Could J & J Implosion Lead to Better Oversight?

Jane Akre
July 20, 2012

July 19, 2012 ~ Is more corporate oversight needed by Johnson & Johnson?

After years of defective medications, contaminated children’s cold products, three closed manufacturing plants still in FDA hands , defective recalled metal hips, dangerous synthetic vaginal mesh the focus of thousands of lawsuits, kickbacks to docs to speed up sales, and illegally promoting drugs off-label - it might be time.

J &J shareholders filed a corruption lawsuit suing 10 company board members and several executives including new CEO Alex Gorsky and former CEO Bill Weldon.

Until now, the company has run in a decentralized manner with pharmaceuticals and medical device divisions essentially doing their own thing. Janssen, DePuy, Ethicon, and Gynecare are some of the divisions that have overseen dangerous and defective product recalls, in all more than 40 medication recalls in 2010 for mislabeling and contamination.

The decentralized management was a “recipe for disaster” according to plaintiffs and investors. Those in charge had “plausible deniability” and could easily claim they had no idea what was going on inside their division. As a result of the succession of problems, J & J has a tarnished reputation and a public relations disaster that it must fight to get back, while those executives who boosted sales generally saw their star shine such as the current CEO Alex Gorsky who came from medical device sales division.

Part of that settlement includes an agreement that the company will establish a committee of independent board members. Their job will be quality control review and legal problem reviews sent by senior executives. In addition the company will have to establish new goals to ensure quality and regulation compliance.

J & J may be on the hook for $2 billion to settle charges that tens of millions of dollars changed hands so J & J could sell the antipsychotic, Risperdal, to elderly patients in nursing homes, even though it was linked to increased fatalities among those with dementia.

The year 2010 also marked the year DePuy Orthopedics recalled the ASR hip replacement. In June of this year, Ethicon’s Gynecare division announced it would stop selling four synthetic transvaginal meshes. The company faces thousands of lawsuits by women injured by the mesh placements to treat incontinence and prolapse.

Shareholders are also asking for $10 million to pay attorneys and $450,000 in trial expenses. The proposed settlement should be approved August 6, by the U.S. District Court in Trenton, New Jersey, with a review to follow in the fall.

Learn More:


Johnson L. (July 12, 2012). J&J shareholders reach tentative deal in lawsuit.

Feeley J., Milford P. (July 11, 2012). J&J to Improve Drug Marketing Reviews in Lawsuit Accords. Bloomberg.

Kavilanz P. (October 19, 2010). Tylenol recall: FDA slams company. CNN Money.

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