US Wants To Question Incoming J&J CEO In Kickback Lawsuit

Date : 04/13/2012 @ 2:10PM
Source : Dow Jones News
Stock : (OCR)
Quote : 97.9  0.0 (0.00%) @ 2:05AM

US Wants To Question Incoming J&J CEO In Kickback Lawsuit

Johnson & Johnson (NYSE:JNJ)
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The U.S. Department of Justice has asked a federal judge to compel incoming Johnson & Johnson (JNJ) Chief Executive Alex Gorsky to undergo questioning as part of a lawsuit accusing J&J of paying illegal kickbacks to a nursing-home pharmacy operator.

J&J has refused to make Gorsky available for a civil deposition, the Justice Department said in a memo filed this week in U.S. District Court in Massachusetts.

J&J spokesman Bill Price declined to comment, citing the pending litigation.

The New Brunswick, N.J., healthcare giant in February named Gorsky, currently a company vice chairman, to succeed William Weldon as CEO, effective April 26. Weldon will continue as chairman.

The Justice Department sued J&J in federal court in Boston in 2010, accusing the company of paying millions of dollars in kickbacks to Omnicare Inc. (OCR), a provider of pharmacy services to nursing homes, in order to induce Omnicare to recommend use of J&J drugs, including the antipsychotic Risperdal.

The government lawsuit said J&J's actions, from 1999 to 2004, caused false reimbursement claims to be submitted to government Medicaid health programs. The Justice Department lawsuit followed prior lawsuits filed by would-be whistleblowers making similar allegations.

J&J has said that its arrangement with Omnicare was lawful and appropriate. Omnicare agreed in 2009 to pay $98 million to resolve government allegations it solicited kickbacks; Omnicare didn't admit wrongdoing or liability as part of that settlement.

In a court filing this week, the Justice Department said Gorsky held the roles of vice president of marketing, and then president, of J&J's Janssen division during the late 1990s and early 2000s, the time period at issue in the Justice Department lawsuit.

The Justice Department said Gorsky "has relevant knowledge concerning Janssen's marketing to Omnicare, including information that Janssen failed to disclose to Omnicare concerning Risperdal, a Janssen drug, and knowledge about various allegedly illegal payments that J&J made to induce Omnicare to purchase and recommend Risperdal."

The government said Gorsky met with senior Omnicare executives in 2000 and 2002 to discuss Omnicare's efforts to promote prescribing of Risperdal and other J&J products.

The Justice Department said it should be allowed to ask Gorsky whether he disclosed to Omnicare executives any information about a Food and Drug Administration letter to J&J in 1999 expressing concern that J&J was marketing Risperdal's use in elderly patients.

The FDA said in the 1999 letter there was limited data on Risperdal's use in the elderly. Later, in 2005, the FDA notified doctors that Risperdal and other similar antipsychotics were associated with an increased risk of death in older patients treated for dementia-related psychosis.

The Justice Department said Gorsky also could shed light on whether he or others at J&J disclosed to Omnicare that the FDA had rejected, because of inadequate safety data, J&J's request to market Risperdal for treatment of psychotic and behavioral disturbances in dementia.

"Mr. Gorsky did have personal involvement in some of the transactions at issue, and likely has knowledge of others--and so the United States should be permitted to depose Mr. Gorsky," the Justice Department wrote in its request to U.S. District Judge Richard Stearns.

In March, the Justice Department asked that J&J propose dates for a deposition of Gorsky, but J&J responded that "it would refuse to make Mr. Gorsky available for a deposition," according to the Justice Department court filing. J&J said Gorsky has "no reasonable connection" to the government's lawsuit, according to the Justice Department.

J&J's marketing practices for Risperdal, which was once its best-selling drug before a patent expiration triggered generic competition, have landed the company in the crosshairs of federal and state authorities.

Earlier this week, an Arkansas judge ordered J&J to pay $1.2 billion in penalties after a jury found the company's Risperdal practices violated the state's deceptive trade practices act and Medicaid fraud false claims act. The state had accused J&J of misrepresenting Risperdal's safety risks and promoting the drug for uses not approved by the FDA.

J&J denied the allegations and plans to appeal the Arkansas case.

In addition, J&J previously disclosed it has an agreement in principle to plead guilty to a misdemeanor violation of a federal law in connection with a separate Justice Department-led investigation of its Risperdal marketing practices. The company is in talks to settle civil allegations in connection with the federal case, which could result in a costly payout.

J&J shares fell 55 cents to $63.60.

-Peter Loftus, Dow Jones Newswires; +1-215-982-5581;

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