Johnson & Johnson (JNJ.N) said it has agreed to pay $181 million to settle consumer fraud claims by 36 U.S. states and the District of Columbia that it improperly marketed its Risperdal antipsychotic drug for unapproved uses.
The diversified healthcare company has also been targeted by federal authorities for separate but related allegations, including improperly promoting the drug for use in nursing homes.
J&J said it had already set aside funds to cover the civil settlement. The funds will be divided among the states participating in the settlement, announced on Thursday.
The company said the settlement was not an admission of wrongdoing.
"We have chosen this path to achieve a prompt and full resolution of these state claims," Michael Yang, president of J&J's Janssen Pharmaceuticals, said in a statement.
Annual sales of Risperdal, which topped $4 billion at their peak, have dwindled in the face of competition from cheaper generic versions.
J&J said it would not promote any of its newer antipsychotics for off-label uses or make any false or misleading claims related to those products. It said it had a system in place to ensure that marketing and promotion policies are followed.
While doctors are free to use medicines in any way they see fit, companies can only promote drugs for uses approved by the U.S. Food and Drug Administration.
J&J previously disclosed a separate agreement in principle with the U.S. Department of Justice to settle three civil False Claims Act matters pending in U.S. courts involving sales and marketing of Risperdal, another schizophrenia treatment, Invega, and the heart failure drug Natrecor. J&J has been accused of targeting the elderly by making payments to Omnicare Inc OCR.N to promote the medicines in nursing homes and long-term care facilities.
J&J took a charge of about $600 million in the second quarter to bolster reserves for a potential settlement of civil lawsuits related to marketing of Risperdal and other drugs. It said it was unclear when the agreement with the Justice Department would become final.
The latest settlement follows a number of costly court setbacks in various states related to Risperdal sales practices.
In April, an Arkansas state judge ordered J&J to pay a $1.1 billion penalty after a jury found the company guilty of using fraudulent tactics to sell Risperdal. J&J filed an appeal of that ruling in July.
Arkansas sued the company, saying it had deceived thousands of doctors by touting the medicine as better and safer than rival therapies and marketing it for unapproved uses in children and the elderly. The state, which was not part of the settlement announced on Thursday, alleged that J&J caused its Medicaid insurance program for the poor to greatly overpay for Risperdal.
The company earlier agreed to pay $158 million to settle a similar lawsuit brought by Texas.
It is appealing decisions that went against it in Louisiana and South Carolina. J&J successfully appealed a similar case in Pennsylvania, while claims brought by West Virginia involving Risperdal sales practices were dismissed.
J&J shares were down 31 cents, or 0.5 percent, at $67.06 in afternoon trade on the New York Stock Exchange amid sharper downturns for the drug sector and broader stock market.
(Reporting by Bill Berkrot and Ransdell Pierson; Editing by Bernard Orr and John Wallace)