J&J Settles Criminal Case Alleging CEO Reviewed Illegal Heart Drug Sales Plan

Johnson & Johnson (JNJ) CEO William Weldon allegedly attended a meeting at which he reviewed an illegal plan to promote the heart failure drug Natrecor, according to a whistleblower lawsuit settled by the company for $85 million today. It is not known whether Weldon's personal involvement in the suit had a role in the settlement. Litigation would likely have led to depositions and perhaps even courtroom testimony if it had gone to trial.

In addition to the fine, a unit of J&J will also plead guilty to a criminal charge of selling misbranded drugs; the plea allows J&J and its executives -- i.e. Weldon -- to avoid being banned from doing business with Medicare, Medicaid and other federal healthcare programs.

The prospect of Weldon being banned was a remote but real one: Former InterMune CEO W. Scott Harkonen was excluded from federal healthcare programs this week and the Department of Justice has stepped up its use of the bans against senior executives recently even if they have not had a direct hand in the crimes their companies have committed.

In the case, Joe Strom, a former Utah area manager for J&J unit Scios, describes how Natrecor was approved by the FDA to treat congestive heart failure among hospital and emergency room patients who also had fluid in their lungs. By 2003, however, J&J's sales managers realized that half of Natrecor's sales were coming from outpatient business, in which doctors injected heart failure patients in non-emergency settings as part of their ongoing, routine care, the case claims.

That was not approved by the FDA and J&J had no data supporting the drug for that type of use. But if J&J could increase the use of Natrecor in unapproved, "off-label" non-acute settings, the company calculated its sales would increase by $330 million to $930 million, Strom says.

Enter Weldon, per the suit:

Further evidencing J&J's direct involvement in Scios's marketing of Natrecor for serial outpatient use, on June 27, 2003, the Chairman of J&J's Board of Directors, Bill Weldon, visited Scios and reviewed Defendants' 2003/2004 Natrecor Business Plan, which discusses the plan to continue marketing Natrecor for outpatient use and sets separate sales goals for "Outpatient" sales.

Things go belly up
Things started to go belly-up around 2005, when medical journals began to question why there was a higher mortality rate when Natrecor was used in some patients. Eager to head the issue off at the pass, J&J formed a expert panel led by Dr. Eugene Braunwald of Harvard Medical School. The Braunwald panel told J&J that Natrecor should be restricted to hospital use, the suit claims. Late that year, Braunwald sent a letter to J&J alleging the company was ignoring his panel's advice:

On July 20, 2005, Dr. Braunwald sent a letter to Dr. Randall Kaye, Scios's Vice President of Medical Affairs, stating that "members of the Natrecor Advisory Panel have been disturbed by what we consider to be significant omissions and lack of clarity in Scios'[s] efforts to comply with the Panel's recommendations."

In an amazing coincidence, J&J took a one-time writedown charge of $678 million on Natrecor in 2007 (see page 39), a full year before the drug was actually due to go off-patent.

Had Weldon (pictured) actually been banned from doing business with the government it would have forced his retirement. Most drug companies are largely dependent on government healthcare plans for their revenue. About 80 percent of congestive heart failure patients are over 65 years old, the suit notes, making them eligible for, and largely dependent on, Medicare.

Looks like Weldon dodged a bullet.

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