State’s Billion-Dollar Case Against Johnson & Johnson Goes to Trial Today in Travis County

By Janet Elliott and Mark Curriden
Writers for The Texas Lawbook
(AUSTIN – January 9) Allen Jones was an investigator for the Pennsylvania Inspector General a decade ago when a routine inquiry exposed a pattern of pharmaceutical companies lavishing trips, meals and other perks on state officials who were in positions to influence which drugs would be used to treat patients under Medicaid.
The efforts appeared to have been particularly successful in Texas, a state with one of the largest Medicaid populations.
In 2004, Jones filed a whistleblower suit alleging that pharmaceutical giant Johnson & Johnson improperly marketed its antipsychotic Risperdal for unapproved uses while funneling money to members of a state panel charged with recommending drug treatments for those in state health programs. In 2006, Texas Attorney General Greg Abbott joined the lawsuit, seeking hundreds of millions of dollars in damages.
The case, which has been described by lawyers as the biggest state lawsuit since the tobacco litigation in the 1990s and involves some of the most prominent trial lawyers in Texas, goes to trial this week in Travis County.
The high-stakes Medicaid fraud lawsuit seeks $579 million in damages from Janssen, a division of New Jersey-based Johnson & Johnson, and penalties that could exceed another $500 million. The federal government will get half of whatever money is recovered in the case, and Jones could receive between 10 and 25 percent.
The Texas case is separate from a reported $1 billion settlement with the federal government and other states, which is also related to Johnson & Johnson’s marketing of Risperdal.
Risperdal was one of a new generation of antipsychotics introduced in the 1990s. Initially approved for adults suffering with schizophrenia, it soon became widely used in Texas mental hospitals and prisons as well as for so-called “off-label” uses, including for children and adolescents in the state’s foster care system.
“Not only was Risperdal not more effective, its risks were worse than its competitors and it was 45 times more expensive,” said Tom Melsheimer, a partner at Fish & Richardson in Dallas who represents the whistleblower. “The company’s claim that its product was superior and its off-label promotional efforts were not supported by science.”
What did support Janssen’s promotional efforts were influential decision makers – including state employees, University of Texas faculty and mental health advocates – who received consulting fees, extravagant meals and travel accommodations, research funding and honoraria, according to the lawsuit.
Janssen denies that it misrepresented Risperdal and rejects allegations that its marketing efforts inflated the state’s spending on the drug. In court filings, the drug company points to the state’s continued use of Risperdal since joining the whistleblower’s case in 2006.
Janssen is represented by lawyers from Locke Lord Bissell & Liddell’s Dallas office, and Stephen McConnico from Austin’s Scott, Douglass & McConnico.
“In the six years since the state began investigating the allegations in this lawsuit, the state’s only action with respect to Risperdal’s reimbursement was to replace branded Risperdal with its generic equivalent on the Preferred Drug List, which the State did not do until 2009. The state’s failure to act on its own allegations of fraud demonstrates not only the absence of any actual fraud, but also plaintiff’s true motivation in pursuing this suit. The state is looking for an ex post facto discount on the cost of Risperdal,” Janssen argued last year in asking a judge to dismiss the case.
In the 2010 fiscal year, Texas spent $15.016 million on Risperdal and $13.275 million on its generic equivalent for patients enrolled in Medicaid and the Children’s Health Insurance Program. A 2006 Texas Comptroller’s report on the use of Risperdal and other antipsychotics for foster children said the drugs cost an average of $229 per prescription.
Payments created conflict of interest, state says
The program known as the Texas Medication Algorithm Project, or TMAP, started in the mid-1990s when state mental health officials contracted with the University of Texas and some of its professors to evaluate medications for treating mental illnesses and disorders.
Jones and the state allege that a process designed to be based on independent experts was co-opted by Janssen using false and misleading information, including ghostwritten articles and industry-funded studies, while downplaying side effects, including weight gain and diabetes.
“Defendants thus ‘seeded the literature’ and increased the ‘noise level’ in the Texas healthcare community, including the Texas Medicaid community, with their false and misleading tale of Risperdal’s superiority to other antipsychotics and suitability for off-label use on vulnerable populations,” the state says in its most recent petition.
Janssen is prepared to vigorously defend itself against these claims, spokeswoman Teresa Mueller said in emailed statement.
“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,” Mueller said. “If questions are raised about adherence to our marketing and promotion policies, we act quickly to investigate the situation and take appropriate disciplinary action.”
Melsheimer said the market was limited for Risperdal prior to the marketing blitz.
“Janssen determined in 1993 that the market for this drug was the one percent of adults with diagnosed schizophrenia, which was a $1 billion market,” he says. “So, the company created a new market for the drug. They created the perception that the drug was a breakthrough for expanded off-label treatments. As a result, the revenue generated by the sale of Risperdal jumped to $34 billion between 1997 and 2010.”
The most sensational allegations involve Janssen’s use of inducements, including consulting fees, extravagant meals, travel accommodations, research funding and honoraria. A key target was Dr. Steven Shon, medical director of the Texas Department of Mental Health and Mental Retardation. Records filed in the case show that Shon received $30,000 in fees and honoraria as a frequent speaker at Johnson & Johnson-sponsored events around the United States.
David J. Rothman, a Columbia University professor who studies relations between medicine and the pharmaceutical industry, said in a report that Shon’s conduct was an “acute conflict of interest.” Shon, who resigned in October 2006, said in a deposition that he did not believe he influenced the placement of drugs on TMAP because he was an administrator and not a decision-maker in the TMAP process.
Another potential witness is M. Lynn Crismon, dean of the University of Texas College of Pharmacy. Crismon was a professor and member of the TMAP advisory panel in the mid-1990s when he “cultivated a financial relationship with J&J, accepting substantial fees and honoraria and soliciting research grants from the company,” according to Rothman’s report. “As a result, Dr. Crismon subverted the scientific integrity of his research and educational presentations, and biased his decision-making capacity as a member of TMAP.”
Crismon did not respond to a request for comment.
Trial Expected to Last Four Weeks
Similar cases against Johnson & Johnson – which did not involve Jones — in other states have produced mixed results. A judge in Philadelphia dismissed that state’s case in June 2010 after state lawyers presented a week of testimony.
Since then, a Louisiana jury has ordered the company to pay $257.7 million in damages for making misleading safety claims; $73 million in state’s legal fees were added. Last month, a South Carolina judge upheld a $327 million jury verdict for deceptive Risperdal marketing.
Other pharmaceutical companies with competing antipsychotics have paid Texas and others states multimillion-dollar settlements.
In 2009 the Texas AG recovered $55 million from Pfizer Inc. as part of a $1 billion multistate agreement over deceptive marketing of products including its antipsychotic drug Geodon. Abbott said Pfizer unlawfully promoted Geodon for use by Medicaid-eligible children to treat numerous conditions, including attention deficit disorder and anxiety, despite the lack of federal approval to use the drug for children.
Texas also reached a $30 million settlement with Eli Lilly & Co. over unlawful marking of Zyprexa and $15.7 million with Bristol-Myers Squibb Co. for its illegal marketing of several drugs, including Abilify.
Melsheimer and lawyers from Abbott’s office will split up the prosecution of the Risperdal case, including jury selection and witness presentation. Among dozens who have been deposed in the case is former state Health and Human Services Commissioner Albert Hawkins.
Eighty prospective jurors were summonsed prior to the holidays and asked to fill out a four-page questionnaire. Jury selection is expected to take one day.
State District Judge John Dietz has given each side 27 hours to present their case, and the trial is expected to last one month.