Johnson and Johnson 2011 Annual Report Download - page 67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 65
GENERAL LITIGATION
In September 2004, Plaintiffs in an employment discrimination liti-
gation initiated against Johnson & Johnson in 2001 in the United
States District Court for the District of New Jersey moved to certify
a class of all African American and Hispanic salaried employees of
Johnson & Johnson and its affiliates in the United States, who were
employed at any time from November 1997 to the present. Plaintiffs
sought monetary damages for the period 1997 through the present
(including punitive damages) and equitable relief. The Court denied
Plaintiffs’ class certification motion in December 2006 and their
motion for reconsideration in April 2007. Plaintiffs sought to appeal
these decisions, and in April 2008, the Court of Appeals ruled that
Plaintiffs’ appeal of the denial of class certification was untimely. In
July 2009, Plaintiffs filed a motion for certification of a modified
class, which Johnson & Johnson opposed. The District Court denied
Plaintiffs’ motion in July 2010, and the Court of Appeals denied
Plaintiffs’ request for leave to appeal the denial of certification of the
modified class. In May 2011, the case was dismissed with prejudice.
Starting in July 2006, five lawsuits were filed in United States
District Court for the District of New Jersey by various employers
and employee benefit plans and funds seeking to recover amounts
they paid for RISPERDAL® for plan participants. In general, Plaintiffs
allege that Johnson & Johnson and certain of its pharmaceutical
subsidiaries engaged in off-label marketing of RISPERDAL® in
violation of the federal and New Jersey RICO statutes. In addition,
Plaintiffs asserted various state law claims. All of the cases were
consolidated into one case seeking class action status, but shortly
thereafter, one action was voluntarily dismissed. In December
2008, the Court dismissed the actions of the four remaining plain-
tiffs. In April 2010, those plaintiffs filed a new consolidated class
action against Johnson & Johnson and Janssen, L.P. (now Janssen
Pharmaceuticals, Inc. (JPI)); and in March 2011, that action was dis-
missed. In April 2011, one of those plaintiffs filed a notice of appeal
with the United States Court of Appeals for the Third Circuit. That
appeal was dismissed in July 2011.
In April 2009, Ortho-Clinical Diagnostics, Inc. (OCD) received
a grand jury subpoena from the United States Department of
Justice, Antitrust Division, requesting documents and information
for the period beginning September 1, 2000 through the present,
pertaining to an investigation of alleged violations of the antitrust
laws in the blood reagents industry. OCD complied with the sub-
poena. In February 2011, OCD received a letter from the Antitrust
Division indicating that it had closed its investigation in November
2010. In June 2009, following the public announcement that OCD
had received a grand jury subpoena, multiple class action com-
plaints seeking damages for alleged price fixing were filed against
OCD. The various cases were consolidated for pre-trial purposes
in the United States District Court for the Eastern District of
Pennsylvania. Discovery is ongoing.
In May 2009, Centocor Ortho Biotech Inc. (now Janssen
Biotech, Inc. (JBI)) commenced an arbitration proceeding before
the American Arbitration Association against Schering-Plough Cor-
poration and its subsidiary Schering-Plough (Ireland) Company (col-
lectively, Schering-Plough). JBI and Schering-Plough are parties to a
series of agreements (Distribution Agreements) that grant Schering-
Plough the exclusive right to distribute the drugs REMICADE® and
SIMPONI® worldwide, except within the United States, Japan,
Taiwan, Indonesia, and the People’s Republic of China (including
Hong Kong). JBI distributes REMICADE® and SIMPONI®, the next
generation treatment, within the United States. In the arbitration,
JBI sought a declaration that the agreement and merger between
Merck & Co., Inc. (Merck) and Schering-Plough constituted a
change of control under the terms of the Distribution Agreements
that permitted JBI to terminate the Agreements. In April 2011,
Johnson & Johnson, JBI and Merck announced an agreement to
amend the Distribution Agreements. This agreement concluded
the arbitration proceeding.
Pursuant to the terms of the amended Distribution Agree-
ments, on July 1, 2011, Merck’s subsidiary, Schering-Plough (Ireland)
relinquished exclusive marketing rights for REMICADE® and
SIMPONI® to Johnson & Johnson’s Janssen pharmaceutical compa-
nies in territories including Canada, Central and South America, the
Middle East, Africa and Asia Pacific (relinquished territories). Merck
retained exclusive marketing rights throughout Europe, Russia and
Turkey (retained territories). The retained territories represent
approximately 70 percent of Merck’s 2010 revenue of approxi-
mately $2.8 billion from REMICADE® and SIMPONI®, while the
relinquished territories represent approximately 30 percent. In
addition, as of July 1, 2011, all profit derived from Merck’s exclusive
distribution of the two products in the retained territories is being
equally divided between Merck and JBI. Under the prior terms of the
Distribution Agreements, the contribution income (profit) split,
which was at 58 percent to Merck and 42 percent to JBI, would have
declined for Merck and increased for JBI each year until 2014, when
it would have been equally divided. JBI also received a one-time
payment of $500 million in April 2011, which is being amortized
over the period of the agreement.
In April 2010, a putative class action lawsuit was filed in the
United States District Court for the Northern District of California
by representatives of nursing home residents or their estates
against Johnson & Johnson, Omnicare, Inc. (Omnicare), and other
unidentified companies or individuals. In February 2011, Plaintiffs
filed a second amended complaint asserting that certain rebate
agreements between Johnson & Johnson and Omnicare increased
the amount of money spent on pharmaceuticals by the nursing
home residents and violated the Sherman Act and the California
Business & Professions Code. The second amended complaint also
asserted a claim of unjust enrichment. Plaintiffs sought multiple
forms of monetary and injunctive relief. Johnson & Johnson moved
to dismiss the second amended complaint in March 2011. The Court
granted the motion in its entirety in August 2011, dismissing all
claims asserted by Plaintiffs. In October 2011, the Court dismissed
the action with prejudice. The plaintiffs filed a notice of appeal in
November 2011. The appeal is pending before the United States
Court of Appeals for the Ninth Circuit.
Starting in April 2010, a number of shareholder derivative law-
suits were filed in the United States District Court for the District of
New Jersey against certain current and former directors and officers
of Johnson & Johnson. Johnson & Johnson is named as a nominal
defendant. These actions were consolidated in August 2010 into one
lawsuit: In re Johnson & Johnson Derivative Litigation. An amended con-
solidated complaint was filed in December 2010. Additionally, in
September 2010, another shareholder derivative lawsuit was filed
in New Jersey Superior Court against certain current and former
directors and officers of Johnson & Johnson. Johnson & Johnson is
named as a nominal defendant in this action as well. The parties to
this action have stipulated that it shall be stayed until the In re
Johnson & Johnson Derivative Litigation is completely resolved.