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State ex rel. Wilson v. Ortho-McNeil-Janssen Pharmaceuticals, Inc.

Supreme Court of South Carolina

July 8, 2015

State of South Carolina ex. rel. Alan Wilson, in his capacity as Attorney General of the State of South Carolina, Respondent,
v.
Ortho-McNeil-Janssen Pharmaceuticals, Inc., f/k/a Janssen Pharmaceutical, Inc., and/or Janssen, L.P., and Johnson & Johnson, Inc., Defendants, of whom Ortho-McNeil-Janssen Pharmaceuticals, Inc. is the Appellant

Heard March 21, 2013.

Withdrawn, Substituted and Refiled July 8, 2015.

Filed February 25, 2015.

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Appeal from Spartanburg County. Roger L. Couch, Circuit Court Judge. Appellate Case No. 2012-206987.

Steven W. Hamm and Steven J. Pugh, both of Richardson, Plowden & Robinson, PA, of Columbia, C. Mitchell Brown, William C. Wood, Jr., A. Mattison Bogan and Miles E. Coleman, all of Nelson Mullins Riley & Scarborough, LLP, of Columbia, Edward M. Posner and Chanda A. Miller, both of Drinker Biddle & Reath, of Philadelphia, Pennsylvania, for Appellant.

John B. White, Jr., and Donald C. Coggins, Jr., both of Harrison, White, Smith & Coggins, PC, of Spartanburg, John S. Simmons, of Simmons Law Firm, LLC, of Columbia, Attorney General Alan M. Wilson, Deputy Attorney General Robert D. Cook and Assistant Deputy Attorney General Clyde H. Jones, Jr., all of Columbia, Fletcher V. Trammell, Robert W. Cowan, and Elizabeth W. Dwyer, all of Bailey Peavy Bailey, of Houston Texas, for Respondent.

Gray T. Culbreath and Laura W. Jordan, both of Gallivan White & Boyd, P.A., of Columbia, for Amici Curiae, The South Carolina Chamber of Commerce, South Carolina Business and Industry Political Education Committee and The South Carolina Manufacturer's Alliance.

TOAL, C.J., BEATTY and HEARN, JJ., concur. PLEICONES, J., dissentingin a separate opinion.

OPINION

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[414 S.C. 45] KITTREDGE, JUSTICE:

Appellant Ortho-McNeil-Janssen Pharmaceuticals (Janssen) is a pharmaceutical company that manufactures the antipsychotic drug Risperdal. Risperdal is among a class of drugs prescribed primarily for the treatment of schizophrenia. The Attorney General of South Carolina believed that Janssen had violated the South Carolina Unfair Trade Practices Act (SCUTPA)[2] by engaging in unfair methods of competition by willfully failing to disclose known risks and side effects associated with Risperdal.

[414 S.C. 46] On January 24, 2007, the State and Janssen entered into a tolling agreement concerning the statute of limitations. SCUTPA has a three-year statute of limitations, as section 39-5-150 of the South Carolina Code provides that " [n]o action may be brought under this article more than three years after discovery of the unlawful conduct which is the subject of the suit." The State filed its Complaint on April 23, 2007, seeking statutory civil penalties against Janssen on two claims. The first claim arose from the content of the written material furnished by Janssen since 1994 with each Risperdal prescription, the so-called labeling claim. The second claim centered on alleged false information contained in a November 2003 Janssen-generated letter sent to the South Carolina community of prescribing physicians, the so-called Dear Doctor Letter. Because both claims arose more than three years prior to January 24, 2007, Janssen pled the statute of limitations as a bar to the Complaint.

The matter proceeded to trial. A jury rendered a liability verdict against Janssen on both claims. The trial court rejected

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Janssen's defenses, including the statute of limitations, finding that both claims were timely. The trial court imposed civil penalties against Janssen for both claims totaling $327,073,700 based on 553,055 separate violations of SCUTPA in connection with its deceptive conduct in the sales and marketing of Risperdal.

Janssen appeals. Because this is an action at law, our review of factual challenges is limited to determining whether there is any evidence to support the verdict. As for properly preserved questions of law, our review is plenary. We affirm the liability judgment on the labeling claim but modify the judgment to limit the imposition of civil penalties to a period of three years from the date of the tolling agreement, which is essentially coextensive with the three-year statute of limitations, subject to an additional three months by virtue of the time period between the January 24, 2007, tolling agreement and the filing of the Complaint on April 23, 2007. We further remit the civil penalties on the labeling claim to $22,844,700. We affirm the liability judgment on the DDL claim, but remit those civil penalties to $101,480,000. Accordingly, we affirm in part, reverse in part, and remand for entry of judgment against Janssen in the amount of $124,324,700.

[414 S.C. 47] I.

A.

FDA Regulatory Process and Background

A brief summary of the Food and Drug Administration's (FDA) regulatory authority over the pharmaceutical industry and the evolution of antipsychotic drugs provides a helpful backdrop to the facts of this case. " In the 1930's, Congress became increasingly concerned about unsafe drugs and fraudulent marketing, and it enacted the Federal Food, Drug, and Cosmetic Act (FDCA)." [3] Wyeth v. Levine, 555 U.S. 555, 566, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009) (citation omitted). The FDCA's " most substantial innovation was its provision for premarket approval of new drugs." Id. Following implementation of the FDCA, the FDA " required every manufacturer to submit a new drug application, including reports of investigations and specimens of proposed labeling" for regulatory review and approval.[4] Id. " Until its application became effective, a manufacturer was prohibited from distributing a drug." Id. FDA regulations require a new drug application to " include all clinical studies, as well as preclinical studies related to a drug's efficacy, toxicity, and pharmacological properties." Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193, 196, 125 S.Ct. 2372, 162 L.Ed.2d 160 (2005) (citing 21 C.F.R. § 314.50(d)(2), (5) (2005)).

The FDA new drug approval process includes specific procedures through which warning labels are drafted, approved, and required to be included in the packaging of manufactured drugs. A drug label " must contain a summary of the essential scientific information needed for the safe and effective use of the drug," and the label " must be informative and accurate and neither promotional in tone nor false or misleading in any [414 S.C. 48] particular." 21 C.F.R. § 201.56(a)(1)-(2) (2014). Indeed, federal regulations set forth detailed requirements as to the content, the formatting, and the order of required information about potential risks and the safe and effective use of a drug. Id. § 201.57(c) (2014). Specifically, FDA regulations require drug labels to include, inter alia : (1) " black box" warnings about serious risks that may lead to death or serious injury; (2) contraindications describing any situations in which the drug should not be used because the risk of use outweighs any possible therapeutic benefit; (3) warnings and precautions about significant adverse reactions and other potential safety hazards; and (4) any adverse reactions for which there is a basis to believe a causal relationship exists between the drug

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and the occurrence of the adverse event. Id. As these FDA regulations make clear, the category in which a particular risk appears on a drug label is a critical indicator of both the degree of the risk and also the likelihood and severity of the adverse consequences the drug may cause.

After a new drug application has been approved, the drug's sponsor has continuing duties to the FDA to ensure the long term efficacy and safety of the approved drug. For example, once drugs are approved by the FDA, the drug's sponsor is required to review, and report to the FDA, all " adverse drug experience" [5] information it receives from any source, including adverse experiences reported during the process of post-marketing clinical trials. 21 C.F.R. § 314.80(b), (c) (2014). As new risks and side effects are discovered, a manufacturer must revise a drug's label " to include a warning about a clinically significant hazard as soon as there is reasonable evidence of a causal association with a drug; a causal relationship need not have been definitely established." 21 C.F.R. § 201.57(c)(6)(i). As the FDA does not conduct independent [414 S.C. 49] scientific testing, it is incumbent upon sponsors to disclose all clinical data to ensure the safe and effective use of drugs.

Some have expressed a growing concern regarding the pharmaceutical industry's reticence to disclose negative clinical data, and the impact this has on the public health and welfare. Indeed, it has been stated that:

[T]he failure to disclose study results not only impacts clinical trial participants, but the health of the general public may be put in jeopardy as well. For drugs that have received FDA approval, postmarket clinical trials investigating new uses of the medication often reveal important information concerning side effects and related adverse complications with the treatment. To the extent that prescribing physicians do not have this essential data, they could inadvertently be putting their patients at serious risk by continuing to recommend the medication.
Over the past few years, numerous scandals in the drug industry illustrate that concealing unfavorable research results is far from an isolated practice. . . . . In a quest to boost sales and increase corporate profits, the temptation to hide or selectively disclose clinical trial data has proven to be too much.

Christine D. Galbraith, Dying to Know: A Demand for Genuine Public Access to Clinical Trial Results Data, 78 Miss. L.J. 705, 710 (2009).

" The FDA's premarket approval of a new drug application includes the approval of the exact text in the proposed label." Wyeth, 555 U.S. at 568 (citing 21 U.S.C. § 355 (2006); 21 C.F.R. § 314.105(b) (2008)). Subsequent to approval of the new drug application, a drug manufacturer must submit a supplemental application to the FDA in order to effect any changes in the drug label. Id. (citing 21 U.S.C. § 355 (2006); 21 C.F.R. § 314.105(b) (2008)). " There is, however, an FDA regulation that permits a manufacturer to make certain changes to its label before receiving the agency's approval." Id. (emphasis added).

Among other things, this " changes being effected" (CBE) regulation provides that if a manufacturer is changing a label to " add or strengthen a contraindication, warning, precaution, or adverse reaction" or to " add or strengthen an [414 S.C. 50] instruction about dosage and administration that is intended to increase the safe use of the drug product," it may make the labeling change upon filing its supplemental application with the FDA; it need not wait for FDA approval.

Id. (quoting 21 C.F.R. § § 314.70(c)(6)(iii)(A), (C)).

Following FDA approval of a new drug (or a new indication for an existing drug), pharmaceutical

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companies may begin to market the drug, subject to federal regulations. See, e.g., 21 C.F.R. § 203.2 (2014) (" The purpose of this part is . . . to protect the public health . . . ." ). Typical pharmaceutical marketing strategies include both direct sales calls (i.e., visits to prescribing doctors to distribute literature and samples) and academic writings and speaking events led by healthcare professionals.

B.

Risperdal

Risperdal (risperidone) is an antipsychotic drug primarily used to treat schizophrenia. Schizophrenia is a chronic, debilitating mental illness that affects approximately 1% of the population. Following onset, schizophrenia is a lifelong, incurable disease, and treatment almost always involves the use of an antipsychotic drug. Between the 1950s and 1990s, medical practitioners prescribed typical antipsychotics such as Thorazine (chlorpromazine), Prolixin (fluphenazine), Haldol (haloperidol), Loxitane (loxapine), and Mellaril (thioridazine) to treat schizophrenia. Although effective, these typical antipsychotics posed a number of negative side effects, including involuntary muscle movements and tardive dyskinesia, a long-lasting movement disorder.

By the 1980s, clozapine was being investigated for the treatment of schizophrenia on the theory that it might be more effective and cause fewer movement disorders than typical antipsychotics. Clozapine was termed an " atypical antipsychotic" because it affected a different part of the brain than the older, typical antipsychotics. The medical community soon discovered that clozapine, too, had negative side effects, including agranulocytosis--a dramatic and sometimes deadly decrease in white blood cell count. Thus, in spite of its efficacy in treating the symptoms of schizophrenia, clozapine [414 S.C. 51] was usually used only as a " last resort" drug, prescribed for only about 10% of the schizophrenic population.

In 1994, Janssen introduced Risperdal in the United States as the second atypical antipsychotic drug on the market. In the first several years Risperdal was on the market, it steadily captured market share from typical antipsychotics, despite costing ten times as much. From 1994 to 1996, Risperdal held a unique place in the market--it was promoted as being more effective than the older, typical antipsychotics, without the dangerous side effects associated with clozapine. In 1996, Eli Lilly (Lilly) introduced a third atypical antipsychotic drug to the market: Zyprexa. Zyprexa was dramatically successful when it hit the market, and Lilly and Janssen competed to capture the antipsychotic market.

Spurred by this fierce competition, Janssen developed a marketing strategy to distinguish Risperdal and protect its market share. By 1998, Janssen was promoting Risperdal as having a lower risk of weight gain and a lower metabolic risk profile than Zyprexa.[6] Despite the claims made by Janssen, post-marketing studies, some as early as 1994, revealed Risperdal posed a serious risk of substantial weight gain, increased prolactin levels,[7] and hyperprolactinemia in patients taking atypical antipsychotics.

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[414 S.C. 52] This increased the long-term risk of developing various kinds of cancer, osteoarthritis, cardiovascular disease, and stroke. Additionally, atypical antipsychotics greatly increased the risk of diabetes mellitus, which can have very serious, even life-threatening consequences. By 1997, Janssen also had information that Risperdal posed a serious risk of stroke, cardiac arrest, and sudden death in the elderly. Despite this clinical information, it was several years before Janssen updated the Risperdal label to accurately reflect the frequency and severity of the risk of hyperprolactinemia, weight gain and diabetes, or stroke, cardiac arrest, and sudden death in the elderly.

In 1997, Janssen commissioned a clinical trial (Trial 113) designed to establish Risperdal's superiority over Zyprexa as to metabolic side effects, including weight gain and diabetes. In 1999, the results of Trial 113 were not what Janssen desired, as the study concluded that there was no difference between Risperdal and Zyprexa in terms of long-term weight gain or the onset of diabetes mellitus.[8] Janssen did not disclose or publish the results of Trial 113 and continued to claim that Risperdal was superior to Zyprexa in terms of these negative metabolic side effects.

By August 2000, Janssen also received results from two epidemiological studies. One study was based on a review of the records of patients treated with atypical antipsychotics in a New England insurance database (ERI study). The ERI study showed that Risperdal patients developed diabetes mellitus [414 S.C. 53] at a significantly higher incident rate than patients taking Zyprexa. The second study was commissioned by Janssen (HECON study), and it concluded that Risperdal was not associated with an increased risk of diabetes mellitus. By this time, and notwithstanding Janssen's furtive efforts, the risks and adverse side effects associated with atypical antipsychotic drugs were fairly well known.

In May 2000, the FDA asked sponsors of atypical antipsychotic drugs to submit a comprehensive review of all clinical data pertaining to metabolic side effects. In response, Janssen did not disclose the results of the Trial 113 study but disclosed only the favorable results from its own HECON study, affirmatively indicating to the FDA that no long-term trials pertaining to metabolic side effects had taken place. The FDA's review was not thwarted by Janssen's efforts, as the FDA's investigation prompted it to request that product labeling for all atypical antipsychotic medications, including Risperdal, include a warning about hyperglycemia and diabetes.

Janssen was concerned that the FDA-mandated label warning would result in a substantial loss of Risperdal market share. Notwithstanding the Trial 113 and ERI study results suggesting an association between Risperdal and diabetes, in October 2000, Janssen's Associate Director of Central Nervous System Medical Affairs wrote an email to her colleagues urging that Janssen must avoid Risperdal being " lumped in to [sic] the atypical class for diabetes. . . . [W]e need to work hard on a strategy to avoid risperdal being thought of as a diabetes-inducing medication. Instead, when worried about diabetes, we want doctors to prescribe Risperdal."

Janssen then determined it would take control of how the message surrounding the new diabetes warning would be communicated. Janssen officials' strategy was to " soften the blow" through what is known in the industry as a Dear Doctor Letter (DDL).

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The inspiration came from a DDL that Lilly sent to prescribers, informing them that the entire class of atypical antipsychotics was now subject to a new " class label" for diabetes and hyperglycemia. A senior vice president for Janssen's parent company wrote in an internal email that " Lilly's DDL is pretty clever. How much commercial liability [414 S.C. 54] would we incur if we sent a similar letter about Risperdal, assuming the FDA is unwilling to communicate the issue?"

On November 10, 2003, Janssen disseminated a DDL, which did not include the text of the new diabetes/hyperglycemia warning, but stated:

Hyperglycemia-related adverse events have infrequently been reported in patients receiving RISPERDAL. Although confirmatory research is still needed, a body of evidence from published peerreviewed epidemiology research suggests that RISPERDAL is not associated with an increased risk of diabetes when compared to untreated patients or patients treated with conventional antipsychotics. Evidence also suggests that RISPERDAL is associated with a lower risk of diabetes than some other studied atypical antipsychotics.

To put it mildly, the November 2003 DDL contained false information.

Additionally, in training its employees on the labeling update, Janssen communicated to its field sales team that Risperdal had a " 0%" increased diabetes risk compared to placebo. This was part of the message communicated to physicians in DDL follow-up visits with physicians.

Meanwhile, by January 2004, Janssen had updated the Risperdal label to include the new diabetes/hyperglycemia warning. Janssen determined that the negative sales impact had been minimal because of its deceptive efforts in the November 2003 DDL. In other words, the November 2003 DDL worked, as far as Janssen was concerned, in protecting its market share.

Thereafter, in April 2004, the FDA's Division of Drug Marketing Advertising and Communications (DDMAC)[9] issued a " Warning Letter" to Janssen, characterizing the November 2003 DDL as " false or misleading" in violation of the FDCA. Specifically, the letter provided:

DDMAC has concluded that the DHCP[10] letter is false or misleading in violation of Sections 502(a) and 201(n) of the [414 S.C. 55] Federal Food, Drug, and Cosmetic Act (Act) (21 U.S.C. 352(a) and 321(n)) because it fails to disclose the addition of information relating to hyperglycemia and diabetes mellitus to the approved product labeling, minimizes the risk of hyperglycemia-related adverse events, which in extreme cases is associated with serious adverse events including ketoacidosis, hyperosmolar coma, and death, fails to recommend regular glucose control monitoring to identify diabetes mellitus as soon as possible, and misleadingly claims that Risperdal is safer than other atypical antipsychotics. The healthcare community relies on DHCP letters for accurate and timely information regarding serious risks and associated changes in labeling and the dissemination of this letter at a time critical to educating healthcare providers is a serious public health issue.

The FDA also determined that the scientific studies referenced in the DDL " do not represent the weight of the pertinent scientific evidence" nor did the DDL accurately describe the results of the cited studies. As a result of the FDA's warning, Janssen issued a corrective letter in July 2004, acknowledging that the November 2003 DDL " omitted material information about Risperdal, minimized potentially fatal risks, and made misleading claims suggesting superior safety to other atypical antipsychotics without adequate substantiation, in violation of the [FDCA]."

As to Risperdal's label, Janssen did not update the label to include a boxed warning regarding the risk of stroke, cardiac arrest, and sudden death in the elderly until February 2005, and no warning about hyperprolactinemia

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appeared in the label until August 2008.[11]

[414 S.C. 56] C.

The State's Unfair Trade Practice Claim

In April of 2007, the Attorney General of South Carolina filed a state law claim against Janssen, seeking civil penalties under SCUTPA. The State pursued two claims against Janssen, one in connection with the Risperdal label (the labeling claim) and the second concerning the November 2003 DDL (the DDL claim). Following a twelve-day trial, the jury returned a verdict on liability in favor of the State, finding ...


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