In its written opinion dated March 20, 2014, the Supreme Court of Arkansas (“Arkansas Supreme Court”) overturned a $1.2 billion verdict against Johnson & Johnson (“J & J”) arising out of the alleged improper marketing of its antipsychotic drug, Risperdal. The Arkansas Supreme Court determined that Arkansas state officials relied on the wrong law and that the fines in the amount of $1.2 billion were assessed in error.
What Is Risperdal?
Risperdal is a second-generation antipsychotic medication that does not have the serious side effects of first-generation antipsychotic drugs, such as severe neuroleptic effects similar to Parkinson’s disease. Risperdal is considered to be highly beneficial in treating schizophrenia patients and allowing them to return to more productive lives.
Risperdal was first approved by the FDA and marketed in the United States in 1994. In 2000, the FDA requested that all drug manufacturers of second-generation antipsychotics provide any information that the companies had regarding weight gain and diabetes associated with the antipsychotics.
In September 2003, the FDA notified J & J’s Janssen unit and all other drug manufacturers producing second-generation antipsychotics to add a class warning to their labels about diabetes. Janssen did not agree with the FDA’s assessment that all second-generation antipsychotics required the same warning and Janssen corresponded with the FDA regarding modification of its label. In addition to the class warning, the FDA required all second-generation antipsychotic-drug manufacturers to send a letter to all healthcare providers nationwide to advise of the label change.
On November 10, 2003, Janssen sent its letter to healthcare providers stating that the FDA had requested all manufacturers of second-generation antipsychotics, including Risperdal, to include a class warning label regarding hyperglycemia and diabetes mellitus in their product labeling and to enclose updated prescribing information for Risperdal. The November 10, 2003 letter included the diabetes class-warning label but also included additional statements regarding Risperdal.
On April 19, 2004, in response to Janssen’s November 10, 2003 letter to healthcare providers, the FDA’s Division of Drug Marketing, Advertising, and Communications (“DDMAC”) notified Janssen that it had concluded that its November 10, 2003 letter was false or misleading in violation of Sections 502(a) and 201(n) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 352(a) and 321(n)), because it failed to disclose the addition of information relating to hyperglycemia and diabetes mellitus to the approved product labeling, that it minimized the risk of hyperglycemia-related adverse events, which in extreme cases is associated with serious adverse events including ketoacidosis, hyperosmolar coma, and death, that it failed to recommend regular glucose control monitoring to identify diabetes mellitus as soon as possible, and that it misleadingly claimed that Risperdal is safer than other atypical antipsychotics.
Despite disagreeing with DDMAC, Janssen sent a corrective letter to 754,000 healthcare providers on July 21, 2004. On October 14, 2004, the DDMAC closed the matter.
In November 2007, Arkansas filed suit against Janssen alleging violations of the Arkansas Medicaid Fraud False Claims Act (“MFFCA”), Ark. Code Ann. §§ 20-77-902 (Repl. 2001), alleging that Janssen knowingly made false statements or representations of material fact in its Risperdal label in violation of the MFFCA, specifically Ark. Code Ann. §20-77-902(8)(B). Arkansas also alleged violations of the Arkansas Deceptive Trade Practices Act (“DTPA”), Ark. Code Ann. § 4-88-107 (Repl. 2003), with regard to Janssen’s November 10, 2003 letter to Arkansas healthcare providers that allegedly made false, deceptive, or unconscionable statements.
After a twelve-day jury trial, the Arkansas jury found that Janssen had violated the MFFCA and the DTPA. The circuit court conducted a civil-penalties hearing and found that 238,874 Risperal prescriptions had been filled from December 2002 to June 2006, 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 verdict, there were 4,569 violations (the number of copies of the Janssen letter sent to healthcare providers) and the circuit court imposed a $2,500 fine per violation, for a total of $11,422,500. Janssen filed an appeal.
The MFFCA Claim
Ark. Code Ann. § 20-77-902(8)(A – B) provides: A person shall be liable to the State of Arkansas, through the Attorney General, for a civil penalty and restitution if he or she: (8) Knowingly makes or causes to be made or induces or seeks to induce the making of any false statement or representation of a material fact: (A) With respect to the conditions or operation of any institution, facility, or entity in order that the institution, facility, or entity may qualify either upon initial certification or upon recertification as a hospital, rural primary care hospital, skilled nursing facility, nursing facility, intermediate care facility for the mentally retarded, home health agency, or other entity for which certification is required; or (B) With respect to information required pursuant to applicable federal and state law, rules, regulations, and provider agreements[.]
The Arkansas Supreme Court stated that the question was whether subsections (A) and (B) are to be read together or whether the provisions stand alone to create separate prohibitions. The Arkansas Supreme Court stated that subsection (8) must be read as one sentence (the word “applicable” in (B) refers to the certification process and laws applicable to the process). The Arkansas Supreme Court held that Janssen is indisputably not a healthcare facility and applying for certification or re-certification as described in the statute and hence, that statutory provision is not applicable.
The DTPA Claim
Ark. Code Ann § 4-88-107(a)(10), “Deceptive and Unconscionable Trade Practices,” provides in pertinent part: (a) Deceptive and unconscionable trade practices made unlawful and prohibited by this chapter include, but are not limited to, the following: … (10) Engaging in any . . . unconscionable, false, or deceptive act or practice in business, commerce, or trade[.]
Janssen challenged the introduction of the April 19, 2004 warning letter from DDMAC into evidence during trial, alleging that it was inadmissible hearsay, that the warning letter does not fall within an exception to the hearsay prohibition, and that it was inadmissible under Rule 803(8)(iv) because the warning letter was the result of a special investigation of a particular complaint, case, or incident.
The Arkansas Supreme Court held that the warning letter was part of a special investigation of a particular complaint, case, or incident and falls directly within the parameters of the prohibited hearsay in 803(8)(iv); additionally, the Arkansas Supreme Court also held that the warning letter was more prejudicial than probative. The Arkansas Supreme Court therefore held that the circuit court abused its discretion in admitting the letter and reversed and remanded the DTPA claim to the circuit court.
You can read the entire Arkansas Supreme Court’s written opinion by clicking here.
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