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U.S. Attorney: Johnson & Johnson Paid Millions In Kickbacks To Boost Sales Of Schizophrenia Drug In Nursing Homes

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TRENTON, N.J. — Federal prosecutors said Friday that health care giant Johnson & Johnson paid tens of millions of dollars in kickbacks so nursing homes would put more patients on its blockbuster schizophrenia medicine and other drugs.

In a complaint filed Friday, prosecutors said J&J paid rebates and other forms of kickbacks to Omnicare Inc., the country's biggest dispenser of prescription drugs in nursing homes. Prosecutors allege Omnicare pharmacists then recommended that nursing home patients with signs of Alzheimer's disease be put on the powerful schizophrenia drug Risperdal, which was later found to increase risk of death in the elderly.

The allegations are in a complaint filed by the U.S. Attorney in Boston, whose office has joined two whistle-blower cases. One was filed in 2003 by a former Omnicare pharmacist in Chicago, Bernard Lisitza, who alleges he was fired after he challenged the Risperdal kickbacks and other improper practices at the company. The other was filed by former Omnicare financial analyst David Kammerer in 2005, after he resigned from the company.

"Kickbacks in the nursing home pharmacy context are particularly nefarious because they can result in excessive prescribing of strong drugs to patients who have little or no control over the medical care they are receiving," U.S. Attorney Carmen Ortiz said in a statement. "Nursing home doctors should be able to rely on the integrity of the recommendations they receive from pharmacists, and those recommendations should not be a product of money that a drug company is paying to the pharmacy."

Johnson & Johnson, based in New Brunswick, N.J., said in a statement it is reviewing the complaint and "will address the government's lawsuit in court. We believe airing the facts will confirm that our conduct, including rebating programs like those the government now challenges, was lawful and appropriate. We look forward to the opportunity to present our evidence in court."

Ortiz's office is seeking triple damages, restitution and other penalties under the federal False Claims Act and other laws. The damages would be based on the amount of false claims charged to Medicaid, which paid for about two-thirds of the claims Omnicare submitted for J&J drugs – possibly hundreds of millions of dollars.

Separately, Johnson & Johnson said Friday it's expanding a recall of over-the-counter medications, due to a moldy smell that has made users sick, from Tylenol to some other brands.

In afternoon trading, Johnson & Johnson shares fell 91 cents to $64.20.

"The government's complaint paints a sordid picture of J&J payola driving sales of drugs in nursing homes," said Michael Behn, a Chicago attorney who filed the whistle-blower complaint in October 2003 on behalf of Lisitza. "Pharmacists are trusted professionals. There can be zero tolerance for kickbacks."

The government's motion to intervene in the case was approved last month.

Its complaint alleges the scheme went on from 1999 through 2004, a period when J&J's sales of drugs through Omnicare jumped from about $100 million to more than $280 million. More than one-third of that was sales of Risperdal; the other drugs were pain relievers Duragesic and Ultram and an antibiotic, Levaquin.

Soon after that, the Food and Drug Administration required Risperdal to be sold with its most severe, "black box" warning, stating that giving Risperdal and similar drugs to elderly patients with dementia-related psychosis increased their risk of death. The warning states the use of Risperdal is not approved for patients with dementia-related psychosis – schizophrenia and other mental illnesses causing delusions and hallucinations.

Yet an Archives of Internal Medicine study published Monday covering nearly 17,000 nursing home residents around the country found one-third of those getting antipsychotic medications in 2006 didn't have appropriate symptoms. In addition, nursing homes that already had the highest rates of antipsychotic medication use were much more likely to give those drugs to new patients as they arrived. Such drugs leave patients sedated – in what's called a chemical restraint – most of the time, making them easier to manage, particularly in nursing homes with insufficient staff.

Risperdal brought J&J $1.73 billion in sales in the first nine months of 2009, nearly 4 percent of its $45.3 billion in total revenue. Sales have been falling recently due to generic competition to one version.

Last November, Omnicare agreed to a $90 million settlement with the federal government and numerous states to resolve its liability in the case, according to Ortiz.

The complaint states that Johnson & Johnson knew Omnicare pharmacists reviewed the charts of nursing home patients at least once a month, then made recommendations to physicians on what drugs patients should be getting. The complaint alleges J&J knew physicians accepted those recommendations more than 80 percent of the time and states that J&J considered those pharmacists an "extension of (J&J's) salesforce."

The government alleges Omnicare agreed to operate "Active Intervention Programs" to increase prescribing of J&J drugs, and that Johnson & Johnson paid for that with so-called "grants" and "educational funding," and other methods that allowed it to evade requirements to pay government health programs equivalent rebates.

Under one of the programs, called the "Risperdal Initiative," physicians were persuaded to prescribe Risperdal to patients with "behavioral disturbances associated with dementia," the government alleges.

Besides Johnson & Johnson, the complaint names two of its subsidiaries as defendants: Ortho-McNeil-Janssen Pharmaceuticals Inc., which makes and sells Risperdal and other drugs, and Johnson & Johnson Health Care Systems Inc., which entered into contracts with Omnicare.

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