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From Health Law Daily, March 21, 2014

Arkansas high court reverses $1.2 billion jury verdict against Johnson & Johnson in Risperdal case

By Harold M. Bishop, JD

The Supreme Court of Arkansas has reversed a $1.2 billion jury verdict against Johnson & Johnson and its subsidiaries for making false statements on the labeling of it antipsychotic drug, Risperdal™ (risperidone), and in a 2003 “Dear Doctor” letter to Arkansas healthcare providers. Johnson & Johnson’s Janssen unit was accused of making misleading claims about Risperdal’s effectiveness and downplaying its diabetes risks on warning labels. The Arkansas high court found that (1) the state erroneously used an inapplicable state Medicaid statute governing healthcare facilities to bring its claim and (2) the admission into evidence of an FDA Warning letter was prohibited hearsay and more prejudicial than probative. The state Medicaid fraud claim was dismissed and a state deceptive practice action was reversed and remanded (Ortho-McNeil-Janssen Pharmaceuticals, Inc. v State of ArkansasMarch 20, 2014, Fox, T).

Background. Risperdal is a second-generation, or atypical, antipsychotic medication developed in 1993 by Ortho-McNeil-Janssen Pharmaceuticals, Inc. f/k/a Janssen Pharmaceuticals, Inc. and/or Janssen, LP, and Johnson & Johnson (collectively “Janssen”). Risperdal is used to treat schizophrenia patients. In September 2003, the FDA notified Janssen and all other drug manufacturers producing second-generation antipsychotics to add a class warning to their labels about diabetes. In addition to the class warning, the FDA required the manufacturers to send a letter to all healthcare providers nationwide, referred to in the pharmaceutical industry as a “Dear Doctor Letter” (DDL), to advise of the label change. After Janssen sent out its DDL in 2003, the FDA’s Division of Drug Marketing, Advertising and Communications sent a Warning Letter to Janssen, directing Janssen to cease dissemination of any promotional materials contained in the information in their DDL and to also submit a plan of action to disseminate accurate and complete information. Janssen complied with both directives and the FDA closed the matter.

State action. In November 2007, the State of Arkansas filed suit against Janssen alleging violations of the Arkansas Medicaid Fraud False Claims Act (MFFCA), Ark. Code Ann. sec. 20-77-902 (Repl. 2001), alleging that Janssen knowingly made false statements or representations of material fact in its Risperdal label in violation of the MFFCA, specifically Ark. Code Ann. sec. 20-77-902(8)(B). The State also alleged violations of the Arkansas Deceptive Trade Practices Act (DTPA), Ark. Code Ann. sec. 4-88-107 (Repl. 2003), by Janssen’s 2003 DDL distribution to Arkansas healthcare providers for making false, deceptive, or unconscionable statements in its promotion letter.

After a twelve-day jury trial, the jury found that Janssen had violated the MFFCA and the DTPA. The circuit court conducted a civil-penalties hearing and found that 238,874 prescriptions had been filled from December 2002 to June 2006 time period, and that each constituted a violation under the MFFCA. The circuit court imposed the minimum statutory fine of $5,000 per violation for a total of $1,194,370,000. With regard to the DTPA violations, the jury found that there were 4,569 DDLs sent to healthcare providers. The circuit court imposed a $2,500 fine per violation for a total of $11,422,500.

Issues on appeal. On appeal, Janssen contended that the circuit court erred when it entered judgment on the State’s MFFCA and DTPA claims.

MFFCA claim. The Arkansas Supreme Court found that the Medicaid statute (sec. 20-77-902(8)) was ambiguous on its face and turned to state legislative history for assistance. However, even with review of the legislative record, it was clear to the court that the Medicaid statute was designed to make a healthcare facility liable for civil money penalties for false statements made in seeking certification or re-certification. As Janssen is indisputably not a healthcare facility and was not applying for certification or re-certification as described in the statute, the court reversed the circuit court’s order denying Janssen’s motion for directed verdict and dismissed the state’s claim under MFFCA.

DTPA claim. On appeal, Janssen asserted that the circuit court erroneously admitted the FDA Warning Letter into evidence. The Supreme Court found that the Warning Letter was part of a special investigation of a particular complaint, case, or incident and thereby fell directly within the scope of the prohibited hearsay under Arkansas Rules of  Evidence, 803(8)(iv). The court also found the Warning Letter more prejudicial than probative. As a result, the circuit court was found to have abused its discretion in admitting the Warning Letter and the court reversed and remanded the DTPA claim to the circuit court.

Related federal action. In a separate action brought by the U.S. Department of Justice, in November 2013, J&J and its subsidiaries agreed to pay more than $2.2 billion to resolve criminal and civil liability arising from allegations relating to the prescription drugs Risperdal, Invega and Natrecor, including promotion for uses not approved as safe and effective by the FDA and payment of kickbacks to physicians and to the nation’s largest long-term care pharmacy provider. One of the largest health care fraud settlements in U.S. history, criminal fines and forfeiture totaled $485 million and civil settlements with the federal government and states totaled $1.72 billion.

Other state actions. J&J and Janssen are also awaiting a ruling by the South Carolina Supreme Court, where the companies have an appeal pending of a $327 million judgment in a similar case. A $330 million verdict against both companies in Louisiana was overturned in January.

The case number is CV-12-1058.

Attorneys: James M. Simpson, Jr. (Allen, Summers, Simpson, Lillie & Gresham, PLLC) and Robert Stephen Shafer (Friday, Eldredge & Clark, LLP) for Ortho-Mcneil-Janssen Pharmaceuticals, Inc., Janssen Pharmaceuticals, Inc., Janssen, LP and Johnson & Johnson, Inc. Attorney General for State of Ark.

Companies: Ortho-Mcneil-Janssen Pharmaceuticals, Inc.; Janssen Pharmaceuticals, Inc.; Janssen, LP; Johnson & Johnson, Inc.; State of Ark.

MainStory: TopStory CaseDecisions LabelingNews AdvertisingNews DrugBiologicalNews  EnforcementNews FraudNews MedicaidNews PrescriptionDrugNews SafetyNews ArkansasNews

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