Johnson & Johnson to Pay $2.2 Billion to Settle DOJ's False Claims, Criminal Suits

Author: Marta Moakley, XpertHR Legal Editor

November 5, 2013

Pharmaceutical giant Johnson & Johnson and three of its subsidiaries have agreed to pay more than $2.2 billion in a global settlement of multiple criminal charges, civil claims and state probes relating to the false marketing of prescription drugs and the paying of kickbacks to physicians and pharmacies for prescribing and promoting the drugs. Various whistleblowers will collect $167.7 million under the False Claims Act settlement, in what has been reported as the largest whistleblower payout in US history.

In remarks delivered at a press conference, Attorney General Eric Holder stated that the companies paid off pharmacies and physicians to prescribe the drug Risperdal and other drugs for unapproved uses, resulting in "government health care programs paying millions of dollars in false claims for these drugs." Calling the conduct "shameful and unacceptable," Holder promised that the law enforcement efforts in this area will continue.

Since 2009, the Departments of Justice (DOJ) and Health and Human Services (HHS) have joined resources as part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which has made critical use of the False Claims Act in prosecuting fraud and abuses of the public trust by pharmaceutical companies. Just last year, British pharmaceutical GlaxoSmithKline agreed to a settlement of $3 billion for similar criminal and civil claims at the federal and state levels. In that case, GlaxoSmithKline entered into an extensive five-year Corporate Integrity Agreement that emphasizes ethics compliance by executives and employees.

These cases illustrate how employee and management team members engaging in unethical behavior, combined with failures in compliance team oversight and a rise in external whistleblowing activities, can result in massive corporate fines and penalties. The liability faced by these employers spanned the jurisdictions of various federal and state agencies, including DOJ, HHS, the Food and Drug Administration, state Attorneys General and prosecutors at the federal, state and local levels. A strong focus on ethics compliance in the workplace may identify potential misconduct before such potential liability risks can be realized, and may discourage incidences of external whistleblowing to enforcement agencies.