Johnson & Johnson Liable to Pay Pennsylvania $52 Million after Falsely Reporting Drug Prices

Tom Corbett Announces $52 Million Settlement with Johnson & Johnson

Nearly $52 million in damages and penalties awarded in Attorney General’s drug pricing case against Johnson & Johnson

Tom Corbett News Release

HARRISBURG – Attorney General Tom Corbett announced that New Jersey-based Johnson & Johnson, Inc. has been found liable to Pennsylvania for nearly $52 million in damages and civil penalties for falsely reporting the prices of its drugs.  Commonwealth Court Judge Robin Simpson rendered the verdict on December 7, 2010, following a five-week trial in Easton, Pennsylvania.

Corbett explained that in 2004, the Office of Attorney General sued Johnson & Johnson and several of its subsidiaries, as well as 14 other drug companies, for allegedly manipulating a pricing benchmark known as Average Wholesale Price (“AWP”). According to the lawsuits, Johnson & Johnson and other drug manufacturers inflated AWP above the true average of wholesale prices in order to increase drug sales and profits.  Many government benefit programs, like Medicaid and PACE (the Pharmaceutical Assistance Contract for the Elderly, run by the Pennsylvania Department of Aging), reimburse pharmacies for brand name drugs using a formula which includes AWP.

“Medicaid and PACE serve the most vulnerable Pennsylvanians, including low income families and seniors,” Corbett said.  “Taking money from these programs by manipulating and inflating drug prices is simply unconscionable.”

Corbett said Judge Simpson found that Johnson & Johnson engaged in unfair and deceptive practices by failing to report accurate wholesale prices.

Johnson & Johnson has been ordered to repay $45,283,562 to Medicaid and PACE Program, along with $6,567,000 in civil penalties.  The Court also issued a perpetual injunction requiring Johnson & Johnson to report accurate prices.

Throughout the trial, the Commonwealth contended that Johnson & Johnson inflated its AWP’s to create a “spread” between actual wholesale prices and the AWP.  Doctors and pharmacies allegedly received that spread as an incentive to prescribe or stock Johnson & Johnson drugs.

“The Pennsylvania Legislature set up a simple system for reimbursement of pharmaceuticals:  pay doctors and pharmacies their wholesale costs plus a dispensing fee,” Corbett said. “Johnson & Johnson and other drug companies turned that simple system into a marketing gimmick, increasing sales and company profits at the expense of consumers and taxpayers.”

Johnson & Johnson can challenge the verdict on appeal and has not paid the restitution or penalties that were awarded. Prosecution of the trial was done by Donald Haviland, Esquire of the Haviland Hughes Law Firm, with the assistance of the Attorney General’s Antitrust Section.