Johnson & Johnson Seeks Settlement in for Allegations of Off-Label Promotion of Risperdal
In 2004, the U.S. Department of Justice (DOJ) Office of the Inspector General (OIG) began investigating Janssen Pharmaceutica Inc. (Janssen), a subsidiary of Johnson & Johnson (J&J), concerning the marketing practices for Risperdal, an antipsychotic prescription drug. Janssen allegedly promoted Risperdal for unapproved off-label uses, a misdemeanor criminal offense. Pursuant to the Federal Food, Drug, and Cosmetic Act (FD&C Act) manufacturers are prohibited from directly marketing a drug for a use other than the U.S. Food and Drug Administration (FDA) approved indication. 21 U.S.C. §§301-97. The FDA approved Risperdal for the treatment of schizophrenia in adults and adolescents. Allegations suggest that Janssen also promoted Risperdal for the treatment of dementia and anxiety disorders. See our previous report here for more information regarding misdemeanor criminal charges resulting from off-label promotion.
On August, 9, 2011, in a quarterly report filed with the Securities and Exchange Commission (SEC), J&J announced efforts to resolve the criminal penalties related to Risperdal marketing. J&J stated that an agreement had been reached with the DOJ regarding the key issues; however, the settlement has yet to be finalized. J&J adjusted its financial statements for the second quarter of 2011 to reflect the financial component of the proposed criminal settlement.
In addition, J&J announced the settlement of a tolling agreement with approximately 40 states. The tolling agreement allows for the delay of the statute of limitations in order to provide J&J an opportunity negotiate civil claims with states before a state is forced to file a complaint to preserve their rights. J&J states litigation is likely if negotiated resolutions cannot be reached in regards to the civil litigation relating to the allegations of off-label promotion of Risperdal. Pursuant to the False Claims Act, companies who knowingly represent a false approval are subject to civil penalties. 31 U.S.C. § 3729.
J&J claims that the resolution of the criminal and civil matters is not expected to have a material adverse effect on the Companys financial position, although the resolution in any reporting period could have a material impact on the Companys results of operations and cash flows for that period.
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