America's Most Admired Lawbreaker: Chapter 9, "Under Siege, Ducking & Weaving"

'Vigorously Contesting the Allegations,' But...

By March 2010, when Johnson & Johnson filed its financial disclosure with the Securities and Exchange Commission covering the events of the year 2009, the world's leading healthcare company was forced to list a daunting collection of suits and investigations involving Risperdal. Subpoenas seeking testimony of its executives "before a grand jury" had been received from the U.S. attorney's office in Philadelphia investigating the marketing of the drug. Other subpoenas had been issued for company officials to testify before a grand jury in Boston looking into the Omnicare relationship. Two qui tam suits had been filed in Massachusetts related to that deal, too, and suits seeking damages and fines had been filed by nine different states.

Beyond that, the company reported that “multiple products of Johnson & Johnson subsidiaries are subject to numerous product liability claims and lawsuits.” Two other allegedly faulty J&J products targeted by the plaintiffs lawyers were a device called a transvaginal mesh patch and an artificial hip implant. Suits involving these two products would soon end up competing with Risperdal for claims on the company’s reputation and treasury.

Johnson & Johnson seemed to take the threats in stride. “The Company and its subsidiaries are vigorously contesting the allegations asserted against them,” its SEC filing declared.

But just in case, the amount that Johnson & Johnson had removed from earnings for 2009 and reserved for liabilities was listed as $1.014 billion—or about 6 percent of its $15.755 billion in pretax earnings for the year. Putting that much aside each year over what was perhaps the fifteen-year life of these potential legal battles was not going to cut deeply into the company’s bottom line.

“In the Company’s opinion,” the filing declared, “based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities already accrued in the Company’s balance sheet, is not expected to have a material adverse effect on the Company’s financial condition.”

Perhaps, but its reputation was another matter. Its best known, family-friendly products were also about to take a turn in the penalty box. And in this case, the alleged misconduct went to the core of Johnson & Johnson’s reputation; it wasn’t about how the company marketed its products, but about the basic care it took in making them.

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To read Chapter 9 in its entirety and view the accompanying materials online, visit The Huffington Post: Highline website: http://huff.to/1F8s3EY.


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