1. Do you think that recommending nonapproved uses of a drug is an appropriate marketing strategy? Why or why not?

2. Which market segmentation strategy do you think Johnson & Johnson was using when it decided to promote Risperdal for Alzheimer’s patients? What did the company fail to take into account when developing this strategy?

Several years ago, the Food and Drug Administration (FDA) approved Johnson & Johnson’s drug Risperdal to treat psychotic disorders, such as schizophrenia, in adults. However, the National Institute of Mental Health found that schizophrenia affects only about 1.1 percent of adults in the United States. According to a lawsuit by the state of Louisiana, Johnson & Johnson therefore decided to seek a wider market for the drug by indirectly promoting it for other purposes.

Under U.S. law, if the FDA has approved a drug for treating at least one disorder, doctors are permitted to prescribe it “off label,” for any other disorder they think the drug will help—even if the FDA has not approved it for that disorder. (The condition the drug is intended to treat must be stated on the labeling.) However, drug manufacturers are forbidden to promote a drug for any other use than the FDA-approved one.

Recently, the U.S. Department of Justice charged Johnson & Johnson with paying hundreds of millions of dollars in kickbacks to Omnicare Inc. to buy and promote Risperdal, among other drugs, for off-label uses. Omnicare, the largest pharmacy for U.S. nursing-home patients, allegedly advocated prescribing Risperdal for elderly patients with Alzheimer’s disease—even though the FDA never approved Risperdal for treating Alzheimer’s. Johnson & Johnson stated, “We believe airing the facts will confirm that our conduct, including rebating programs like those the government now challenges, was lawful and appropriate. We look forward to the opportunity to present our evidence in court.”

As far back as 1994—just one year after it approved Risperdal for psychotic disorders—the FDA ordered Johnson & Johnson to stop its claims that Risperdal was more effective than competing drugs. In 1999, the FDA warned the company that its marketing literature exaggerated Risperdal’s benefits for elderly patients with Alzheimer’s disease and understated the risks. Nonetheless, a Johnson & Johnson business plan revealed the company’s intention to increase Risperdal’s sales to these vulnerable patients well into the 21st century (as Baby Boomers age). Sales of Risperdal peaked at $4.5 billion in 2007, before the patent expired and other companies could legally manufacture cheaper, generic versions of the drug.

In 2005, the FDA issued a public health advisory, warning that Risperdal and similar drugs actually increased the chances of death among elderly Alzheimer’s patients, usually from heart failure or pneumonia. The FDA has also required Risperdal to carry a “black box” warning, the most stringent in the FDA’s arsenal.

Ten states have filed lawsuits against Johnson & Johnson for promoting Risperdal off label. Louisiana sued to force the company to pay millions of dollars in fines and to regain public money spent on Risperdal. Johnson & Johnson’s lawyers argued that Louisiana did not cite any evidence of misrepresentation or off-label promotion. The company also claimed that there was no connection between its marketing and Louisiana doctors’ decision to prescribe Risperdal. The judge rejected this argument, and the trial date was set. A spokesman for Johnson & Johnson said that the case “should be decided on the body of evidence, including testimony, not on the basis of excerpts from documents.” The company has not put any money aside toward a settlement.

Omnicare paid $98 million to settle charges of running kickback plans with nursing homes and other drug manufacturers. Neither Omnicare nor Johnson & Johnson acknowledged doing anything wrong.