Vol 22, 2013 Annals of Health Law 441
PROSECUTIONS OF PHARMACEUTICAL COMPANIES
by other shareholders and alleged the same misconduct, but had been
proceeding more slowly.228 The Delaware judge held that collateral
estoppel did not apply to give the federal court’s ruling a preclusive effect
against the claims of other stockholders.229 Further, the court then found
that a demand would have been futile and was excused under Delaware law,
thereby disagreeing with the federal court’s determination that the plaintiffs
had failed to state a claim.230 The essentially identical claims of the
Delaware plaintiffs were therefore allowed to continue against Allergan and
its directors, despite the earlier victory against shareholders in the federal
Even when defendants choose not to settle shareholder suits relating to
off-label marketing and are successful in defeating shareholders’ claims,
that success often comes only after protracted and costly litigation. For
instance, a lawsuit filed against Johnson & Johnson by the DOJ and the
U.S. Attorney’s Office in Massachusetts over off-label marketing led to a
protracted shareholder suit against Omnicare, Inc., a provider of
pharmaceutical care services to residents at long-term care facilities.231
Relying heavily on the DOJ suit against Johnson & Johnson, the DOJ’s
investigation of Johnson & Johnson, and a whistleblower suit against
Omnicare, the plaintiff stock purchasers in Indiana State District Council
of Laborers and Hod Carriers Pension & Welfare Fund v. Omnicare, Inc.
alleged that Omnicare and Johnson & Johnson developed a scheme to
market Risperdal to nursing home patients with dementia.232 Risperdal was
FDA-approved only for treatment of schizophrenia, making this an illegal
off-label marketing scheme that allegedly was misrepresented in
Omnicare’s registration documents, in violation of the Securities Exchange
Act of 1934.233 Although the suit was ultimately dismissed, the defendant
prevailed only after filing a motion to dismiss the third amended complaint
and six years of litigation.234
The trend of filing shareholder derivative suits based on DOJ
allegations of off-label marketing shows no sign of slowing down. New
suits continue to be filed on a regular basis, particularly after a company
discloses that it has set aside hundreds of millions of dollars, or even
228. Louisiana Municipal, 46 A.3d at 317-322.
229. Id. at 323-324.
230. Id. at 358-359.
231. Indiana State District Council of Laborers and Hod Carriers Pension & Welfare
Find v. Omnicare, Inc., No. 06-cv-26, 2012 U.S. Dist. LEXIS 17526 (E.D. Ky. Feb 13,
232. Id. at *7.
233. Id. at *7-8.