Johnson & Johnson (NYSE:JNJ) has agreed to pay $181 million to settle fraud consumer claims received from 36 states in the U.S, after it was accused of wrongly marketing some of its products. The company had been blamed for improperly publicizing its Risperdal antipsychotic drug for unapproved uses.
Additionally, Johnson & Johnson (NYSE:JNJ) has also been accused by the Federal authorities for wrongly promoting the drug for use in nursing homes, and thereby, could still face more charges over the offense. In responding to the accusations, J&J expressed that it had already budgeted for the inevitable cash outflow, by setting aside funds for the expected settlements.
Dov Gertzulin's DG Capital is having a strong year. According to a copy of the hedge fund's letter to investors of its DG Value Partners Class C strategy, the fund is up 36.4% of the year to the end of June, after a performance of 12.8% in the second quarter. The Class C strategy is Read More
Reuters quotes Michael Yang, president of J&J’s Janssen Pharmaceuticals, in a statement saying, “we have chosen this path to achieve a prompt and full resolution of these state claims.” The wrongly, promoted drug yielded $4 billion in sales, during its peak period, but now this scenario has changed, giving in to pressure from both public and authorities.
The company has further assured its customers that it will not promote any of its latest antipsychotics for off-label uses, nor do anything that might result in a misrepresentation of facts about the product, by implementing a systemic policy on marketing and promotions.
Apparently, the company cannot control the manner in whcih doctors use the drug and hence, to some extent, are limited in determining its use. Notably, Johnson & Johnson (NYSE:JNJ) can only promote drugs approved by the U.S department of Food and Drug Administration.
Nonetheless, J&J has been accused of using other means to promote unapproved drugs; for instance, the company was accused of, “targeting the elderly by making payments to Omnicare Inc, to promote the medicines in nursing homes and long-term care facilities,” notes Reuters.
Interestingly, one would wonder whether the company was fully aware of whatever it was doing, after having set aside $600 million in anticipation of what exactly happened. Risperdal has indeed been on the headlines, almost since the beginning of this year, as it is on record that the company was ordered by an Arkansas judge to pay a total of $1.1 billion for cases related to improper promotions of the drug.
It is also on record that the company had earlier agreed to pay a total of $158 million for a similar accusation in Texas. However, the company did also emerge victorious in some of the cases, after the judge ruled in its favour for the Pennsylvania case. We can only wait and see how the company is going to deliver on its promise in strengthening its monitoring of promotional activities.
The food and drug industry is one of the most lucrative industries, because of the decisions on whether to buy the products or not, come naturally and cannot be waived away. However, the industry also holds a great risk, as the outcome of a drug for instance, could lead to such cases as we have just seen.
J&J also faces great competition from Pfizer Inc. (NYSE:PFE), the global wholesaler, along with Novartis AG (NYSE:NVS), and Covidien Plc (NYSE:COV), among others.
The company’s stock closed at $67.21 per share, down $0.16 or 0.24% from the previous close, and was unchanged during the after hours period.