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J&J Sued by Shareholders for Ongoing Safety, Quality Issues

July 16, 2012 — Lawyers representing the shareholders of Johnson & Johnson are suing the company’s executives for not fixing serious problems at the company for years. The shareholders and executives have reached a tentative settlement, with J&J agreeing to make changes to help ensure high standards at America’s largest pharmaceutical company.

The investors claim that J&J executives ignored the signs of misconduct, failed to address ongoing manufacturing deficiencies, and more.

As part of the settlement agreement, J&J will establish a Regulatory, Compliance and Government Affairs Committee to receive regular reports from company executives. The committee will then report to shareholders any significant compliance or quality issues at the company. Furthermore, all of J&J’s 120,000 employees will undergo performance evaluation and receive compensation commensurate with their adherence to high-quality standards.

U.S. District Judge Freda Wolfson of Trenton, New Jersey is expected to give preliminary approval of settlement on August 6. Shareholders will have a comment period, and final approval of the settlement could be reached in the fall.

Several high-profile scandals have rocked J&J in recent years, including:

  • Illegally paying kickbacks to doctors and pharmacists to boost product sales: The U.S. Department of Justice joined this criminal investigation and found that J&J paid kickbacks to doctors who prescribed Risperdal to elderly nursing home patients, though Risperdal is tied to an increased risk of death for elderly people with dementia.
  • Marketing drugs for off-label uses: J&J agreed to pay $2.2 billion to settle claims that they illegally marketed the anti-psychotic drug Risperdal for unapproved uses. The company also paid $82 million in criminal and civil penalties for marketing Topamax for unapproved use in children.
  • Three dozen drug recalls for manufacturing problems since 2009: Products have been recalled for containing the wrong amount of active ingredients, glass and metal shards in liquid medicines, and foul odors on medicines. In April 2010, 136 million bottles of Tylenol, Benadryl, and Motrin were recalled. The government has ordered 70% of J&J’s non-prescription medications off the market for two years.
  • Recalled medical devices: J&J subsidiary DePuy Orthopedics has set aside billions to settle claims from people injured by the defective ASR hip implant, which the FDA forced the company to recall after it was linked to a 15% five-year failure rate.

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