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Johnson & Johnson Records a $3.3 Billion Charge for Product Liability

Lawsuits over Risperdal Marketing at Johnson & Johnson Continue to Raise Questions about Ethics at the Company

Johnson & Johnson announced this week that it has recorded pretax charges and special items totaling $3.3 billion for the fourth quarter of 2011 in order to provide a reserve for probable losses from product liability lawsuits. The pending lawsuits are attributable to misleading marketing practices and manufacturing-quality lapses.

I have previously blogged about product deficiency and ethics questions at Johnson & Johnson with respect to issues such as: quality control-failures at manufacturing plants of subsidiary McNeil Consumer Healthcare that led to recalls of the popular over-the counter drug Motrin; baby shampoo that allegedly includes the potentially cancer-causing chemical methylene chloride; lawsuits concerning its subsidiary DePuy Orthopaedics and the metal-on-metal hip implants that were found to shed minute metal particles into a patient’s bloodstream over time; and suits by women who have suffered serious injury and disfiguration claiming that vaginal mesh manufactured by J&J subsidiary Ethicon caused them life-altering complications. In today’s blog I deal with what may be the worst ethical lapse at J&J -- its marketing of the antipsychotic medication Risperdal.  

Risperdal is an "atypical antipsychotic". It works by changing the effects of chemicals in the brain. Risperdal is used to treat schizophrenia and symptoms of bipolar disorder (manic depression). It is also used in autistic children to treat symptoms of irritability. In the latter case questions have been raised whether the company received approval from the federal Drug Administration (FDA) to market the drug for use by children. Other states have brought lawsuits against J&J for marketing agreements to promote the drug.

On January 9, J&J, which has already lost judgments of almost $660 million over the marketing of its Risperdal, went to trial facing a demand by Texas for damages of more than $1 billion. State Attorney General Greg Abbott said J&J’s Janssen unit paid state officials to get Risperdal on approved drug lists, marketed it for unapproved uses to children and the elderly, and lied about its safety and effectiveness. The case in state court in Austin was filed by a whistle-blower, Allen Jones, an ex-investigator for the Pennsylvania Office of Inspector General.

A jury weighing only the claim that the company downplayed the drug’s risks awarded Louisiana $257.7 million in 2010. A judge in South Carolina last year ordered J&J to pay $327 million over Risperdal sold in the state. The Texas suit may result in the largest-ever false-claims verdict, said Patrick Burns of the advocacy organization Taxpayers Against Fraud in Washington. J&J and its Janssen unit, which sold Risperdal, deny any wrongdoing.

Jones probed allegations that the chief pharmacist for the state’s mental health office had received payments from pharmaceutical companies. He sued Texas in 2004, his last year in the Pennsylvania job. Jones determined in his probe that Janssen had “engaged in a fraudulent scheme that included payments to at least one Texas state official” to ensure that Risperdal was included as a preferred drug in the state’s Texas Medication Algorithm Project, known as TMAP, he said in court papers.

“Janssen had made payments to Texas and other state officials to facilitate the exportation of TMAP to other states, including Pennsylvania,” Jones said. He sued under a Medicaid-fraud law similar to the federal False Claims Act. It allows a whistle-blower to share in any settlement money or damages.

Texas claims that Janssen and J&J paid four state health officials $340,000 to promote Risperdal, inducing them to breach their duties to the state. “J&J sent the four leaders of TMAP around the country to promote TMAP, and, in the process, Risperdal,” David Rothman, a state expert, said in a pretrial report.

With respect to off-label uses, allegations include that J&J marketed Risperdal for the treatment of medical conditions for which it hadn’t received regulatory approval after clinical trials. It was allegedly sold for use by children and the elderly, according to Texas officials. Texas alleged that Janssen began promoting prescriptions for children as soon as the drug was being sold without any approvals by the FDA for such use.

“They had their sales people out calling upon doctors as early as 1994 who saw no adult patients, who saw only children”. One psychiatrist in north Texas who treated only children was called by Janssen sales people 96 times. There was no FDA-approved indication for any use in the child and adolescent population from December 1993 to October 2006, Texas said in its complaint.

Johnson & Johnson needs a change in leadership and the board of directors must play a more active role in overseeing the company’s product quality processes and the marketing of pharmaceutical products. It is sad to see how low the company has fallen on the ethics scale. The reputation it built in handling the Tylenol poisoning incident in 1982 has been all but forgotten. What’s worse is the company seems to have forgotten the values in its own Credo that made it a model for business ethics. They include the statement:

“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality”.

Blog posted by Steven Mintz, aka Ethics Sage, on January 27, 2012