Texas Attorney General Greg Abbott is pitted against one of the largest multinational pharmaceutical companies in a trial starting this week that could bring the state more than $1 billion - one of its largest potential awards since a multibillion-dollar tobacco settlement in 1998.
Abbott is charging that Johnson & Johnson Inc., its wholly owned subsidiary Janssen Pharmaceutical LLC and five other related companies defrauded the state in a "sophisticated marketing scheme" that caused the Texas Medicaid Program to pay too much for Janssen's schizophrenia drug Risperdal, the lawsuit says.
The state also questions the companies' marketing practices and alleges that the companies misled state health officials about the drug's effectiveness, the risk of side effects and its suitability for pediatric use.
The trial is scheduled to begin at 9 a.m. today in Judge John Dietz's 250th state District Court in Travis County.
The drug companies have denied the allegations in court documents and in a statement issued last week.
"Janssen is prepared to vigorously defend itself against these claims," the company said. "We are committed to ethical business practices and have policies in place to ensure that our products are only promoted for their FDA-approved indication. If questions are raised about adherence to our marketing and promotion policies, we act quickly to investigate the situation and take appropriate disciplinary action."
Texas got involved with Risperdal litigation about six years ago, when Abbott's office joined a lawsuit filed by corporate whistle-blower Allen Jones, who is a former employee of the office of the inspector general of Pennsylvania.
Jones has questioned the process for how Risperdal was approved in Texas and how that information was used by other states in their approval processes.
Jones filed suit in 2004 after his investigation in Pennsylvania led him to examine the companies' track record in Texas. As a whistle-blower plaintiff, he alleged that the companies overcharged the states and overstated the drug's effectiveness.
Risperdal, approved by the FDA in 1993, was one of Johnson & Johnson's top-selling drugs. Sales dropped off when Risperdal got generic competition in June 2008. Originally, the drug was only approved for adults, but later the FDA allowed it for children and the elderly.
Texas' case alleges that the drug companies prevented state health officials from receiving "truthful information about the safety, efficacy, appropriate uses and cost-effectiveness of Risperdal."
Risperdal - which once brought Johnson & Johnson more than $3.4 billion in annual sales - and similar antipsychotic drugs have been linked to increased risk of strokes and death in elderly dementia patients, seizures, major weight gain, onset of diabetes and potentially fatal high blood sugar, plus many more common but less-serious side effects. It also has been linked to lactation in some male patients, according to court documents.
The lawsuit says that Johnson & Johnson and its subsidiaries employed suspect tactics in order to sell Risperdal in the public sector, which promised to be especially lucrative. Eighty-five percent of Risperdal's revenue was projected to come from the public sector, because schizophrenic adults tend to be poor and uninsured.
"Understanding the need to obtain significant government buy-in to achieve their financial goals for Risperdal, defendants set their sights on a state with one of the largest Medicaid populations in the country - Texas," according to the filing by the state and Jones.
But getting a state like Texas to put a drug on a list of preferred medications - which the companies ultimately accomplished - can be a tremendous undertaking.
The lawsuit discusses the challenge for the companies to persuade decision-makers in Texas' public medical agencies to make the move - despite what it said was evidence that the drug is more expensive and no more effective than older medications, the state and Jones say in their lawsuit.
Johnson & Johnson and the related companies even created a special business unit called the Public Health Systems and Reimbursement Department designed to push the drug in the public sector, the lawsuit says.
The companies also had to navigate the Texas Medicaid Program's cost-savings measures , and to do so the companies employed a campaign that included misrepresentations about the drug's effectiveness and superiority over other drugs, the state alleges.
The state's case outlines allegations of kickbacks - "money going directly to key decision-makers," the lawsuit says - paid more than a decade ago to several doctors employed by the state's Health and Human Services Commission to give Risperdal preference over other antipsychotic drugs.
Jones' lawsuit claims that Risperdal became part of the treatment plan because of the drug companies' "improper influence" over Dr. Steven Shon, the former medical director for behavioral health at the Department of State Health Services. Shon had served as a paid Janssen consultant and traveled the country promoting the Texas plan. He denies the allegations in the lawsuit, however. And in 2006, he said: "I didn't personally benefit from this project."
Stephanie Goodman, a spokeswoman for the commission, said in an email last week that Shon resigned from the state in October 2006.
No state employees were named in the suit, but one of the doctors is accused of accepting an honorarium from Johnson & Johnson to fly around the country urging doctor colleagues in other states' Medicaid and mental-health programs to use Risperdal instead of other drugs, said Thomas Melsheimer, a Dallas lawyer who represents Jones and is co-counsel with the Texas attorney general in the case.
Jones' legal team also charged that the company perfected its marketing skills in Texas before reaching out to the other states in which it pushed for expanded Risperdal prescriptions.
Other states have already successfully sued Johnson & Johnson and its subsidiaries in Risperdal-related cases.
In October 2010, Louisiana got a ruling to receive $258 million from the drugmaker for violating the state's Medicaid Fraud Act.
And in June of last year, a judge in South Carolina issued an order for the defendants to pay $327 million, plus $73 million for the state's legal expenses, for misrepresentation of possible side effects of Risperdal.
Attorneys for South Carolina told The Associated Press that it was the biggest verdict in the country over the marketing of Risperdal.
By comparison, Melsheimer has said that he is seeking more than $1 billion against the companies, based on the large number of Texans who were prescribed the drug.
Texas' largest legal award came in 1998, when it won a $17.3 billion settlement from five tobacco manufacturers after suing to recover the state's cost of treating ill smokers.
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source: Austin American Statesman (Eaton, 1/8)
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