Texas had been seeking up to $1 billion from the drug maker.
Janssen Pharmaceuticals, Inc., one of the J&J subsidiaries that had been sued, said in a statement it will pay $158 million in full resolution of all claims in Texas.
The settlement represents a resolution to claims brought by Texas for alleged Medicaid overpayment during the years 1994-2008, the company said.
"Janssen is committed to ethical business practices, and has policies in place to ensure its products are only promoted for their FDA-approved indications," the company statement said.
Tom Kelley, a spokesman for the office of Texas Attorney General Greg Abbott, which was leading the case on behalf of the state, confirmed the settlement but declined further comment.
A court hearing in which the settlement was to be announced was pending Thursday morning. Testimony in the trial began Jan. 10.
A whistle-blower filed the lawsuit, then Texas joined it. The lawsuit is one of dozens of pending state and federal cases alleging illegal marketing practices and kickbacks in an effort to boost Risperdal over competing drugs. Risperdal is a pill for schizophrenia and bipolar disorder.
Lawyers for Abbott's office and whistle-blower Allen Jones accused Johnson & Johnson and some of its subsidiaries of committing fraud against Medicaid, the joint state-federal health care program for the poor, by making false or misleading statements about Risperdal and its safety, cost and effectiveness compared to other drugs in the 1990s.
Risperdal is used to treat schizophrenia and bipolar disorder.
At the start of the trial, lawyers for the New Brunswick, N.J.-based health care giant had insisted the company did nothing improper in marketing the drug.
The lawsuit was originally filed in 2004 by Jones, a former employee of the Office of Inspector General in Pennsylvania, who said he learned of Johnson & Johnson's actions in Texas while investigating similar claims in his home state. Texas joined the case in 2006.
Last year, a South Carolina judge ruled Johnson & Johnson must pay a $327 million civil penalty after a jury found it guilty of overstating the safety and effectiveness of Risperdal. In 2010, a Louisiana jury found the company violated that state's Medicaid fraud act and awarded it $258 million in damages.
The company is appealing the Louisiana verdict and has said it will appeal the South Carolina verdict as well.
