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Johnson & Johnson $2.2 Billion Settlement Just a Slap on the Wrist

Fines are just another cost of doing business in an out-of-control pharmaceutical industry.
 
 
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When profit is the name of the game, why let teenage boys growing breasts or elderly nursing home patients suffering strokes stand in the way?

On Monday, the U.S. Department of Justice announced that pharmaceutical giant Johnson & Johnson agreed to pay out $2.2 billion to settle civil and criminal complaints related to illegal marketing of the antipsychotic drug Risperdal, among other products.

The $2.2 billion figure seems large at first glance. However, compared to the money that the company made off of the drug, it’s just another cost of doing business in an out-of-control pharmaceutical industry hell-bent on bringing in massive profits no matter the consequences for the patients who take the drugs.

According to the allegations, J&J subsidiary Janssen promoted Risperdal between 1999 and 2005 to treat teenagers, mentally disabled patients and elderly people suffering from dementia despite the fact that it had only gained FDA approval to treat schizophrenia in adults during that time. The company also paid kickbacks to doctors and pharmacists for prescribing the drug and downplayed or covered up evidence of its most serious side effects, according to the DOJ complaint.

While it’s not illegal for doctors to prescribe medicine for off-label uses, it is against the law for manufacturers to market their products for symptoms or illnesses for which they haven’t been approved by the FDA. Risperdal was no benign medication, either. Among the side effects it is known to cause are intestinal issues, sexual problems, anxiety, aggression, diabetes, strokes and breast growth. Some young adult males had to have mastectomies after they were improperly prescribed the antipsychotic.

The latest settlement is at least the 15th J&J has made with states or the federal government since 1991, and the 10th since 2010. The company is still facing hundreds of Risperdal-related personal injury lawsuits as well as waiting on appeals of hundreds of millions more in fines in several individual states.

“This is just another example of how pharmaceutical companies continue to run amok,” said Brian J. McCormick Jr., an attorney in Philadelphia handling many of the civil lawsuits for consumers harmed by Risperdal. There were about 490 in total.

“If they can make $25 or $30 billion over the life of a drug and pay a $2 billion fine 10 years later, that’s a pretty good investment,” he said.

According to the criminal complaint, Risperdal brought in $9 billion between 1999 and 2005. Subsequently, sales only went up—the drug netted some $24 billion between 2003 and 2010, according to Public Citizen.

“I think one could conclude that Johnson & Johnson made out very well,” said Bonnie Patten, executive director of the nonprofit Truth in Advertising.

“It seems that it is very economically advantageous for these pharmaceutical companies to market drugs for off-label uses,” Patten said, citing similar settlements by Wyeth and Amgen earlier this year. “Even after fines are taken into consideration they’re still pocketing billions and billions of dollars for these marketing practices.”

Indeed, Johnson & Johnson stock barely budged even after this week’s announcement, and has risen more than 50 percent over the last five years despite the near constant civil and criminal payouts.

The company acknowledged its criminal culpability while continuing to deny civil liability even while agreeing to the settlement. As part of the deal, J&J had to enter into a corporate integrity agreement to clean up its act. The company was already under an agreement for an entirely different illegal marketing settlement for an epilepsy drug called Topamax.

The big pharma poster child could hardly claim ignorance of its actions. Included in the evidence the government brought were repeated warnings by the FDA to not market Risperdal for the elderly, particularly those suffering from dementia. Nevertheless, J&J admitted that it specifically promoted it to healthcare providers to treat behavioral disturbances in older patients.

A large portion of pharmaceutical profits come from public money via Medicare and Medicaid. So, while the companies are defrauding the government that grants them monopoly rights to distribute a drug, the taxpayers are stuck paying the bill—in some cases the very taxpayers who are harmed by the medications.

“The conduct at issue in this case jeopardized the health and safety of patients and damaged the public trust,” Attorney General Eric Holder said in a press release. “Through these alleged actions, these companies lined their pockets at the expense of American taxpayers, patients, and the private insurance industry. They drove up costs for everyone in the healthcare system and negatively impacted the long-term solvency of essential healthcare programs like Medicare.”

Such corporate bad behavior is systemic and ongoing. Big Pharma companies settled at least 239 cases for a total of $30.2 billion between 1991 and 2012, according to a report by citizen interest nonprofit Public Citizen, of which 74 settlements worth $10.2 billion came since November 2010. J&J was the third worst offender, with a total of $2.33 billion pried from company coffers since 1991—not including this week’s payout and trailing only Pfizer and GlaxoSmithKline (GSK).

The latest Risperdal settlement was also the third largest total individual settlement ever, following a $3 billion GSK agreement last year and a $2.3 billion payout by Pfizer in 2009.

While regulatory activity by the Department of Justice, as well as the size of the fines, has increased in recent years, it’s still far from sufficient to deter continued endangerment to the public as the company continues to pull in the big bucks.

“On a federal level, financial penalties still continue to pale in comparison to company profits,” the report stated. “Stronger legislation and more robust enforcement are needed on a federal and state level to deter future unlawful behavior.”

“If you’re an executive in this company, you’re just going to do the simple math and realize that crime does pay,” said Sammy Almashat, a Public Citizen research associate who was one of the authors of the report. “This case is sort of a microcosm of the types of fraud that we’re seeing on a very large scale across the industry.”

Almashat recommended legislation such as a bill proposed by Vermont Senator Bernie Sanders, which would cancel drug monopoly rights for manufacturers if they admit to criminal activity, resulting in dramatic cuts to potential profits. Predictably, the legislation has stalled.

Serious jail time for corporate executives might help, but there seems to be little political appetite to go after them. Executives can be held criminally responsible for their firms’ wrongdoings under what is known as the Park doctrine, even if there is no evidence that they directly knew about or sanctioned the acts. Nevertheless, enforcement is rare. As of the Public Citizen report’s publication, only four executives had been successfully prosecuted under the Park doctrine. Only one among those was sentenced to prison time—for a meager 30 days.

“The lack of prosecutions of executives who contributed to the fraud shows that the government still isn’t doing enough,” Almashat said. “Unless individual executives realize they are open to risk on a really personal level they will just look at these fines as a cost of doing business.”

All those ill-begotten profits come in handy to buy off lawmakers and regulators. In 2012, J&J spent nearly $6 million on lobbying and contributed over $1.1 million to the campaigns of Democrats and Republicans alike, according to OpenSecrets. In total Big Pharma made over $45 million in campaign donations and spent nearly $240 million on lobbying last year.

Lawmakers seem to lack enthusiasm for going after the people who pay for them to get elected to office. Maybe a better idea, if we can’t lock up executives who profit off the illnesses of the citizenry, would be to force them to take their own medicine.

Aaron Kase is a freelance writer from Philadelphia. Follow him on Twitter at @Aaron_Kase.