April 11, 2012, 10:31 a.m.
LITTLE ROCK, Ark. — An Arkansas judge on Wednesday fined Johnson & Johnson and a subsidiary more than $1.1 billion after a jury found that the companies downplayed and hid risks associated with taking the antipsychotic drug Risperdal.
Circuit Judge Tim Fox determined that Johnson & Johnson and its subsidiary, Janssen Pharmaceuticals Inc., committed nearly 240,000 violations of the state's Medicaid fraud law — or one for each Risperdal prescription issued to state Medicaid patients over a 3 1 / 2-year period. Each violation carried a $5,000 fine, the state's mandatory minimum amount, bringing the total to more than $1.1 billion.
Fox issued an additional $11 million fine for more than 4,500 violations under the state's deceptive practices act, but he rejected the state's request to levy fines in excess of the $5,000 minimum for the Medicaid violations.
Attorney General Dustin McDaniel said in an emailed statement that the ruling "sends a clear signal that big drug companies like Johnson & Johnson and Janssen Pharmaceuticals cannot lie to the (U.S. Food and Drug Administration), patients and doctors in order to defraud Arkansas taxpayers of our Medicaid dollars."
Janssen issued a statement in which it said, "We are disappointed with the judge's decision on penalties. If our motion for a new trial is denied, we will appeal."
The Arkansas Supreme Court would hear the appeal.
Janssen attorney Ed Posner argued during Wednesday's penalty hearing that there was no evidence that harm had been done to people who were prescribed Risperdal or to the state's Medicaid program, and that the state's mandatory penalties were therefore inappropriate. At the beginning of the hearing, the companies unsuccessfully lobbied the judge to declare the penalty portions of the Medicaid fraud and deceptive practices laws ruled unconstitutional.
Arkansas was one of several states to sue over Risperdal. A South Caroline judge upheld a $327 million civil penalty against the J&J and Janssen in December. Meanwhile, Texas reached a $158 million settlement with the companies in January in which the company didn't admit fault.
Hours after the ruling, shares of New Brunswick, New Jersey-based Johnson & Johnson were down 24 cents, to $64.00.
Jurors in Arkansas were not told about the financial stakes during 10 days of testimony, beyond that Janssen could have seen a $200 million swing in its revenues if it issued alarming warnings that the drug could cause weight gain, diabetes and other health effects. If upheld, the award would go toward the state's Medicaid fund, which is facing a projected $400 million deficit next year.
Risperdal, introduced in 1994, is a "second-generation" antipsychotic drug that earned Johnson & Johnson billions of dollars in sales before generic versions became available several years ago. It is used to treat schizophrenia, bipolar disorder and irritability in autism patients. Risperdal and similar antipsychotic drugs have been linked to increased risk of strokes and death in elderly dementiapatients, seizures, weight gain and diabetes.
The 12-person jury deliberated for three hours Tuesday before deciding in favor of the state.
Janssen continued to maintain after the verdict that it did not break the law, pointing out that the package insert included with the medication was approved by the U.S. Food and Drug Administration.
At the start of Wednesday's hour-long hearing, Fox said the Arkansas Supreme Court had ruled in a 1969 case that fines could not be found excessive, and thus unconstitutional, based simply on a large number of violations.
The ruling represents a political victory for McDaniel, who is expected to run for governor in 2014.
The state is facing a shortfall of an estimated $400 million in its Medicaid program next year.
Matt DeCample, a spokesman for Gov. Mike Beebe, said it's too early to say how the money will be distributed if the fines are upheld.
"While it's a very impressive award, we recognize that the appeals process can be a lengthy one, so it is too early to speculate about the use of that money," DeCample said in an email.