Johnson & Johnson accused of paying kickbacks to raise drug sales

Drug company Johnson & Johnson has been accused of paying tens of millions of dollars in kickbacks to a US nursing home pharmacy company to increase sales of drugs to patients.

The US Department of Justice (DoJ) said between 1999 and 2004, the pharmaceutical giant illegally paid Kentucky-based Omnicare, the biggest pharmacy serving nursing homes in the US, to buy Johnson & Johnson drugs and to promote their use at nursing homes. The kickback were directed towards a number of the company’s products, including Propulsid, Levaquin, Procrit, Duragesic, and Ultram, but the biggest share of the payments revolved around Risperdal, which is prescribed to help control anxiety.

According to the report which appeared in the Wall Street Journal, it is common in the pharmaceutical industry for drug makers to pay rebates for drugs sold through middlemen, such as Omnicare, whose role it is to process prescriptions, distribute the drugs, and manage insurance coverage. The practice is not illegal. Instead, prosecutors are accusing Johnson & Johnson of hiding the rebates, partly by disguising them as payment for information that Omnicare usually provides for free to drug company clients.

The report said that intermediary companies such as Omnicare often wield strong influence in the drug making business, because they determine the brands of drugs prescribed to millions of patients in the US.

The 34-page complaint cites evidence such as admission in internal presentations by Johnson & Johnson executives of the pivotal role played by Omnicare in product selection by nursing home patients. In one email, the company calculated that US$3 million in rebates would result in US$9 million in sales, with a net return of US$4.8 million. In 2000, the two companies entered into a four-year agreement, involving a payment of US$4.65 million to Omnicare, in return for the pharmacy company making an effort to persuade patients to switch to Johnson & Johnson products.

The complaint also alleges that Johnson & Johnson sponsored Omnicare’s annual national managers meeting at a Florida resort. Between 1999 and 2004, the drug company paid US$50,000 for the sponsorship each year, and in return its sales managers were able to rub shoulders with Omnicare managers, and persuade them to buy more of the company’s drugs. The report goes on to say that the DoJ complaint was brought about by two whistle-blowers who were former employees at Omnicare.

Johnson & Johnson, which is based in New Jersey, has responded by saying that its acts were “lawful and appropriate”, and that the company is looking forward to defending against the claims in court. The company did not elaborate further.