Johnson and Johnson 2011 Annual Report Download - page 66

64 JOHNSON & JOHNSON 2011 ANNUAL REPORT
OMNICARE
In September 2005, Johnson & Johnson received a subpoena from
the United States Attorney’s Office for the District of Massachusetts,
seeking documents related to the sales and marketing of eight drugs
to Omnicare, Inc. (Omnicare), a manager of pharmaceutical bene-
fits for long-term care facilities. In April 2009, Johnson & Johnson
and certain of its pharmaceutical subsidiaries were served in two
civil qui tam cases asserting claims under the Federal False Claims
Act and related state law claims alleging that the defendants pro-
vided Omnicare with rebates and other alleged kickbacks, causing
Omnicare to file false claims with Medicaid and other government
programs. In January 2010, the government intervened in both of
these cases, naming Johnson & Johnson, Ortho-McNeil-Janssen
Pharmaceuticals, Inc. (now Janssen Pharmaceuticals, Inc. (JPI)),
and Johnson & Johnson Health Care Systems Inc. as defendants.
Subsequently, the Commonwealth of Massachusetts, Virginia, and
Kentucky, and the States of California and Indiana intervened in the
action. The defendants moved to dismiss the complaints, and in
February 2011, the United States District Court for the District of
Massachusetts dismissed one qui tam case entirely and dismissed
the other case in part, rejecting allegations that the defendants had
violated their obligation to report its “best price” to health care pro-
gram officials. The defendants subsequently moved the Court to
reconsider its decision not to dismiss the second case in its entirety,
which the Court denied in May 2011. The claims of the United States
and individual states remain pending.
In November 2005, a lawsuit was filed under seal by Scott
Bartz, a former employee, in the United States District Court for the
Eastern District of Pennsylvania against Johnson & Johnson and cer-
tain of its pharmaceutical subsidiaries (the J&J Defendants), along
with co-defendants McKesson Corporation (McKesson) and Omni-
care, Inc. The Bartz complaint raises many issues in common with
the Omnicare-related litigation discussed above already pending
before the United States District Court for the District of Massachu-
setts, such as best price and a number of kickback allegations. After
investigation, the United States declined to intervene. The case was
subsequently unsealed in January 2011. In February 2011, the plain-
tiff filed an amended complaint, which was placed under seal.
Thereafter, on the J&J Defendants’ motion, the case was transferred
to the United States District Court for the District of Massachusetts,
where it is currently pending. In April 2011, the amended complaint
was ordered unsealed and alleges a variety of causes of action under
the Federal False Claims Act and corresponding state and local
statutes, including that the J&J Defendants engaged in various
improper transactions that were allegedly designed to report false
prescription drug prices to the federal government in order to
reduce the J&J Defendants’ Medicaid rebate obligations. The com-
plaint further alleges that the J&J Defendants improperly retaliated
against the plaintiff for having raised these allegations internally.
Bartz seeks multiple forms of relief, including damages and rein-
statement to a position with the same seniority status.
The J&J Defendants subsequently moved to dismiss the com-
plaint in May 2011, and oral argument was held in August 2011. In
June 2011, Bartz filed a notice of intent to voluntarily dismiss
McKesson and Omnicare from the case and added McKesson
Specialty Pharmaceuticals, LLC, as a co-defendant. The parties are
awaiting a ruling on the motion to dismiss.
OTHER
In July 2005, Scios Inc. (Scios) received a subpoena from the United
States Attorney’s Office for the District of Massachusetts, seeking
documents related to the sales and marketing of NATRECOR®.
In August 2005, Scios was advised that the investigation would be
handled by the United States Attorney’s Office for the Northern
District of California in San Francisco. In February 2009, two qui tam
complaints were unsealed in the United States District Court for
the Northern District of California, alleging, among other things,
improper activities in the promotion of NATRECOR®. In June 2009,
the United States government intervened in one of the qui tam
actions, and filed a complaint against Scios and Johnson & Johnson
seeking relief under the Federal False Claims Act and asserting a
claim of unjust enrichment. The civil case is proceeding and discovery
is ongoing. In October 2011, the Court approved a settlement of the
criminal case in which Scios pled guilty to a single misdemeanor vio-
lation of the Food, Drug & Cosmetic Act and paid a fine of $85 million.
In February 2007, Johnson & Johnson voluntarily disclosed to
the United States Department of Justice (DOJ) and the United
States Securities & Exchange Commission (SEC) that subsidiaries
outside the United States are believed to have made improper pay-
ments in connection with the sale of medical devices in two small-
market countries, which payments may fall within the jurisdiction
of the Foreign Corrupt Practices Act (FCPA). In the course of
continuing dialogues with the agencies, other issues potentially
rising to the level of FCPA violations in additional markets were
brought to the attention of the agencies by Johnson & Johnson. In
addition, in February 2006, Johnson & Johnson received a subpoena
from the SEC requesting documents relating to the participation
by several of its subsidiaries in the United Nations Iraq Oil for Food
Program. In April 2011, Johnson & Johnson resolved the FCPA
and Oil for Food matters through settlements with the DOJ, SEC
and United Kingdom Serious Fraud Office. These settlements
required payments of approximately $78 million in financial penal-
ties. As part of the settlement with the DOJ, Johnson & Johnson
entered into a Deferred Prosecution Agreement that requires
Johnson & Johnson to complete a three-year term of enhanced
compliance practices.
In June 2008, Johnson & Johnson received a subpoena from
the United States Attorney’s Office for the District of Massachu-
setts relating to the marketing of biliary stents by Cordis Corpora-
tion (Cordis). Cordis is currently cooperating in responding to the
subpoena. In addition, in January 2010, a complaint was unsealed in
the United States District Court for the Northern District of Texas
seeking damages against Cordis for alleged violations of the Federal
False Claims Act and several similar state laws in connection with
the marketing of biliary stents. The United States Department of
Justice and several states have declined to intervene at this time. In
April 2011, the United States District Court for the Northern District
of Texas dismissed the complaint without prejudice.
In October 2011, the European Commission announced that
it opened an investigation concerning an agreement between
Janssen-Cilag B.V. and Sandoz B.V. relating to the supply of fentanyl
patches in The Netherlands. The investigation seeks to determine
whether the agreement infringes European competition law.
In recent years Johnson & Johnson has received numerous
requests from a variety of United States Congressional Committees
to produce information relevant to ongoing congressional inquiries.
It is Johnson & Johnson’s policy to cooperate with these inquiries by
producing the requested information.