To settle charges of misbranding and paying "kickbacks" to doctors and nursing homes, Johnson & Johnson will pay $2.2 billion.
The settlement involves the schizophrenia drugs Risperdal and Invega, and the heart failure drug Natrector. According to the Attorney General Eric Holder, the company "lined their pockets at the expense of American taxpayers, patients and the private insurance industry."
The penalty amounts to one of the country's largest health care-related settlements.
It is also one of the largest whistleblower payouts in U.S history. Whistleblowers in three states will collect $167.7 million under the False Claims Act.
The drug Risperdal was approved by the Federal Drug Administration to treat schizophrenia but was marketed to doctors and nursing homes as treatment for dementia in elderly patients. The company also knew there was an increased risk for diabetes on the drug, but did not publicly acknowledge the risk. The heart failure drug was marketed as treatment for patients with less severe heart failure than mentioned in its FDA approval.
Johnson & Johnson will plead guilty to a misdemeanor misbranding charge stemming from marketing charges.
The settlement includes payments to the federal government and several states by Johnson & Johnson and several subsidiaries including Janssen Pharmaceuticals and Scios.
In 2011, Johnson & Johnson paid Arkansas $1.2 billion in fines for deceptive marketing and making false claims about Risperdal. The Arkansas case involved 239,000 violations of the state's False Claims Act and 4,600 violations of the Deceptive Trade Practices Act.
The False Claims Act allows for "any person," including a corporation, who engages in fraudulent or illegal business practices to be held financially responsible for the fraud. When pharmaceutical fraud is committed, "any person" may include:
Â· A drug manufacturer
Â· An executive of the drug manufacturer
Â· A sales representative for the drug manufacturer
Â· A doctor, health care professional or health care system
Anyone who participates in a scheme to defraud the federal government may be held liable under the False Claims Act. The following are common examples of pharmaceutical fraud that are prohibited under federal law:
Â· Off-label marketing. Marketing a drug for a purpose not approved by the FDA, pharmaceutical fraud includes:
Â· Medicaid or Medicare rebate fraud or price fixing. Drug companies must disclose the best price paid for their drugs each quarter and must refund the difference that Medicaid or Medicare paid above the company's best price or average manufacturer price (AMP).
Â· Improperly manufactured drugs. When the FDA approves a drug, it also approves the specific process by which the drug is manufactured. Deviating from the approved process results in an illegal altered or adulterated drug.
Â· Kickbacks. Fees paid to doctors by a drug manufacturer, often disguised as 'consulting fees' or 'training fees,' as compensation or an incentive for prescribing its drug are illegal.
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Source: CNN, "Johnson & Johnson to pay $2 billion for false marketing," Nov. 4, 2013.