Maybe it's the fact that the company is more than 120 years old or that its trademark looks a lot like the Red Cross' insignia, but I've always thought Johnson & Johnson (NYSE:JNJ) had a kind of goody-two-shoes aura.
Not anymore. The U.S. Department of Justice is joining a lawsuit against Johnson & Johnson over the company's marketing of heart failure drug Natrecor. Doctors are generally allowed to prescribe drugs for anything they'd like, but companies are only allowed to market drugs for the indications approved by the FDA. The agency says Johnson & Johnson marketed Natrecor for less-severe heart failure even though it's only approved for patients with more complicated issues.
The DOJ has been doing a pretty good job getting money out of the pharmaceutical companies for off-label marketing recently. Eli Lilly (NYSE:LLY) recently paid more than $1.4 billion to settle a lawsuit over its marketing of Zyprexa, only to be topped by Pfizer's (NYSE:PFE) $2.3 billion fine over its marketing of painkiller Bextra. The latter whopper got hidden a bit by the drugmaker announcing it at the same time it announced its purchase of Wyeth (NYSE:WYE).
Part of the reason that the DOJ sues is to recoup money that companies charge government agencies like Medicare and Medicaid. The good news for Johnson & Johnson is that sales of Natrecor peaked at around $400 million -- compare that to Bextra, which had sales of $1.3 billion before it was pulled off the market, or Zyprexa, which had sales of $4.7 billion last year, albeit well after Eli Lilly stopped its off-label marketing. Johnson & Johnson could get a smaller slap on the wrist, with fines closer to those paid by Merck (NYSE:MRK) or Cephalon (NASDAQ:CEPH).
The lawsuit may tarnish Johnson & Johnson's image a little, but it's still (perhaps even because of the lawsuits) an all-American company -- even if Warren Buffett isn't so sure about it anymore.
More Foolishness:
- Buffett wouldn't like these companies either.
- Fight inflation with dividend stocks.
- You should sell, but not for the reason you think.
