Federal prosecutors in Washington, D.C., have rejected a roughly $1 billion proposed settlement to resolve allegations that Johnson & Johnson promoted the antipsychotic drug Risperdal for unapproved uses, according to people familiar with the matter.
J&J and the federal prosecutors in Philadelphia who had reached the tentative deal now must go back to the drawing board, because the officials in Washington are seeking a larger settlement, the people said.
Since 2004, federal prosecutors have been investigating Risperdal marketing by J&J’s Janssen Pharmaceutical unit. Under federal law, firms can market a drug only for uses approved by the U.S. Food and Drug Administration, though doctors may prescribe drugs however they see fit.
Seeking to put the probe to rest, J&J and federal prosecutors in Philadelphia had reached a tentative settlement about two months ago, according to people familiar with the matter. But prosecutors at the Justice Department, who must sign off on any deal, rejected it within the past two weeks, the people said.
A spokeswoman for J&J referred to a Feb. 23 securities filing that described as “ongoing” the company’s discussions with state and federal prosecutors to resolve civil claims stemming from investigations into the off-label promotion of Risperdal and another schizophrenia treatment, Invega.
The securities filing said J&J and federal prosecutors had reached an “agreement in principle” for the company to resolve potential criminal charges stemming from Risperdal marketing by pleading to a misdemeanor violation of the federal Food, Drug and Cosmetic Act.
A spokeswoman for the U.S. Attorney’s Office in Philadelphia said it doesn’t “confirm or deny investigations.” A Justice Department spokesman declined to comment.
The Justice Department prosecutors are seeking a settlement of around $1.4 billion, the sum that Eli Lilly & Co . agreed to in 2009 to resolve allegations it had improperly promoted its antipsychotic drug Zyprexa, according to one of the people familiar with the matter. Yet J&J officials have resisted paying that amount.
An outright rejection of a deal is unusual, according to Shelley Slade, a former Justice Department health-care fraud lawyer who now represents whistleblowers suing drug makers. Ordinarily, prosecutors in a U.S. Attorney’s Office work with counterparts in Washington, D.C., to find mutually agreeable terms, Ms. Slade said.
“It’s not unusual for there to be disagreements along the way, but for things to get so far down the road where there is what I would say is a handshake deal” is “highly unusual,” said Ms. Slade, who isn’t involved in the Risperdal case.
Risperdal is a pill approved for treating schizophrenia and bipolar disorder. It had been one of J&J’s top-selling drugs, generating more than $2.2 billion in U.S. sales in 2007, before its U.S. patent expired.
In January, J&J agreed to pay $158 million to settle a lawsuit alleging that company marketing caused Texas’s Medicaid program to overpay for Risperdal.