Johnson & Johnson Reaches Risperdal Lawsuit Agreement

Healthcare conglomerate Johnson & Johnson (NYSE: JNJ) and the Department of Justice have reached an agreement in principle to the illegal marketing practices of antipsychotic drug Risperdal.

In the drug maker's securities filing it indicated “issues remain open” before settlements can be concluded. The Wall Street Journal has said the settlement could exceed $2.2 billion. Due to the number of states suing the company a fixed figure is impossible determine.

Back in 2009 Pfizer Inc. (NYSE: PFE) agreed to pay $2.3 billion to settle an investigation by the Department of Justice into the fraudulent marketing practices of the anti-inflammatory drug Bextra.

Johnson & Johnson said South Carolina, Arkansas and Louisiana are not expected to take part in the settlements. Currently at least 40 states are investigating the marketing practices of Risperdal or suing the drug maker.

Risperdal had been Johnson & Johnson's top-selling drug with $2.2 billion in sales in 2007, the year prior to its patent expiration. The medicine treats the symptoms of mental illnesses such as schizophrenia, bipolar disorder, mania and irritability in autistic patients.

The point of contention that prosecutors claim was the marketing of Risperdal as prescribed to control anxiety among patients with dementia and Alzheimer's disease, both of which are unapproved uses.

Under federal law, drug makers can market medicines only for uses approved by the U.S. Food and Drug Administration, though doctors can prescribe drugs for unapproved or off-label uses.

On August 1 UBS reiterated its Buy recommendation of Johnson & Johnson based on a valuation call. The drug company shares are trading up 1 percent at $69.22 in mid morning trading. The stock is close to its 52 week high of $69.75. Analysts at Jefferies Group raised their price target from $75 to $76 on July 18.