Johnson & Johnson's quality catastrophe

After more than 50 product recalls in 15 months, including for artificial hips and Tylenol, the $60 billion company is fighting to clear its once-trusted name.

By MSN Money Partner Apr 1, 2011 1:05PM

BusinessWeek on MSN MoneyImage: Pills (© MedicalRF.com/Corbis)By David Voreacos, Alex Nussbaum and Greg Farrell

 

In the split second after the blast, Lance Corporal Cody Perkins thought he was still sitting in his unit's Humvee, enveloped in blinding dust kicked up by the roadside bomb. It was only when he slammed with shattering force onto the pavement that the 20-year-old U.S. Marine realized he'd been ejected from the rolling vehicle and thrown into the air.

 

Perkins's commanding officer was killed in the November 2005 incident outside Haditha, Iraq, and two other Marines were injured. Perkins came away with scrapes, bruises, and a fractured femur, or thigh bone. After emergency surgery in Iraq, the Mississippi native was transported back to the U.S., where surgeons implanted screws to fuse the broken bone.

 

That failed, leaving Perkins hobbled. A military surgeon, Dr. Keith Holley, told him that his best option was a so-called metal-on-metal prosthetic hip made by DePuy Orthopaedics, a unit of Johnson & Johnson (JNJ). The new hip was being promoted as tough and durable—and thus perfect for younger, physically active patients like Perkins. On Dec. 13, 2006, Dr. Holley implanted DePuy's ASR XL Acetabular System in the soldier at the Navy Medical Center in San Diego. (Story continues after list).

 

Johnson & Johnson's recall rap sheet

  • AUG 2008: Consultants to J&J buy defective Motrin from stores. The FDA says it wasn't notified of this "phantom recall."
  • NOV 2009: McNeil pulls about 6.3 million bottles of tainted Tylenol Arthritis Pain caplets made in Puerto Rico.
  • JAN 2010: McNeil expands withdrawal to include Benadryl Allergy, Tylenol, Children's Tylenol Meltaway, and Rolaids.
  • APR 2010: J&J recalls 135 million bottles of meds made in Fort Washington, Pa., and closes the plant.
  • MAY 2010: The FDA's Joshua Sharfstein says the U.S. may pursue criminal charges against J&J.
  • JUNE 2010: McNeil expands the recall from its Puerto Rico plant to include five more lots of Benadryl and Tylenol.
  • JULY 2010: Yet more recalls; company submits remediation plan for McNeil plants to FDA.
  • AUG 2010: Company appoints Ajit Shetty as quality-control czar, announces corporation-wide standards.
  • AUG 2010: J&J pulls 100,000 boxes of 1-Day Acuvue TruEye contact lenses; days later, DePuy recalls ASR hips.
  • DEC 2010: 13 million packages of Rolaids softchews are recalled after customers find wood and metal particles in them.
  • JAN 2011: J&J withdraws 43 million bottles of Rolaids, Tylenol, Benadryl, and Sinutab.
  • JAN 2011: J&J announces 2010 earnings, puts lost sales from recalls and plant slowdowns at $900 million.
  • FEB 2011: J&J units announce recalls of 70,000 potentially cracked syringes preloaded with the antipsychotic Invega.
  • MAR 2011: J&J withdraws 585,000 surgical sutures due to concerns about compromised sterile packaging.
  • MAR 2011: David Floyd, president of DePuy Orthopaedics, announces his resignation.
  • MAR 2011: J&J's Animas unit announces recall of 384,000 insulin-pump cartridges that may leak.
  • MAR 2011: FDA and McNeil announce consent decree that will give agency expanded oversight of three plants.

Perkins never regained the mobility he had before the injury, but he was able to resume full-time work. By late 2009, however, while he was working as a Marine criminal investigator at California's Camp Pendleton, it started—muscle fatigue at first, which led to shin splints, followed by pain in his hip that radiated up to his back and down to his knees. Soon he was unable to sleep through the night. "It's always uncomfortable," he says. "There's never a completely pain-free day."

 

The cause of his trouble, his current physician Dr. Richard Conn says, isn't a complication from his original injury but the replacement hip. Perkins has been told he'll need to undergo "revision" surgery to replace the ASR hip with another implant—a highly invasive procedure with a heightened risk of infection and joint dislocations down the road. It's also likely to render him unable to pass the Marines' rigorous annual physical fitness test.

 

"I wanted to retire out of the Marine Corps," says Perkins, who has earned two Purple Hearts. "But there's no way that can happen ... not a chance."

Now a sergeant based at North Carolina's Marine Corps Air Station Cherry Point, Perkins has joined more than 1,000 other people who are suing Johnson & Johnson over its DePuy ASR implants, seeking damages for medical costs, lost wages, and pain and suffering.

 

On Aug. 26 last year, DePuy announced a voluntary recall for two types of ASR hips, including the one in Perkins's leg, but only after 93,000 had been implanted in patients worldwide, including 37,000 in the U.S. J&J says DePuy withdrew the hips for safety reasons, while denying in court papers that the devices are defective. Announcing the voluntary recall, it cited unpublished 2010 data from the U.K. showing that within five years, 13 percent of ASR XL hips failed and needed to be replaced, and 12 percent of the similar ASR Hip Resurfacing System failed. (The U.S. doesn't collect numbers on hip failure rates.) All types of implants are susceptible to post-operative problems; Australia's registry for joint implants says 3.3 percent of all implants fail after five years. But the stats DePuy cited for the recall—three to four times that norm—now appear sadly optimistic. On Mar. 9 the British Orthopaedic Assn. and the British Hip Society said preliminary data put the ASR XL's failure rate in the U.K. as high as 49 percent after six years.

 

The new report adds weight to plaintiffs' lawyers predictions that thousands more patients will file similar lawsuits. Case after case describes patients in pain and immobilized by joint dislocations, infections, and bone fractures. Their claims are backed by surgeons who say metal debris from the hips, made from a cobalt-and-chromium alloy, causes tissue death around the joint and may increase the amount of metal ions in the bloodstream to harmful levels. "There's so much metal, it's toxic to the tissues," says Dr. William Jiranek, a professor at Virginia Commonwealth University School of Medicine in Richmond and an orthopedic surgeon who has removed ASR hips.

 

Accusations of selling bum hips are bad enough; the lawsuits allege worse: that DePuy continued to push the hips even after it received preliminary numbers as early as 2007 indicating rising failure rates for both ASR models. "This wasn't driven by science. This was driven by marketing," contends Michael Kelly, a lawyer at San Francisco's Walkup, Melodia, Kelly & Schoenberger, which has filed 75 cases on behalf of patients with the DePuy hips.

J&J has so far committed $280 million to the recalls, and has pledged to "address reasonable and customary costs associated with testing and treatment," including new hips for patients who need them. Based on the latest estimates of failure rates, Kelly and others say, the total tab could reach billions of dollars.

 

With $28 billion in holdings of cash and short-term securities at the end of 2010, J&J will surely weather the financial blowback from the bad hips. More troubling to customers and stakeholders, however, is that the DePuy recalls may be symptoms of a systemic quality-control problem at the 125-year-old corporation: a pattern of behavior that is distinctly at odds with the comforting image long enjoyed by the creator of brands like Band-Aid and "No More Tears" Baby Shampoo.

 

The DePuy crisis is one of more than 50 voluntary product recalls that J&J has issued just since the start of 2010, covering brand names that read like an inventory of the family medicine cabinet. Tylenol and St. Joseph Aspirin were recalled for foul odors people said made them sick. Benadryl and Zyrtec were recalled for botched amounts of ingredients. Rolaids were recalled for containing bits of wood and metal. Most of these drugstore stalwarts come from J&J's McNeil Consumer Healthcare unit, which has been plagued by dismaying revelations about the conditions and lax controls at its factories in the U.S. It shuttered one factory in Fort Washington, Pa., for a quality overhaul. Under a Mar. 10 consent decree, that plant and two others—in Lancaster, Pa., and Puerto Rico—will remain under Food and Drug Administration (FDA) oversight for five years. J&J/McNeil faces fines of $10 million per year if the agency isn't satisfied with its progress.

 

Johnson & Johnson management, from Chief Executive Officer William Weldon on down, maintains that the company's quality-control issues are aberrations. Any suggestion of a broader malaise, says Weldon, "is just Monday morning quarterbacking. ... There's a lot of 'J&J has lost its way,' but I think that everything has been overshadowed by one company [McNeil]," Weldon says. "This is not a systemic problem. This is not an issue around J&J."

 

Except the problems don't end with McNeil or DePuy. Over the last 15 months, the company has also recalled contact lenses, syringes filled with prescription medications, hernia devices, and other products made by subsidiaries around the world. In the year ended Mar. 8, 2011, J&J was involved in at least 11 major recalls, as defined by the FDA, almost twice as many as Pfizer (PFE), the world's largest health-care-products company by revenue, or Procter & Gamble (PG), the world's largest consumer-products company. "I'm not familiar with another company that has had this many debacles in a very short period of time," says Ira Loss, an analyst at investment research firm Washington Analysis who has followed the FDA for more than three decades.

 

Moreover, J&J's woes aren't confined to the last couple of years. During the last decade, the company has been repeatedly confronted with claims that it sold a product that was defective, or that carried risks J&J downplayed in its marketing. It has been accused of paying kickbacks and using other financial incentives to promote off-label use of drugs and devices. It has been cited by federal authorities for trying to avoid the publicity of a recall by quietly buying up tainted products. And it frustrated FDA regulators who were urging the company to strengthen quality control at the factories that produced many of the recalled over-the-counter products. J&J has steadfastly denied these claims, but its own annual report for 2010 contains eight pages detailing government criminal and civil investigations and thousands of private lawsuits covering a wide range of drugs, devices, and business practices.

 

Story continues here.

 

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