Cuccinelli recovers $21 million in health care fraud settlements with Johnson & Johnson

- J&J and its subsidiary marketed antipsychotic drugs Risperdal and Invega for unapproved uses in vulnerable patient populations -

RICHMOND (November 4, 2013) - Late today, Attorney General Ken Cuccinelli announced that his office has recovered $21 million in two settlements with pharmaceutical companies that allegedly defrauded Virginia's Medicaid program by - among other things - marketing the antipsychotic drugs Risperdal and Invega for uses not approved by the Food and Drug Administration. Johnson & Johnson and subsidiary Janssen Pharmaceuticals, Inc., also promoted that Risperdal be prescribed to children, the elderly, and those with mental disabilities despite warnings of significant health risks and despite no FDA approval for use in these patient populations. The two settlements agreed to today will result in nearly $10 million in restitution to Virginia's Medicaid program in addition to civil and criminal penalties for the companies.

"J&J put profits over patients when it promoted Risperdal and Invega for unapproved uses that threatened the most vulnerable in our commonwealth - our children, the elderly, and those with mental disabilities," said Cuccinelli.

Virginia joined with other states and the federal government in a $1.6 billion total global settlement with New Jersey-based pharmaceutical manufacturer Johnson & Johnson (J&J) and its subsidiary, Janssen Pharmaceuticals, Inc. Once the FDA approves a drug as safe and effective, a manufacturer cannot market or promote the drug for another unapproved off-label use.

The states and the federal government contend that the companies promoted Risperdal for unapproved uses, made false and misleading statements about the safety and efficacy of the drug, and paid illegal kickbacks to health care professionals and long-term care pharmacy providers to induce them to prescribe Risperdal to children, the elderly, and those with mental disabilities.

The states and the federal government further contend that the companies promoted Invega for off-label uses and made false and misleading statements about the safety and efficacy of the drug. The manufacturers' alleged unlawful conduct caused false claims to be submitted to government-funded health care programs, including state Medicaid programs. (More information on what the companies did is in the "Details of off-label allegations" section below.)

Virginia will receive approximately $17,445,682 as part of this settlement. Cuccinelli will be returning approximately $8,105,539 of that to the commonwealth's General Fund Health Care account, which funds the state part of Virginia's Medicaid program. Because Medicaid is a joint federal-state program, J&J's conduct caused losses to both the federal and state governments. The remaining part of the $17 million will reimburse the federal government for its portion of the losses in Virginia's Medicaid program, and a percentage will also go to the whistleblowers who helped bring the case.

Under the civil portion of the settlement, the companies will pay more than $1.2 billion total to the states and the federal government for allegedly violating the federal False Claims Act and state false claims laws. In addition, Janssen will plead guilty to a criminal misdemeanor charge of misbranding Risperdal in violation of the federal Food, Drug, and Cosmetic Act. As part of the criminal plea, Janssen has agreed to pay an additional $400 million in criminal fines and forfeitures, for a total settlement of $1.6 billion from the two companies. The companies will also enter into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services' Office of the Inspector General, which will monitor the companies' future marketing practices.

Details of off-label allegations

The states and federal government alleged that Janssen marketed Risperdal to control the behaviors of elderly nursing home residents, children, and individuals with mental disabilities.

The complaint alleged that J&J and Janssen were aware that Risperdal posed serious health risks for the elderly, including an increased risk of strokes, but that the companies downplayed these risks. For example, when a J&J study of Risperdal showed a significant risk of strokes and other adverse effects in elderly dementia patients, the complaint alleged that Janssen combined the study data with other studies to make it appear that there was a lower overall risk of adverse effects.

The complaint also alleged that Janssen knew that patients taking Risperdal had an increased risk of developing diabetes, but promoted that Risperdal did not cause diabetes.

The complaint alleged that, despite the FDA warnings and increased health risks, from 1999 through 2005, Janssen aggressively marketed Risperdal to control behavioral disturbances in dementia patients through an "ElderCare sales force" designed to target nursing homes and doctors who treated the elderly. In business plans, Janssen's goal was to "[m]aximize and grow RISPERDAL's market leadership in geriatrics and long term care."

In addition to promoting Risperdal for elderly dementia patients, from 1999 through 2005, Janssen allegedly promoted the antipsychotic drug for use in children and individuals with mental disabilities. The complaint alleged that J&J and Janssen knew that Risperdal posed certain health risks to children, including the risk of elevated levels of prolactin, a hormone that can stimulate breast development and milk production.

In addition to allegations relating to Risperdal, today's settlement also resolves allegations relating to Invega, a newer antipsychotic drug also sold by Janssen. Although Invega was approved only for the treatment of schizophrenia and schizoaffective disorder, the government alleged that, from 2006 through 2009, J&J and Janssen marketed the drug for off-label indications and made false and misleading statements about its safety and efficacy.

A second settlement over kickbacks

In a separate but related case, in 2010, the United States, Virginia, California, Indiana, Kentucky, and Massachusetts issued complaints in the U.S. District Court for the District of Massachusetts alleging Johnson & Johnson paid the kickbacks to Omnicare, the nation's largest pharmacy specializing in dispensing drugs to nursing home patients. The alleged kickbacks were to switch nursing home patients to Johnson & Johnson drugs, including Duragesic, Aciphex, Propulsid, Levaquin, Ultram, Procrit and, most notably, Risperdal. Such kickbacks violated the Virginia Fraud Against Taxpayers Act.

Omnicare settled these allegations with the United States and the five plaintiff states in 2009 for $98 million. J&J settled today for $149 million, with $132 million going to the federal government, and $17 million going to the five participating states.

Virginia will receive an additional $3,574,970 as a result of this separate kickback settlement. $1,775,497 will go to the commonwealth's General Fund Health Care account. The remainder of the $3.5 million will reimburse the federal government for its portion of the losses in Virginia's Medicaid program, and a percentage will also go to the whistleblowers who helped bring the case.

Assistant attorneys general Candice Deisher, Kimberly Bolton, and former assistant attorney general Lelia Winget-Hernandez represented the commonwealth in the kickback case. The Virginia Department of Medical Assistance Services assisted in the development of the case, especially with evidence discovery.

AG's fraud recoveries have paid the General Fund double the office's budget allocation

On October 18, Cuccinelli announced a $37 million settlement his office negotiated with McKesson Corporation over allegations the company violated the Virginia Fraud Against Taxpayers Act by conspiring to inflate prices for more than 400 brand-named prescription drugs.

With McKesson's recovery and today's two recoveries, the office has returned almost twice as much money to the General Fund during Cuccinelli's tenure than the General Assembly appropriated to fund the office. From 2010-2013, the General Fund budget for the office was approximately $78 million. The Medicaid fraud unit alone has returned almost $78 million to the General Fund during that same time. Additionally, the Consumer Protection Section, which handles fraud not related to Medicaid, has returned $73 million to the General Fund. And Cuccinelli has returned an additional $3.2 million to the General Fund through annual savings in his budget over the last four years.

Virginia MFCU's recoveries in last four years now total more than $1.6 billion - more than all other recoveries combined since MFCU began 30 years ago. This amount includes money recovered not only for Virginia, but for the federal Medicaid program and other states.