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J & J reserves money in federal drug marketing probe

Wed, 05/11/2011 - 11:17am
LINDA A. JOHNSON - AP Business Writer - Associated Press

Healthcare giant Johnson & Johnson has set aside a reserve related to a federal criminal investigation of its sales and marketing practices for antipsychotic drug Risperdal, once one of its biggest sellers.

The company did not disclose the amount of the reserve. It was mentioned in J&J's quarterly financial filing with the Securities and Exchange Commission, in an 11-page section detailing government investigations of the company.

Company spokeswoman Carol Goodrich said Wednesday that J&J does not disclose the amount of reserves taken for individual product litigation.

When J&J reported its first-quarter results last month, it noted it took after-tax charges totaling $271 million for litigation expenses and additional costs related to its recall of defective hip replacements made by its DePuy unit. J&J, based in New Brunswick, N.J., did not give a breakdown of those charges.

The wide-ranging Risperdal probe focuses on whether J&J illegally promoted sales of the schizophrenia drug for unapproved uses, including encouraging nursing homes to give it to patients with dementia, a group for whom it can hasten death.

Marketing drugs for unapproved, or off-label, uses has been common in the pharmaceutical industry for years as companies seek to bolster their revenue, outsell their rivals and meet Wall Street expectations.

The probe started with a 2004 federal subpoena demanding documents, covering the years 1997 through 2002, on J&J's sales practices, payments to physicians related to marketing of Risperdal and clinical trials conducted on the drug. That subpoena came from the Office of the Inspector General of the U.S. Office of Personnel Management.

In 2005, the U.S. Attorney's Office in Philadelphia also subpoenaed J&J, asking for information on the marketing of and adverse reactions to Risperdal, which brought in more than $3 billion in annual sales before getting generic competition about three years ago. The company stated it has been cooperating by providing requested documents and witnesses for testimony before a grand jury.

In February 2010, the government demanded additional information on sales and marketing of Risperdal and a newer schizophrenia drug, Invega. Currently, the Department of Justice and the U.S. Attorney in Philadelphia are actively pursuing both criminal and civil actions against J&J, according to its quarterly SEC filing submitted late Tuesday.

The company said discussions with the government continue "in an effort to resolve criminal penalties" under the Food Drug and Cosmetic Act, as well as civil claims in a whistleblower lawsuit related to Risperdal marketing. The government has notified Johnson & Johnson it will join the whistleblower in that lawsuit — likely a sign the government believes there's a strong case and that it may be able to recover millions paid for prescriptions for patients in government health programs.

If J&J can't instead reach a settlement with the government agencies, criminal and civil cases related to the alleged off-label promotion are likely, the company stated in the SEC filing. J&J wrote that any resolution should not significantly harm its financial position, but could have a material effect on quarterly results.

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