It could be a lesser-of-two-evils situation facing Dow component Johnson & Johnson (NYSE:JNJ). The drug maker was reported this week getting ready to dig into its deep pockets to preserve its good name, regarding the effects of an anti-psychosis drug it manufactures, and how said drug was being used.
On Wednesday, media outlets reported that J&J was close to a deal with the U.S. Justice Department over allegations it promoted Risperdal for unapproved uses, a deal which could cost the corporation upwards of $2 billion U.S.
The same media sources were saying that J&J is facing a number of lawsuits from states that allege it improperly marketed Risperdal for patients and conditions for which it was not approved by U.S. regulators -- including to elderly residents of nursing homes.
Risperdal, which had been one of J&J's biggest products before it went off patent, is approved to treat schizophrenia, bipolar disorder and irritability associated with autism. While doctors may use their judgment when prescribing medicines, companies are allowed to promote them only for uses specifically approved by the U.S. Food and Drug Administration.
The deal could take several weeks to wind up; meantime, neither the company nor the Justice Department is saying much. The alternative to paying out the settlement might have involved facing a felony charge, effectively putting the kibosh on J&J selling any of its medicines to government health programs such as Medicare.
The company is quite well-acquainted with the inside of a courtroom lately; last week, a woman in New Jersey filed a suit against J&J and its Ethicon subsidiary involving surgical mesh products they make called Gynecare Prolift and TVT Secur, implants she alleged caused internal injuries and an assortment of other medical problems that she says she carries with her to this day. She was implanted during a medical procedure in the fall of 2007. No dollar figure was named in news reports outlining the suit.
The controversy has clouded the outlook for the New Brunswick, New Jersey-based company, whose stock price decreased Thursday by 62 cents, or 0.9%, to $66.39. The price’s 52-week range peaked at $68.05 early last July, before bottoming out at $59.08 in August. What effect the legal actions have on the future conduct of Johnson & Johnson, and the drug industry in America in general, remains to be seen.
