Drugmaker Johnson & Johnson will pay North Carolina $38.8 million as part of a $1.2 billion multistate settlement to resolve allegations that the company improperly marketed some drugs, resulting in Medicaid fraud.

North Carolina’s share of the settlement will fund Medicaid with the civil penalties going to public schools, according to a statement from the North Carolina attorney general’s office announcing the settlement.

The states alleged that Johnson & Johnson and its subsidiary Janssen Pharmaceuticals, both based in New Jersey, marketed anti-psychotic drugs Risperdal and Invega for uses not approved by the Food and Drug Administration, including to treat elderly dementia patients and hyperactive children. The allegations included making misleading statements about the safety of the two drugs and, in the case of Risperdal, paying kickbacks to health care professions who promoted or prescribed the drug to children or the elderly.

As a result of those alleged actions, government-funded health care programs bought the drugs for unapproved uses, and false claims were submitted to Medicaid, the federal program that provides health insurance to the poor.

Janssen Pharmaceuticals also will plead guilty in federal court of a criminal misdemeanor charge of misbranding Risperdal and pay $400 million in criminal fines and forfeitures.

In North Carolina, the settlement agreement was reached by the sattorney general’s Medicaid Investigations Division and the N.C. Division of Medical Assistance.

Staff writer Mary Cornatzer

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