Johnson & Johnson has been boosted by the news that a US court has overturned a $1.2 billion penalty imposed on the healthcare giant two years ago over alleged marketing of its antipsychotic blockbuster Risperdal.

The fine was imposed in April 2012 after a jury in Little Rock, Arkansas, found that J&J and its Janssen pharmaceuticals unit engaged in “false and deceptive acts” when it sent marketing letters to more than 6,000 doctors in the state in 2003 claiming Risperdal (risperidone) had a superior safety profile over competitors. Now the Arkansas Supreme Court has dismissing one judgement and sent a deceptive trade practices act complaint back to circuit court.

This stops the $1.2 billion award and in a separate decision the Supreme Court has also reversed the lower court's award of $181 million to cover attorney fees. Justice Karen Baker said the latter had erred in saying the Medicaid false claim act applied in the case for false statements about use of Risperdal because that applied to false statements about processes in healthcare facilities such as nursing homes, not actual prescription drugs or the firm making them.

She also said J&J had been prejudiced by admission into evidence of a warning letter about the use of Risperdal. The letter arose from a specific investigation and thus was inadmissible hearsay in the Little Rock case, so Justice Baker ruled that the state sued J&J under an incorrect law that applies to health care facilities, not pharmaceutical companies.

Arkansas Attorney General Dustin McDaniel issued a statement saying that "we pursued this case based on the belief we continue to hold, which is that the General Assembly intended to give the Attorney General’s Office the authority to pursue penalties against those that would enter our state and blatantly deceive the public". He added that "I am disappointed that the Court viewed the law differently. Nevertheless, I will keep working to protect consumers against fraud and the kinds of irresponsible and greedy actions shown by" the company.

J&J repeatedly argued that there was no fraud or improper reimbursements for Medicaid patients who were prescribed Risperdal. It issued a statement saying is pleased with the decision, adding that the group "remains strongly committed to ethical business practices".

J&J is awaiting a ruling by the South Carolina Supreme Court in a similar case, following an appeal of a $327 million judgment, while a $330 million award in Louisiana was overturned in January.

However, in a separate action brought by the US Department of Justice, J&J agreed in November 2013  to pay more than $2.2 billion to resolve criminal and civil allegations that it promoted antipsycotics in Risperdal for unapproved uses. The settlement was the third-largest settlement ever between a drugmaker and the US government.