Johnson & Johnson has taken some costly beatings in court this year. And it could get worse.
Just last week, a jury ordered J&J to pay $8 billion for wrongfully pushing doctors to prescribe the anti-psychotic drug Risperdal. While the amount the company pays for the verdict will probably be significantly less, it came on the heels of billions more in 2019 court losses or settlements from damage claims involving baby powder, opioid painkillers and artificial hips.
The health care giant still faces at least 100,000 lawsuits alleging injuries from those products and others, including vaginal-mesh devices and the diabetes drug Invokana, company filings to regulators show. Analysts say the cost of resolving those cases may reach $20 billion, and J&J’s handling of the various litigations is likely to spark questions when the company reports results on Tuesday.
Shares of J&J are down 12% from a peak, partly because there’s no end in sight for liability costs. Concern over litigation will be “an overhang on the shares for the foreseeable future,” with the company already discounted in value to reflect at least $20 billion of exposure, Chris Schott, an analyst at JPMorgan Chase & Co., said in a report.
“J&J has been riding the litigation bronco over the past couple of years, and the ride is far from over,” Carl Tobias, a University of Richmond law professor who teaches about product liability. “I’m sure investors are tired of it.”
J&J shares were down 0.3% to $130.97 at 10:42 a.m. in New York.
Some critics say the company’s legal woes suggest it valued profit above all else.
“J&J used to be the gold standard of ethical behavior in the pharmaceutical industry,” said Michael Santoro, a business ethics professor at California’s Santa Clara University. “They just seem incapable of properly managing their ethical behavior at this point. They’ve lost their way.”
J&J Chairman and Chief Executive Officer Alex Gorsky said on the company’s website that its code of business conduct calls for the highest standards of behavior to ensure customers trust its products. J&J has a long history of high ethical business practices, he said.
To be sure, battling in court has become routine for many drugmakers, and J&J is no exception. The New Brunswick, N.J-based company said it has an expansive legal strategy that carefully evaluates all claims to determine when to settle and when to fight.
“We’re operating within a very litigious environment, and we must at times be willing to go to trial when the science, facts and law are on our side,” Ernie Knewitz, a J&J spokesman, said in an emailed statement. “We also have to remain open to resolving cases through settlement when and where that’s appropriate to do. We have a proven track record of being able to successfully and appropriately manage this balance.”
Here’s a look at where J&J stands on its biggest liabilities:
Opioids
- This may be the most costly threat because of the staggering damages alleged by states, counties and cities seeking reimbursement for tax dollars spent on the fallout from a U.S. addiction epidemic. J&J is just one of two dozen companies targeted by more than 2,000 lawsuits, but it already lost at trial in Oklahoma in March when a judge ordered the drugmaker to pay $572 million for wrongful opioid sales in the state.
- Opioid companies are accused of overstating the benefits of the painkillers and downplaying their risks to reap billions in profit. The governments accuse drugmakers and distributors of a racketeering conspiracy to boost demand for the addictive painkillers by duping doctors into prescribing more.
- The first federal trial begins Oct. 21 in Cleveland, where a judge is overseeing thousands of claims. But J&J won’t be a defendant because it reached a $20 million settlement earlier this month. That may signal J&J is making progress in reaching a global resolution to all the opioid cases, said Sam Fazeli, a Bloomberg Intelligent litigation analyst.
- Some analysts predict J&J and other companies may have to fork over a combined $150 billion to resolve the opioid cases. Fazeli estimates J&J’s share may be as much as $5 billion.
- J&J acknowledged those risks in the July filing with the U.S. Securities and Exchange Commission. Any adverse opioid judgment “could result in imposition of large monetary penalties and significant damages, including punitive damages, cost of abatement and substantial fines,” it said.
Baby Powder
- There are more than 15,000 suits claiming the talc product caused different types of cancers. The company is appealing a $4.7 billion award handed down last year to more than 20 women who said their long-term use of the talc-based product led to ovarian cancer.
- Many plaintiffs allege J&J officials knew the baby powder was tainted with asbestos—a carcinogen—and hid the information to protect one of the company’s beloved brands.
- It can take years for mesothelioma, a cancer tied to asbestos exposure, to manifest itself, so J&J could be facing such claims for decades, said Elizabeth Burch, a University of Georgia law professor who teaches about mass torts. That, along with the challenge of figuring out how to cover future illnesses make the cases a long-term nightmare, Burch said.
- Of the talc cases tried since 2016, plaintiffs won 12 while J&J won at least 10, according to data compiled by Bloomberg. Some of the awards were overturned by judges while others are being appealed. “The company believes it has strong ground to appeal to overturn these verdicts,” J&J said in the SEC filing.
- Sanford C. Bernstein & Co. analyst Lee Hambright estimates J&J may have to pay $5 billion to resolve all its talc cases, most of which are being gathered before a federal judge in New Jersey.
Risperdal
- J&J and its Janssen unit are accused of violating federal law by marketing the anti-psychotic drug to the elderly and children. Some teenage boys who took the pills developed female-sized breasts and sued.
- In 2013, J&J agreed to pay $2.2 billion to resolve criminal and civil probes into allegations it illegally marketed the drug. The settlement, which also includes marketing claims about two other J&J drugs, was one of the largest U.S. health-fraud penalties in history.
- Earlier this month, a Philadelphia jury awarded $8 billion to a Maryland man, after hearing evidence that Janssen’s marketing plan called for sales representatives to hand out microwave popcorn and Lego-style blocks emblazoned with the Risperdal name to “butter up” doctors.
- While that award will probably be reduced significantly, the drugmaker faces more than 13,000 Risperdal suits, the SEC filing shows. More than 7,000 are in the same state court in Philadelphia, where another case is scheduled to start in December.
- “These punitive damage cases are like a card game where the jokers are wild,” said Richard Ausness, a University of Kentucky law professor who specializes in mass torts. “J&J doesn’t have a clue about its total exposure because every one of them could be a billion or more. They ought to start thinking about coming up with a settlement to make these cases go away.”