Former Employee Accuses J&J, Other Companies Of Pricing Fraud

Date : 02/24/2011 @ 3:47PM
Source : Dow Jones News
Stock : (OCR)
Quote : 97.9  0.0 (0.00%) @ 2:05AM

Former Employee Accuses J&J, Other Companies Of Pricing Fraud

Johnson & Johnson (NYSE:JNJ)
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A former Johnson & Johnson (JNJ) employee has accused the health-care giant in a lawsuit of defrauding government health programs by improperly reporting drug-pricing information.

The lawsuit was originally filed confidentially in 2005 in federal court in Philadelphia, under U.S. laws designed to encourage would-be whistleblowers to bring information to government investigators about alleged health-care fraud. The Justice Department has declined to intervene in the case so far, according to court records.

The suit was unsealed in December, and another defendant in the case, pharmacy-service provider Omnicare Inc. (OCR), disclosed the suit in a regulatory filing Thursday. The lawsuit also names wholesale drug distributor McKesson Corp. (MCK) as a defendant.

The case was filed by Scott Bartz, who worked for J&J from 1999 until 2007, according to his lawsuit. His roles included working as a sales-compensation manager, in which he calculated product sales for use in determining bonuses for sales representatives.

J&J, of New Brunswick, N.J. and other drug makers who want their products paid for by the Medicaid health plan for the poor are required to offer Medicaid similar prices to the best prices available to private purchasers.

In an amended version of his lawsuit filed in 2007, Bartz alleged that J&J concealed from Medicaid discounts on drugs including antipsychotic Risperdal Consta and Razadyne treatment for Alzheimer's disease that were offered to other purchasers, and that McKesson and Omnicare assisted these efforts. The suit alleges these actions violated the federal False Claims Act.

Bartz also alleged in the lawsuit that J&J inflated its earnings by engaging in "channel stuffing," or selling large amounts of drugs to distributors ahead of end-buyer demand.

Bartz also alleges that J&J retaliated against him for voicing his concerns about these efforts, including a demotion before his employment was terminated in 2007.

Bartz has since filed another amended version of the lawsuit, but it's under seal by court order. An attorney for Bartz couldn't immediately be reached. A J&J spokeswoman said the company will defend the case in court.

Omnicare said in its regulatory filing the allegations are without merit, and it intends to defend itself. A spokesman declined to comment further. A spokeswoman for McKesson declined to comment immediately.

Court records indicate the case has been transferred to federal court in Boston at the defendants' request. That is the same venue where other whistleblower cases involving J&J are pending. Last year, the Justice Department intervened in two whistleblower cases and accused J&J of paying millions of dollars of kickbacks to Omnicare to encourage use of J&J drugs, including Risperdal. J&J has said it believes its conduct was lawful and appropriate.

In 2009, Omnicare agreed to pay $98 million to settle government allegations that it participated in kickback schemes along with drug makers including J&J.

   -By Peter Loftus, Dow Jones Newswires; +1-215-656-8289; 
   --Dinah Wisenberg Brin contributed to this article. 

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