In the third-largest settlement the government has reached with a pharmaceutical company, Johnson & Johnson (J&J) and two of its subsidiaries have agreed to pay $2.2 billion in fines and penalties and to comply with terms of a 101-page corporate integrity agreement (CIA). The CIA includes certifications by its management employees that they will comply with the terms of the agreement. In addition to the $2.2 billion fine, the settlement includes an executive financial recoupment program that provides for forfeiture of annual incentive compensation for certain covered executives in the event of misconduct discovered by J&J and J&J Pharmaceutical Affiliates. The five-year CIA will cause J&J to make significant changes in its operation, provide greater transparency, and submit detailed reports to the government about its compliance program and business operations to the Health and Human Services Office of Inspector General. In a Nov. 4 announcement, the U.S. Department of Justice revealed the settlement with J&J and two of its subsidiaries, Janssen Pharmaceutical Inc. and Scios Inc., that resolved several allegations including misbranding drugs, promoting off-label use of certain drugs, and paying kickbacks to physicians and pharmaceutical distributors. The settlement covered both federal and state alleged Medicare and Medicaid false claims […]
In the third-largest settlement the government has reached with a pharmaceutical company, Johnson & Johnson (J&J) and two of its subsidiaries have agreed to pay $2.2 billion in fines and penalties and to comply with terms of a 101-page corporate integrity agreement (CIA).
The CIA includes certifications by its management employees that they will comply with the terms of the agreement. In addition to the $2.2 billion fine, the settlement includes an executive financial recoupment program that provides for forfeiture of annual incentive compensation for certain covered executives in the event of misconduct discovered by J&J and J&J Pharmaceutical Affiliates.
The five-year CIA will cause J&J to make significant changes in its operation, provide greater transparency, and submit detailed reports to the government about its compliance program and business operations to the Health and Human Services Office of Inspector General.
In a Nov. 4 announcement, the U.S. Department of Justice revealed the settlement with J&J and two of its subsidiaries, Janssen Pharmaceutical Inc. and Scios Inc., that resolved several allegations including misbranding drugs, promoting off-label use of certain drugs, and paying kickbacks to physicians and pharmaceutical distributors. The settlement covered both federal and state alleged Medicare and Medicaid false claims violations.
“This global settlement resolves multiple investigations involving the antipsychotic drugs Risperdal and Invega—as well as the heart drug Natrecor and other Johnson & Johnson products,” said Attorney General Eric Holder in announcing the settlement. “The settlement also addresses allegations of conduct that recklessly put at risk the health of some of the most vulnerable members of our society—including young children, the elderly, and the disabled.”
As part of the CIA, J&J must change its executive compensation program to permit the company to recoup bonuses and other long-term incentives even after executives leave the company if the executives or any of their subordinates engage in significant misconduct. The agreement also requires the above-mentioned certification by company executives, including senior executives and certain members of J&J’s independent board of directors. The company must also report payments it makes to physicians for research, educational speaker events and other work promoting the use of its products, and the payment of grants to physicians and pharmaceutical companies that promote their drugs for off-label use.
The investigation involved agencies of the federal government as well as several state agencies and involved both civil and criminal actions and plea agreements. The whistleblower suit will result in payments to relators in Pennsylvania, Massachusetts, and California totaling approximately $167 million.
Holding Individuals Accountable
This case may be an indication of a more aggressive approach to settlement agreements whereby individuals, company officers, and potentially board members are held accountable for their actions or for not controlling the actions of their subordinates. It takes the very aggressive approach of making a company change compensation agreements for executives to deter individuals from trying to profit off of misconduct by the requirement of the financial recoupment program as part of the CIA. Also, the head of each business unit must sign an annual certification of compliance with not only the settlement agreement but also with company policy and procedure related to its compliance program.
Takeaway: The government is increasing its efforts to hold individuals such as company executives and upper-level managers accountable for their participation in schemes and frauds involving false claims and kickback violations as a means to deter such activity.
