UPDATE 2-U.S. accuses J&J of kickback scheme with Omnicare

* J&J accused of paying millions of kickback dollars

* Kickbacks allegedly coaxed Omnicare to tout J&J drugs

* J&J denies any wrongdoing

* J&J shares fall 1.2 pct; Omnicare falls 2.4 pct (Adds background on industry kickbacks, mention of separate recall; updates share prices)

By Jeremy Pelofsky and Ransdell Pierson

WASHINGTON/NEW YORK, Jan 15 (Reuters) - The U.S. Justice Department accused giant pharmaceutical company Johnson & Johnson JNJ.N of paying tens of millions of dollars in kickbacks to Omnicare Inc OCR.N to buy and recommend J&J drugs.

The alleged kickbacks, dating from 1999 through 2004, included providing pharmacy services company Omnicare with increased rebates in exchange for more prescriptions of J&J drugs as well as payments for data that was never furnished, the Justice Department said.

J&J also made other payments, called “grants” and “educational funding,” that were meant to persuade Omnicare to recommend the company’s medicines, the government said.

“Kickbacks such as those alleged here distort the judgments of health care professionals and put profits ahead of sound medical treatment,” Tony West, assistant attorney general for the Justice Department’s civil division, said in a statement on Friday.

Omnicare, the largest U.S. provider of pharmacy services to nursing homes, agreed in November to pay $98 million to settle allegations of soliciting kickbacks from J&J and Teva Pharmaceutical Industries Ltd TEVA.TA subsidiary IVAX Pharmaceuticals. As part of that agreement, Omnicare did not admit any wrongdoing.

A J&J spokesman said the company was reviewing the complaint but denied any wrongdoing.

“We believe airing the facts will confirm that our conduct, including rebating programs like those the government now challenges, was lawful and appropriate,” said J&J spokesman Jeffrey Leebaw.

Separately, J&J’s consumer division said it was recalling more than 53 million bottles of over-the-counter products including Tylenol, Motrin and Rolaids after reports of an unusual odor, expanding on an issue that led to a Tylenol recall last year. [ID:nN15208591]

Shares of J&J were down 1.5 percent to $64.10 in afternoon trading on the New York Stock Exchange, in line with a weak overall market. Omnicare shares were down 1.6 percent to $25.51.


The kickbacks boosted Omnicare’s purchases from J&J to $280 million annually from about $100 million, according to the complaint filed in a Massachusetts federal court on Friday.

Between 1999 and 2004, Omnicare was one of J&J’s largest customers, particularly for the antipsychotic drug Risperdal.

At J&J’s request, Omnicare pharmacists recommended the drug for nursing home patients who had symptoms associated with Alzheimer’s disease and dementia, the complaint said. The complaint also charged two of J&J’s units, Ortho-McNeil-Janssen Pharmaceuticals Inc and Johnson & Johnson Health Care Systems Inc.

Recent studies have suggested that many patients with dementia have inappropriately been given antipsychotic drugs, such as Risperdal, and that the drugs raise the risk of death in such patients.

Since 2001, there have been more than 40 major U.S. criminal and civil resolutions against drug companies related to questionable marketing practices, including kickbacks, according to the federal government.

Pfizer Inc PFE.N in September agreed to pay a record $2.3 billion to settle allegations it improperly marketed 13 medicines, including kickbacks to healthcare providers.

Eli Lilly and Co LLY.N a year ago agreed to pay $1.42 billion to settle probes into selling its Zyprexa schizophrenia drug for unapproved uses, a practice known as "off-label" marketing. Merck & Co MRK.N in 2008 settled charges that it paid kickbacks to health care providers so they would prescribe its drugs. (Reporting by Jeremy Pelofsky and Ransdell Pierson, editing by Gerald E. McCormick and Tim Dobbyn)