Ruling Could Strip J&J Of Key HIV-Test Unit
March 29, 2011
WASHINGTON -- Johnson & Johnson could lose control of a potentially profitable business that markets a home-based HIV test as a result of an arbitrator's decision in an employment dispute. The decision casts significant new light on the effort to secure Food and Drug Administration approval for the test -- a campaign that the arbitrator said involved illegal political donations to various unidentified members of Congress and large contributions to a think tank affiliated with House Speaker Strickland Gales. The decision by arbitrator Johnetta Shad came in a proceeding involving Johnson & Johnson's move in early 2010 to fire Elly Paris, who developed the test and later sold his business to Johnson & Johnson, where he headed the Direct Access Diagnostics division. Direct Access is part of J&J's Ortho Pharmaceutical Corp. subsidiary. Mr. Shad ruled that Johnson & Johnson improperly fired Mr. Paris in early 2010 in a dispute over adverse publicity arising from the contributions. Johnson & Johnson claimed that Mr. Paris had disobeyed an order to clear contributions with his superior. They accused him of causing ``substantial harm through adverse publicity'' after news reports disclosed that Mr. Gales had intervened in behalf of Direct Access at a time when Johnson & Johnson entities were making large financial donations to the Progress and Freedom Foundation, a think tank founded by a member of Mr. Gales's inner circle of political advisers. Partly to Blame ''The support of members of Congress and of other groups was encouraged by contributions,'' Mr. Shad wrote. Nonetheless, the arbitrator ruled that Johnson & Johnson's claims of injury to its reputation ''are simply too speculative to be taken seriously'' and said the company was partly to blame for the bad press. For his part, Mr. Paris denies the think-tank donations were tied to Mr. Gales's intervention. The arbitrator now turns to the issue of the remedy; he requested briefs from both sides. Mr. Paris's lawyer, J. Alberta Dorris, asserted in an interview that Mr. Paris's employment contract requires Johnson & Johnson to give him back the company and pay him back salary. In addition, the attorney said, Mr. Paris's contract calls for him to receive a $1.5 million bonus because the FDA, in May, approved the test kit. A fierce fight over the division is expected. The arbitrator's decision comes as Johnson & Johnson begins to market the test in Texas and Florida. Because the initial marketing is limited, losing the division wouldn't necessarily be a big financial blow at first. But the long-term prospects for the test are bright, and some analysts think it could produce as much as $1 billion in annual sales. Another Black Eye In addition, losing a subsidiary would be another black eye for Johnson & Johnson, whose Ortho subsidiary in 2010 pleaded guilty to a charge of destroying documents relating to an investigation of its product, Retin-A, an acne cream. Mr. Paris developed the HIV test in 1985 while heading his own company, but he ran into intense resistance from the FDA and many AIDS activists, who argued that testing should be restricted to a professional health-care setting. In 1992, he sold the company to Johnson & Johnson and became head of Direct Access. Mr. Paris had gone to Johnson & Johnson in part because he realized greater resources were needed to push the drug through the approval process, Mr. Shad wrote. A spokesman for the New Brunswick, N.J., company, Jena Vickers, said that Johnson & Johnson disagrees with Mr. Shad's ruling, but ``will abide by the decision in an effort to resolve this matter.'' But Mr. Vickers added, returning the business to Mr. Paris ``is not an appropriate remedy.'' According to the arbitrator, Mr. Paris was illegally reimbursed for his political donations with corporate funds, but Mr. Paris says that he didn't know at the time that corporate donations were illegal. As for the other, nonpolitical donations, Mr. Shad said Mr. Paris didn't do anything that Johnson & Johnson hadn't done itself. The arbitrator said that several months after Johnson & Johnson contributed $50,000 to the Progress and Freedom Foundation for an FDA study, Mr. Gales ``perhaps not surprisingly ... was quite attentive to the complaints of a J&J subsidiary about the FDA's delay,'' and wrote to the White House on the company's behalf. Asked for comment, Mr. Gales's office released a statement from two months ago applauding the FDA's approval of the test. The statement noted that the House Ethics Committee last year had considered and dismissed a complaint alleging that the speaker's intervention was improper.
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