Dec 28, 2006 03:00 AM

Dec. 28, 2006 (Bloomberg) — A Johnson & Johnson unit misled Texashealth officials about the risks of an antipsychotic drug toincrease prescriptions, according to a whistleblower lawsuitjoined by the state attorney general.

The suit claims that J&J’s Janssen Pharmaceutica unit causedTexas to overspend on Risperdal, the world’s second-best-sellingschizophrenia drug last year. The case is one of several againstmakers of antipsychotics and stems from Texas prescribingguidelines directing state-funded doctors to give priority tonewer, more expensive drugs.

The guidelines and deceptive marketing techniques boostedsales of Risperdal, raising costs for Texas and endangeringpatients, according to the complaint, which was secret until itwas unsealed Dec. 15. The state is seeking unspecified damages.Risperdal sales were $10 billion in the U.S. from 2001 through2005, according to IMS Health Inc.

“This is a case about sales and marketing trumping medicalscience,” said Thomas Melsheimer, an attorney for the originalplaintiff, in a Dec. 19 phone interview. “The basic allegationis that Janssen promoted Risperdal use not for sound medicalreasons but for economic reasons.”

Tom Kelley, a spokesman for Texas Attorney General GregAbbott, declined yesterday to comment on the case.

Johnson & Johnson, the maker of thousands of health-careproducts from Band-Aids to heart devices, does “not promote ourproducts for off-label use,” said Ambre Morley, a spokeswomanfor the New Brunswick, New Jersey-based company, in an interviewthis week. J&J doesn’t comment on litigation, she said.

Shares of J&J rose 41 cents to $66.42 in New York StockExchange composite trading. The share price has risen 11 percentthis year, underperforming the 13 percent rise among members ofthe Standard & Poor’s 500 Pharmaceuticals Index.

Texas Law

The complaint was initiated in 2004 by Allen Jones, a formerPennsylvania state investigator. Under Texas law, whistleblowersuits are dismissed unless the attorney general joins them. Jonesmay collect 15 to 25 percent of any payments by J&J, Melsheimersaid.

Lawsuits across the U.S. accuse drug companies of engagingin deceptive marketing by overstating the effectiveness andunderstating the risks of newer antipsychotics. The suits alsoclaim companies promoted the drugs for unapproved uses.

Mississippi, Louisiana, Alaska and West Virginia sued EliLilly & Co. this year on behalf of their Medicaid health programsfor the poor, saying the company fraudulently touted theantipsychotic Zyprexa for unapproved uses. Indianapolis-basedLilly settled about 8,000 personal-injury complaints for $700million in 2005 and faces 4,000 more claims.

Lilly spokesman Phil Belt said yesterday that Lilly is“committed to being transparent about the risks of Zyprexa.” Hedeclined to comment on specific cases.

Zyprexa was the world’s top-selling schizophrenia drug with$4.2 billion in revenue last year. Risperdal was second with $3.6billion.

AstraZeneca

London-based AstraZeneca Plc, the maker of the third-best-selling antipsychotic, Seroquel, stands accused in more than 200federal and state lawsuits of concealing the diabetes risk facedby users. AstraZeneca is “vigorously defending” the cases, saidspokesman Jim Minnick in an e-mailed statement. Sales rose 36percent last year to $2.8 billion.

The Texas complaint says the health department received asmuch as $6 million in contributions from Janssen and otherparties to implement treatment guidelines under the TexasMedication Algorithm Project, known as TMAP. The guidelines werethen exported to other states through training programs.

The largest contributors, according to the lawsuit, wereJanssen Pharmaceutica and the Robert Wood Johnson Foundation, acharity endowed by the co-founder of J&J.

The Princeton, New Jersey-based foundation provided threegrants totaling $2.8 million to evaluate TMAP as part of aneffort “to improve treatment of chronic disease,” saidspokesman David Morse, in a phone interview this week.

Standardize Treatment

The Texas program began in 1996 as a way to standardizeprescribing of medication to state mental patients, led by StevenShon, then medical director for behavioral health for the Texashealth department, and University of Texas academics.

Shon resigned effective Oct. 31 at the request of CharlesBell, acting health department commissioner, said Ted Hughes, aspokesman for the Texas Health and Human Services Commission.Bell requested the resignation after being briefed on the suit bythe attorney general’s office, Hughes said.

Shon also consulted for Janssen, an arrangement thedepartment was unaware of and wouldn’t have approved, Hughessaid. Shon didn’t respond to requests for comment left on hishome telephone answering machine.

`Significant Increase’

After the guidelines were adopted, Janssen “experienced asignificant increase in sales of Risperdal” in Texas and workedto bring the program to other states, the suit alleges. Stateofficials “traveled extensively, at the expense of defendants,to tout the wonders of the new drugs,” the complaint says.

Janssen “improperly influenced state decision-makers withtrips, perks, travel expenses, honoraria,” and paid stateofficials “to speak in their official capacities” to promotethe drugs, the complaint says.

One of the first states to adopt prescribing guidelines wasPennsylvania. Jones, the whistleblower who filed the suit, was aninvestigator for Pennsylvania’s Office of the Inspector Generalin Harrisburg. Assigned to look into payments made to stateagencies and employees, he interviewed Janssen officials, thecomplaint says.

Jones says he was blocked by his superiors frominvestigating company marketing practices and was fired when hecontinued to do so and leaked information to reporters.

The case is Texas v. Janssen LP, No. GV-401288 in TravisCounty District Court, Austin.

To contact the reporter on this story:Rob Waters in San Francisco at rwaters5@bloomberg.net .

Last Updated: December 28, 2006 16:18 EST

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