Supreme Courts of Arkansas Reverses $1.2 Billion Judgments in Risperdal Labeling Case, Declares FDA “Warning Letters” Inadmissible Evidence

March 20, 2014: The Supreme Court of Arkansas overturned a $1.2 billion judgment against Johnson & Johnson and its subsidiary, Janssen Pharmaceuticals, over the antipsychotic medication Risperdal. The State of Arkansas had alleged Janssen included inadequate risk information on its product label. Janssen argued that not only had their labels not been false, but that they quickly corrected their actions by sending out revised letters to all the affected parties.

In reversing the trial court’s decision in favor of the State of Arkansas, the Arkansas Supreme Court found the State’s attempt to use a Medicaid fraud law governing healthcare facilities to support fining Johnson & Johnson over its Risperdal drug was flawed. Furthermore, the Court found that the Janssen had been improperly prejudiced by admission into evidence of a federal “Warning Letter.”

In a separate ruling, the state’s high court also overturned a $181 million award of legal fees associated with the case.

Appeals courts have been looking closely at fines related to Risperdal. Earlier this year, the Supreme Court of Louisiana overturned a $330 million judgment against Johnson & Johnson, finding the Attorney General failed to present evidence that the defendants made or attempted to make fraudulent claims within the Louisiana Medical Assistance Program Integrity Law (“MAPIL”). Johnson & Johnson is also awaiting a ruling by South Carolina’s Supreme Court on whether to overturn $327 million of penalties in a similar case.

Risperdal Warning Letter

In 2003, the Food and Drug Administration (FDA) notified all manufacturers of atypical antipsychotics, including Risperdal, that new warnings would be required on the drug labeling to advise healthcare providers and the public of the increased risk of hyperglycemia and diabetes-related adverse events associated with this class of drugs. Additionally, the FDA required all atypical antipsychotic drug manufacturers to send out a letter to all healthcare providers nationwide (known within the industry as a “Dear Health Care Provider” letter (“DHCP letter”)) to advise them of the label change.

Janssen did not agree with the FDA determination, but hey sent out a DHCP letter with FDA’s required information. They also included the following paragraph:

“Hyperglycemia-related adverse events have infrequently been reported in patients receiving RISPERDAL. Although confirmatory research is still needed, a body of evidence from published peer-reviewed epidemiology research suggests that RISPERDAL is not associated with an increased risk of diabetes when compared to untreated patients or patients treated with conventional antipsychotics. Evidence also suggests that RISPERDAL is associated with a lower risk of diabetes than some other studied atypical antipsychotics” (emphasis added).

A few months later, the FDA sent the following Warning Letter to Janssen directing them to deliver corrective information about Risperdal to the recipients of the DHCP letter:

The Division of Drug Marketing, Advertising, and Communications (DDMAC) has reviewed a “Dear Healthcare Provider” (DHCP) Letter for Risperdal…DDMAC has concluded that the DHCP letter is false or misleading in violation…of the Federal Food, Drug, and Cosmetic Act…because it fails to disclose the addition of information relating to hyperglycemia and diabetes mellitus to the approved product labeling (PI), minimizes the risk of hyperglycemia-related adverse events, which in extreme cases is associated with serious adverse events…fails to recommend regular glucose control monitoring to identify diabetes mellitus as soon as possible, and misleadingly claims that Risperdal is safer than other atypical antipsychotics.

Janssen maintained that their initial statements were correct. However, they delivered the required new letter entitled “Important Correction of Drug Information” on July 21, 2004 to all healthcare providers nationwide.

On October 14, 2004, the DDMAC closed the matter. They stated that Janssen “indicated that it had discontinued all promotional materials for Risperdal containing same or similar claims, issued a corrective DHCP letter…to 754,000 healthcare providers, and issued an alternative DHCP letter that was posted on FDA’s MedWatch website. In light of the aforementioned actions taken by J&JPRD regarding Risperdal’s promotional materials, DDMAC considers this matter closed.”

Risperdal Litigation

Despite the fact that the DDMAC closed their investigation, in November 2007, the State filed suit against Janssen alleging the company knowingly made false statements or representations of material fact in its Risperdal label in violation of the Arkansas Medicaid Fraud False Claims Act (“MFFCA”). The State also alleged violations of the Arkansas Deceptive Trade Practices Act (“DTPA”) by Janssen’s November 10, 2003 DHCP letter distribution to Arkansas healthcare providers for making false, deceptive, or unconscionable statements in its promotion letter.

The State’s theory of the case was that Janssen failed to comply with a federal labeling requirement and that the alleged labeling violations triggered a violation of the MFFCA when the Arkansas Medicaid program paid for reimbursement of Risperdal prescriptions.

As for the DTPA, the State argued that Janssen’s 2003 DHCP letter violated the DTPA, and it submitted the number of healthcare providers in Arkansas that had received the DHCP as violations.

After a twelve-day jury trial, the jury found that Janssen had violated the MFFCA and the DTPA. The circuit court found that 238,874 prescriptions had been filled during the December 2002 to June 2006 time period, and that each constituted a violation under the MFFCA. The circuit court imposed the minimum statutory fine of $5,000 per violation for a total of $1,194,370,000. With regard to the DTPA violations, the circuit court found that, based on the jury’s verdict, there were 4,569 violations, the number of copies of the DDL sent to healthcare providers, and imposed a $2,500 fine per violation for a total of $11,422,500. Janssen appealed.

Appeal

After closely examining the Arkansas Medicaid Fraud False Claims Act (MFFCA), the Court found that the Act does not apply to drug companies. “[W]e reverse the circuit court’s order denying Janssen’s motion for directed verdict and dismiss the State’s claim under the MFFCA as Janssen is indisputably not a healthcare facility and applying for certification or re-certification as described in the statute,” the court stated (emphasis added).

Arkansas’ Supreme Court also overturned the trial court’s finding that Janssen violated the DTPA when it sent Arkansas doctors a letter expressing views about Risperdal’s safety. The Court held the trial judge improperly admitted into evidence the Warning Letter that FDA had sent to Janssen. The Court held the warning letter, which the FDA sent after Janssen distributed its “Dear Doctor” letter, was inadmissible hearsay evidence and noted it did not represent any official determination by FDA that Janssen violated any federal law. Thus, the letter did not fall within a hearsay exception, The Supreme Court stated: “Accordingly, based on our standard of review, we hold that the circuit court abused its discretion in admitting the letter and reverse and remand the DTPA claim to the circuit court.”

Louisiana Reverses $330 Million Risperdal Judgment

On January 28, the Supreme Court of Louisiana overturned a $330 million judgment against Johnson & Johnson and its subsidiary, Janssen Pharmaceutica, finding the Attorney General failed to present evidence that the defendants made or attempted to make a fraudulent claim within the Louisiana Medical Assistance Program Integrity Law (“MAPIL”). In its suit, the Attorney General alleged the defendants “knowingly misrepresented” that their anti-psychotic drug Risperdal was “safer and/or more effective” than other antipsychotics. The Court disagreed, and in doing so provided a very restrictive interpretation of when manufacturers can be liable for false marketing claims.

The Louisiana case had a similar background to the Arkansas case. However, the case went to trial on the issue of whether the defendants had any liability, under Louisiana’s MAPIL, arising out of their dissemination of the “off-label statements” contained in the November 10, 2003 DHCP letter to Louisiana health care providers. The district court found that if the government is able to “prove false, misleading, misrepresentative, deceitful, intent to defraud type statements…that in and of itself is the causation” needed for the defendants to be liable for civil penalties.

In 2010, a jury returned a verdict for the state, finding that the defendants had violated Louisiana’s MAPIL 35,146 times (based on the number of letters mailed and sales calls made) and assessed a civil penalty of $7,250 per violation. The verdict was affirmed by the intermediate appellate court. The district court on March 9, 2011 signed a judgment in favor of the Attorney General and against the defendants in the following amounts: $257,679,500.00, with legal interest from the date of the jury’s October 14, 2010 verdict; $70,000,000.00 in attorney fees; $3,000,200.00 in costs and expenses.

Louisiana Supreme Court Opinion

The Supreme Court of Louisiana utilized a very methodical approach to statutory interpretation. They broke their analysis up into three parts—the three sections of Louisiana’s false claims act statute.

A. No person shall knowingly present or cause to be presented a false or fraudulent claim.

The Court dissected the statute and stated: “A ‘false or fraudulent claim’ means a claim which the health care provider or his billing agent submits knowing the claim to be false, fictitious, untrue, or misleading in regard to any material information” (emphasis added). The Court reasoned quite simply that the defendants had not physically submitted a claim. “To be liable under this provision,” they stated, “the Attorney General would have had to show that a Louisiana doctor who prescribed Risperdal for his patient, or a health care provider who dispensed the drug to the patient, knew that the defendants had made misleading statements about their product, but nonetheless prescribed or dispensed the drug to the patient knowing that there may be drugs that are equally safe, and less expensive, or safer than Risperdal, and notwithstanding that knowledge, prescribed or dispensed Risperdal.”

In limiting the false claims statute to its most direct level, the court stated that the “doctor or health care provider would have had to have knowingly committed malpractice, prescribing or dispensing Risperdal despite knowing there were better, cheaper, or safer, more efficacious drugs available, for the defendants to be liable under this provision.” The court found this was not the case.

B. No person shall knowingly engage in misrepresentation to obtain, or attempt to obtain, payment from medical assistance programs funds.

To dispel this section, the court stated that, “[i]n this case, there was no showing the defendants either failed to disclose or concealed information required on a claim for payment made against the medical assistance program funds.”

C. No person shall conspire to defraud, or attempt to defraud, the medical assistance programs through misrepresentation or by obtaining, or attempting to obtain, payment for a false or fraudulent claim.

The court stated that the plaintiffs did not show that the defendants failed to truthfully or fully disclose or concealed any information required on a claim for payment made against the medical assistance programs, or that the statements were made to the department relative to the medical assistance programs. Furthermore, “[t’he purpose of MAPIL is to prevent false or fraudulent claims from being presented to and paid by the medical assistance programs. Thus, there must be a causal link between the misleading marketing statement and a false or fraudulent claim for payment to a health care provider or other person to establish liability under MAPIL,” the court stated.

__________________

Analysis:

The language of both Risperdal cases suggests that the courts were looking for ways to reverse these judgments.

In the Arkansas opinion, the court repeatedly noted the effectiveness of Risperdal. “Risperdal is considered to be highly beneficial in treating schizophrenia patients and allowing them to return to more productive lives,” the court stated in the first paragraph. The court also noted: “The State’s expert, psychiatrist Dr. William Wirshing, compared the introduction of Risperdal to the advent of the antibiotic penicillin in the 1950s and labeled Risperdal as a ‘godsend.’ Further, Wirshing testified that second-generation antipsychotics are among the most powerful disease modifiers in all of modern medicine and that psychiatrists felt it was a ‘miracle drug’ because it did not have the serious side effects of first-generation antipsychotics.” 

Perhaps the court would have gone down a different path had they disputed the drug’s benefits. Johnson & Johnson capitalized on this goodwill in its release: “Janssen remains strongly committed to ethical business practices. Risperdal continues to help patients around the world who suffer from the debilitating effects of schizophrenia and bipolar mania,” 

Furthermore, the Arkansas case simply did not have any allegations of bad acts beyond a mere disagreement between Janssen and the FDA over the relative effectiveness of Risperdal compared to other antipsychotic drugs. In Janssen’s original letter, the company complied with the FDA required warnings, but also reported in a short paragraph that Risperdal had been associated with lower risks than other atypical antipsychotics. Upon receipt of the Warning Letter, Janssen immediately delivered corrective information about Risperdal to the recipients of the DHCP letter. Both the Arkansas and Louisiana rulings went against the grain of some recent FCA cases because they made no mention of kickbacks.

After the Arkansas Court’s decision, the Washington Legal Foundation released the following statement by Chief Counsel Rich Samp:

“The judgment below imposed massive liability based on nothing more than good-faith disagreements regarding regulatory requirements. Today’s decision overturning that judgment vindicated First Amendment rights by eliminating a penalty that was imposed without a showing that the defendants had said anything false. The judgment’s size was particularly unwarranted given that Arkansas introduced no evidence that any of its citizens was injured.”

A final point of note: In the Louisiana opinion, the court seemed to take every opportunity to require a close connection between the drug company’s alleged misstatements and the actual claim for state payment. As the FCA Blog notes, “the Louisiana court’s reasoning is straightforward but powerful: a statute designed to prevent false or fraudulent claims requires a close connection between the allegedly fraudulent conduct and the claim for payment from the state, and liability will not necessarily attach to any allegation of wrongdoing that ultimately winds its way to a Medicaid claim.”