at a time it was only approved by the U.S. Food and Drug Administration to treat schizophrenia, Holder said.

Janssen's sales representatives "aggressively" promoted Risperdal to doctors and other prescribers who treated elderly dementia patients, and through a special "ElderCare sales force" targeted nursing home operators.

"The company also provided incentives for off-label promotion" and based sales representatives' bonuses on total sales, not just sales for FDA-approved uses, the DOJ said.

Under FDA regulations, doctors may prescribe drugs for unapproved, or off-label, use. But pharmaceutical companies are allowed to market their drugs in the United States only for FDA-approved uses.

The FDA said it had delivered repeated warnings to Janssen about "misleading marketing messages" to doctors, and later initiated a criminal complaint.

"Our investigators devoted considerable time and resources to this case, to help ensure that pharmaceutical companies do not mislead healthcare providers and the general public," John Roth, director of the FDA's Office of Criminal Investigations, said in a statement.

As part of the settlement, Justice Department lawyers filed a civil complaint against Johnson & Johnson in U.S. District Court for the Eastern District of Pennsylvania on Monday.

Johnson & Johnson said that the settlement of "the civil allegations is not an admission of any liability or wrongdoing, and the company expressly denies the government's civil allegations."

Monday's settlement also resolved allegations that J&J and a subsidiary, Scios Inc., marketed Natrecor for off-label uses not approved by the FDA and not covered by federal healthcare programs.

J&J disclosed in a securities filing in 2011 it had reached an agreement to resolve criminal penalties related to the promotion of Risperdal, which was once one of the company's biggest sellers, but that certain issues remained open.

The company on Monday said no additional charges will be recorded to earnings in connection with the settlement. J&J shares were down about 0.9 percent in midday trading on the New York Stock Exchange.

"We reached closure on complex legal matters spanning almost a decade," said Michael Ullmann, general counsel of Johnson & Johnson.

Most large drugmakers have had to pay major fines to the U.S. government and various states over the past decade for alleged improper marketing of their medicines.

Pfizer Inc in 2010 agreed to pay $2.3 billion to settle allegations it improperly marketed 13 drugs, including kickbacks to healthcare providers.

Last year, Britain's GlaxoSmithKline Plc agreed to pay $3 billion to resolve criminal charges that it improperly targeted its Paxil depression treatment to children, sold its Wellbutrin antidepressant for unapproved uses and failed to inform U.S. regulators of safety risks seen with its Avandia diabetes drug.

Glaxo is now under the microscope of Chinese police, who in recent months alleged it has participated in a widespread bribery and corruption scheme in which the company used travel agencies to funnel illegal payments to doctors and government officials to bolster drug sales.

Other drugmakers this year have also come under scrutiny in China, both for marketing practices and drug prices, but Glaxo has suffered the most damage from the scandal as many Chinese doctors have shunned its sale representatives. Glaxo's drug sales in China plunged 61 percent in the third quarter.

(Additional reporting by Ros Krasny and Ransdell Pierson; Editing by Howard Goller, Nick Zieminski, Jeffrey Benkoe and Leslie Adler)

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