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LITTLE ROCK, Ark. - The Arkansas Supreme Court tossed out a $1.2 billion judgment against Johnson & Johnson on Thursday, reversing a lower court verdict that found the drug maker engaged in fraudulent tactics when marketing the antipsychotic drug Risperdal.
The high court ruled the state's Medicaid fraud law, which formed the basis of Arkansas' lawsuit, regulates health care facilities and that drug manufacturers, including Johnson & Johnson and its subsidiary, Janssen Pharmaceutical Inc., don't fall under its scope.
The state alleged that the companies didn't properly communicate Risperdal's risks and marketed it for off-label use, calling the practices fraudulent.
Johnson & Johnson said there was no fraud and Arkansas' Medicaid program wasn't harmed.
Attorney General Dustin McDaniel said Thursday that he believes the Legislature intended for the Medicaid fraud law to allow lawsuits like the one against Johnson & Johnson.
"I am disappointed that the Court viewed the law differently. Nevertheless, I will keep working to protect consumers against fraud and the kinds of irresponsible and greedy actions shown by Johnson & Johnson and Janssen Pharmaceuticals in their marketing of the drug Risperdal," McDaniel said in a statement released by his office.
Johnson & Johnson issued a statement that included a defence of how Risperdal is used.
"We are pleased that the Arkansas Supreme Court has ruled in our favour, reversing and dismissing the state's claims brought under the Medicaid Fraud False Claims Act, and has also reversed the Deceptive Trade Practices Act claim, remanding it to the court below.
"Janssen remains strongly committed to ethical business practices. Risperdal continues to help patients around the world who suffer from the debilitating effects of schizophrenia and bipolar mania," the companies said in the release.
McDaniel's office said it can't refile the major component of the lawsuit by alleging the companies broke some other law, but it intends to pursue a lesser aspect of it that the state Supreme Court sent back to the lower court. That part of the lawsuit, for which the state was awarded $11 million, claimed that the companies broke the state's deceptive trade practices law.
In a separate ruling, the justices threw out $181 million in fees and costs awarded to the state. Johnson & Johnson argued, among other things, that the award was premature. The high court agreed and sent the fee issue back to Fox's court.
Risperdal and similar antipsychotic drugs have been linked to increased risk of strokes and death in elderly patients, along with seizures, weight gain and diabetes.
Risperdal was introduced in 1994 as a "second-generation" antipsychotic drug — and it earned Johnson & Johnson billions of dollars in sales before generic versions became available. The drug is used to treat schizophrenia, bipolar disorder and irritability in autism patients.
An Arkansas jury found the New Jersey-based companies liable in 2012. Pulaski County Circuit Judge Tim Fox then ordered the companies to pay $5,000 for each of the 240,000 Risperdal prescriptions for which Arkansas' Medicaid program paid during a 3 1/2-year span.
The lawsuit accused the companies of deceptive trade practices and Medicaid fraud and sought repayment for millions paid out by the state's Medicaid program for unnecessary prescriptions. The original lawsuit identified more than 597,000 prescriptions over a 13-year period, but that number was whittled down after challenges from the drug companies during pretrial proceedings.
Fox also fined the companies $2,500 for each of the more than 4,500 letters that Janssen sent to Arkansas doctors that the state said downplayed Risperdal's side effects. That's where the $11 million award was made under the state deceptive trade practices law.
In a separate action brought by the U.S. Department of Justice, Johnson & Johnson agreed in November to pay more than $2.2 billion to federal and state governments and in penalties to resolve criminal and civil allegations that the company promoted powerful psychiatric drugs, including Risperdal, for unapproved uses in children, seniors and disabled patients.
The agreement was the third-largest settlement with a drug maker in U.S. history.
Johnson & Johnson and Janssen are also awaiting a ruling by the South Carolina Supreme Court, where the companies have an appeal pending of a $327 million judgment in a similar case. A $330 million verdict against both companies in Louisiana was overturned in January.
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Follow Chuck Bartels on Twitter at https://twitter.com/cbartelsLIT
