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J&J Penalized $1.1 Bln. In Risperdal Malpractices Case

4/11/2012 7:50 PM ET

An Arkansas Court Wednesday slapped a fine of more than $1.1 billion on Johnson & Johnson (JNJ: Quote), after it was found guilty of using dubious means to push its schizophrenia drug Risperdal in the state.

The fine is related to a 2007 lawsuit whereby J&J and its Janssen unit were charged with misleading Medicaid officials in Arkansas into believing that Risperdal was better compared to rival drugs. J&J was also alleged to have inflated the cost of Risperdal thereby causing undue loss to Arkansas Medicaid insurance program.

J&J was also charged for failing to disclose exact information about potential risks of Risperdal, including increased blood sugar and diabetes. The company was also found guilty of marketing the drug for unapproved uses in children and adults. The FDA had cleared the drug for treatment of adult schizophrenic patients only.

The Arkansas trial spanned two weeks and was held in Pulaski County Circuit Court in Little Rock. State Judge Tim Fox announced the over $1.1 billion penalty Wednesday.

Fox's judgment was on the premise that J&J committed about 238,000 violations of state Medicaid fraud laws by using questionable means to sell Risperdal for about four years from 2002. Judge Fox penalized J&J with $5,000 for each violation.

J&J meanwhile has denied all of the charges.

This is not the first time that J&J is being handed out penalties. The company in January said it would pay $158 million to settle a Texas suit accusing it of illegally marketing Risperdal to patients. Similar suits are pending in other states as well.

The company was earlier asked to shell out $327 million in a South Carolina case and $258 million in Louisiana, where appeals are on in both cases.

J&J has also agreed in principle to plead guilty to a misdemeanor violation of a federal law in connection with a U.S. Justice department-led investigation of its Risperdal selling practices. The company is reported to be in talks to settle civil allegations in connection with the case.

The Justice department has been over the years probing these charges. Investigations go way back to 2004 when Attorney General Abbott and whistleblower Allen Jones had sued Janssen. Jones unearthed evidence during his work as an investigator in the Pennsylvania Office of Inspector General.

JNJ is trading at $64.13, down $0.07 or 0.11%, on the NYSE. In after hours, the stock dropped 0.05%.

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by RTT Staff Writer

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