JNJ Johnson and Johnson

By Sara Randazzo and Jared S. Hopkins 

An Oklahoma judge ordered Johnson & Johnson to pay $572 million for contributing to the state's opioid-addiction crisis, a verdict that could signal further findings of liability for drug companies as similar cases wind through courts across the country.

More than 2,000 cases brought by state and local municipalities seek to hold drug makers, retail pharmacy chains and distributors accountable for widespread opioid abuse that began gaining public attention in the early 2000s. That flood of litigation coincides with intensifying efforts by the Justice Department to use data to investigate over-prescription of opioids by doctors.

Oklahoma's case was the first to go to trial and became focused solely on Johnson & Johnson after two other drugmakers settled their claims.

In a widely anticipated ruling Monday, Oklahoma state court judge Thad Balkman said the state proved Johnson & Johnson launched a misleading marketing campaign to convince the public that opioids posed little addiction risk and were appropriate to treat a wide range of chronic pain.

"The increase in opioid addiction and overdose deaths following the parallel increase in opioid sales in Oklahoma was not a coincidence," the judge wrote. From 1994 to 2006, prescription opioid sales increased fourfold, the judge said in the ruling. In 2015, more than 326 million opioid pills were dispensed in the state, enough for every adult Oklahoman to have 110 pills.

Judge Balkman ordered Johnson & Johnson to pay for just one year of abatement, not the 20 or more years the state requested. He said the $572 million should go toward addiction treatment and overdose prevention services, programs aimed at managing pain without opioids and other resources.

Johnson & Johnson said it would appeal the judgment and that the judge's conclusions disregards the company's compliance with federal and state laws.

"The company here made medicines that are essential for patients who suffer from debilitating harm," Sabrina Strong, an attorney for Johnson & Johnson, said after the ruling. "They did it responsibly."

Oklahoma Attorney General Mike Hunter commended the ruling, calling it "a major victory for the state of Oklahoma, the nation and everyone who has lost a loved one because of an opioid overdose."

Over the course of the seven-week trial, attorneys for Oklahoma argued that Johnson & Johnson is liable not only for two opioid drugs it sold -- the fentanyl patch Duragesic and tapentadol pill Nucynta -- but also because it owned two companies that supplied the active pharmaceutical ingredients and narcotic raw materials to other drugmakers for their own opioid painkillers.

The judge said in the ruling that Johnson & Johnson's misleading marketing included unbranded campaigns jointly developed with other companies that suggested pain was undertreated and that higher amounts of opioid prescriptions were the solution. The state said the company's actions created a "public nuisance" and asked the judge to award as much as $17 billion to abate the costs of the crisis.

Analysts followed the Oklahoma trial closely for signs of what might happen in the broader opioid litigation. Attention will turn next to Cleveland, where two counties are set to go to trial in October against an array of drugmakers and distributors. That trial is serving as a bellwether for hundreds of others brought by cities and counties that have been consolidated in federal court in Ohio before U.S. District Judge Dan Polster.

The verdict could put pressure on settlement talks in the rest of the opioid cases. Judge Polster has pushed the parties to settle while allowing the October case to head to trial. Complicating settlement talks is tension between state attorneys general, which want to maximize recoveries from cases they have filed in state courts, and the many cities and counties pressing cases in federal court.

Ashtyn Evans, an analyst at Edward Jones & Co., said damages were expected to be under $1 billion in the Oklahoma case and investors were responding favorably to that. "A multibillion dollar ruling would have been a worst-case scenario," she said.

David Maris, an analyst at Wells Fargo & Co. who covers the pharmaceutical industry, said he expects companies fighting the cases consolidated in Ohio will be more motivated to reach a settlement. The $572 million might be a small amount to a company of Johnson & Johnson's size, he said, but could be onerous for smaller companies with larger market shares and more liabilities.

"There's no manufacturer that's high-fiving their lawyers after today," Mr. Maris said.

University of Connecticut School of Law professor Alexandra Lahav cautioned against reading too much into Judge Balkman's ruling as it pertains to the Ohio litigation, given how public nuisance laws -- on which the Oklahoma case hinged exclusively -- vary among states.

Traditionally used in property disputes, state attorneys general are increasingly using such laws in cases against private industries. A North Dakota judge in March dismissed a case brought by that state's attorney general against Purdue Pharma, citing the misapplication of public nuisance laws.

"This is one small data point in a much larger legal picture," Ms. Lahav said of Monday's decision.

More than 6,000 Oklahomans have died from opioid abuse since 2000, according to the state. Nationwide, there were nearly 400,000 opioid overdose deaths between 1999 and 2017, federal data shows.

The judgment surpasses the settlements two other companies reached in the run-up to trial. OxyContin-maker Purdue Pharma LP and its owners, the Sackler family, agreed to pay $270 million, much of it to fund an opioid-addiction research center. Teva Pharmaceutical Industries Ltd. agreed to an $85 million deal.

Johnson & Johnson argued during the trial that its drugs accounted for a fraction of those taken in Oklahoma and that an influx of illegal heroin and fentanyl were the real culprits in overdose deaths.

From 2006 to 2012, Johnson & Johnson's products represented 8% of the market for fentanyl patches and pouches bought by U.S. pharmacies, according to a Wall Street Journal analysis of Drug Enforcement Administration data. The company represented around one-quarter of 1% of the market for prescription opioid pills in that period, the data shows.

The company still makes Duragesic but sold its interests in Nucynta in 2015 and exited the opioid-ingredients businesses by 2016.

Shares for Johnson & Johnson and other defendant companies were trading up slightly in after-market trading following the judgement before losing some of their gains.

Brad Beckworth, a Texas attorney hired to represent the Oklahoma attorney general's office in the two-year-old case, said the verdict shows that the opioid crisis is about more than Purdue, which has drawn the most attention for its role in marketing OxyContin for wide-ranging pain. "This crisis didn't occur based on one person or one company," Mr. Beckworth said.

As Johnson & Johnson continues to battle the opioid cases, it also faces thousands of lawsuits alleging harms from its signature baby powder, pelvic mesh and hip devices as well as a handful of pharmaceutical products.

--Joseph Walker contributed to this article.

Write to Sara Randazzo at sara.randazzo@wsj.com

(END) Dow Jones Newswires

August 26, 2019 19:20 ET (23:20 GMT)

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