Healthcare giant Johnson & Johnson (JNJ: Quote) is nearing a $1.5 billion to $1.7 billion settlement with the Department of Justice prosecutors to resolve allegations against its subsidiary for using false marketing tactics for its schizophrenia drug Risperdal, according to a Wall Street Journal report on Wednesday. An agreement is expected to be reached in a couple of weeks.
The federal prosecutors rejected a tentative $1 billion settlement in mid-March and were pushing for stiffer settlement, which will see an end to a number of lawsuits, state probes and other investigations. They are said to be looking for a $2 billion settlement.
Meanwhile, J&J is also looking to prevent a felony charge, which can prevent it from selling its drugs to government health programs such as Medicare.
J&J's Risperdal has been its flagship product and a top-selling drug until it lost U.S. patent protection for the drug in 2008. It generated record sales of $2.2 billion in 2007.
The drug maker's New Jersey-based subsidiary Janssen Pharmaceuticals, Inc. is alleged to have used unlawful means between 1999 and 2004 to persuade Medicaid health program officials to spend millions on Risperdal.
New Jersey-based Janssen focuses on mental health and offers prescription medications for the treatment of schizophrenia, autistic disorder, among others.
J&J has been investigated up on for alleged off-label promotion of Risperdal and another schizophrenia treatment Invega to nursing-home pharmacy operators, including for nursing home residents, by paying them millions of dollars in bribe. It is said to have bribed pharmaceutical benefits manager Omnicare, Inc. (OCR).
The bribe was paid to prescribe the drugs for unapproved uses, such as for treating dementia and Alzheimer's. Janssen is also accused of having recommended the usage of the antipsychotic drug on children, even though FDA had only approved it to treat adult schizophrenic patients.
Further, Janssen is alleged to have misled Medicaid officials to give preference to Risperdal over other companies' medications, even though there wasn't any difference in the drug's efficacy. Risperdal was also exorbitantly priced compared to competitors.
The courts have until now already ordered J&J to pay a total of more than $1.9 billion related to judgments in various state courts on the illegal promotion of Risperdal.
In April, an Arkansas Court slapped a fine of more than $1.1 billion on J&J, and in January the company said it would pay $158 million to settle a Texas suit. J&J has also been asked to shell out $327 million in a South Carolina case and $258 million in Louisiana, with appeals progressing in both cases.
The investigations date back to 2004, when Attorney General Abbott and whistleblower Allen Jones had sued Janssen. Jones had uncovered the evidence during his work as an investigator in the Pennsylvania Office of Inspector General.
The company said earlier in the month that it expects to record a special charge of about $600 million in second quarter related to settlement of lawsuits. It also took a $1.1 billion charge in the fourth-quarter to cover the potential legal settlements.
In a similar probe, the DoJ reached a $1.4 billion settlement with Eli Lilly & Co. (LLY) in 2009 to resolve the allegations. Eli Lilly alleged improperly promoted its antipsychotic drug Zyprexa. Another drug major Pfizer, Inc. (PFE) also agreed in 2009 to pay $2.3 billion to settle a federal probe related to the promotion of its painkiller Bextra and other drugs.
JNJ closed Wednesday's regular trading session at $67.00, up $0.28 or 0.42% on a volume of 21.25 million shares.
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by RTT Staff Writer
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