Johnson & Johnson, a household name in India and world over for drugs and cosmetic products, pled guilty to fraud in a case brought by the U.S. government, and agreed to pay $2.2 billion in settlement over allegations that the company and its subsidiaries promoted psychiatric medications for unapproved uses and bribed doctors to prescribe those medications frequently.

In the cases, which date from the late 1990s through the early 2000s the U.S. Department of Justice along with the Food and Drug Administration slapped Johnson & Johnson with criminal fines to the tune of $485 million and civil and administrative fines of $1.72 billion, for a healthcare fraud on an unprecedented scale, involving illegal methods used to promote antipsychotic drugs Risperdal and Invega, and a heart drug, Natrecor.

According to the DoJ’s criminal and civil complaint “for 22 months ending Dec. 31, 2003… [the company’s] sales force actively promoted the use of the company's antipsychotic medications for elderly patients with confusion or dementia, despite evidence that they increases the risk of stroke in such patients.” Among the plaintiffs are Johnson and Johnson subsidiaries Janssen Pharmaceuticals Inc. of Titusville, New Jersey, and Scios Inc. of Sunnyvale, California.

Under the provisions of the law a portion of the penalty that Johnson & Johnson coughs up will be directed towards several U.S. states that have joined the federal government lawsuit on the grounds that Johnson & Johnson’s “improper marketing defrauded those states of funds intended to insure care for the poor and disabled.”

In a statement this week Eric Holder, U.S. Attorney-General said, “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 health care system and negatively impacted the long-term solvency of essential health care programs like Medicare.”

Similar to the case of Ranbaxy, which pled guilty to seven felonies and agreed to pay a fine of $500 million earlier this year, the cases resulting in this week’s settlement with Johnson and Johnson came out of “qui tam”, or whistle-blower lawsuits, which suggests that up to $168 million is likely to be paid out to go to the whistle-blowers in California, Massachusetts and Pennsylvania who were said to have brought evidence of wrongdoing to the federal government's attention.

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