J&J Sued by Consumers Over Children's Cold Medicines

Johnson & Johnson, the world’s largest health-products company, was sued by U.S. consumers accusing it of fraud and racketeering, and demanding cash refunds for recalled children’s cold and allergy medicines.

In five complaints seeking class-action, or group, status filed yesterday in federal court in Chicago, the consumers spurned an offer by J&J’s McNeil Consumer Healthcare and McNeil- PPC Inc. units for refund coupons and demanded cash.

The coupons are “worthless” because McNeil has stopped making the medicines and “wrongly assumes that all consumers will want to purchase the company’s children’s products at some uncertain future date,” according to the complaints.

The companies on April 30 recalled more than 40 types of pediatric pain and allergy drugs saying their quality and potency didn’t meet internal requirements. Among the products it named were children’s formulations of liquid Tylenol, Motrin and Benadryl. J&J’s over-the-counter medicines and nutritionals unit had revenue of $1.21 billion in the first quarter.

Bonnie Jacobs, a spokeswoman for New Brunswick, New Jersey based J&J, said consumers can request a refund or coupon at mcneilproductrecall.com. She declined to comment further, saying that as a policy the company doesn’t discuss litigation.

January Recall

J&J recalled other over-the-counter medicines in January that may have been contaminated by a chemical found on shipping and storage materials. The U.S. Food and Drug Administration sent a warning letter to the drugmaker at the time, saying it had waited more than a year to notify regulators after getting complaints of customers becoming sick.

J&J expanded that recall once in June to include lots it “inadvertently omitted,” and then again yesterday after identifying additional medicines that could have been affected.

“At some point investors are going to get fed up with the continued recalls,” said Les Funtleyder, an analyst with Miller Tabak & Co. in New York, who recommends buying J&J stock and doesn’t own any himself. “The dribble, dribble, dribble of negative news is not helping the shares.”

J&J fell 84 cents, or 1.4 percent, to $60.54 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have lost 5.8 percent since the April 30 children’s medicine recall, compared with a decline of 4.4 percent in that period for the Standard & Poor’s 500 Pharmaceuticals Index.

‘Phantom Recall’

The complaints say that purchasers who have used up or thrown out the drugs without keeping receipts won’t be able to avail themselves of the company’s recall.

U.S. Representative Edolphus Towns, a New York Democrat, on May 27 accused the company of having executed a “phantom recall” of its Motrin products in August 2008, attempting to retrieve large quantities of the 88,000 packages without notifying regulators.

Towns’ comments came during a House oversight committee investigation into J&J’s actions.

Echoing the congressman’s charge in their complaints, the consumers said the defendants’ manufacture of substandard products then hiring of contractors to retrieve them amounted to a “cover up” by a “criminal enterprise,” warranting a finding of racketeering and an award of punitive damages.

The suits seek to proceed on behalf of plaintiffs’ groups for residents of Illinois, Texas and Florida, as well as consumers in the U.S. and Canada, who have bought the drugs since December 2008.

The cases are Burrell v. McNeil Consumer Healthcare, 10cv4252; DeGroot v. McNeil Consumer Healthcare, 10cv4253; Michaud v. McNeil Consumer Healthcare, 10cv4254; Nguyen v. McNeil Consumer Healthcare, 10cv4255; Roberson v. McNeil Consumer Healthcare, 10cv4256, U.S. District Court, Northern District of Illinois (Chicago).

-- With assistance from Shannon Pettypiece in New York, and Drew Armstrong and Dan Hart in Washington. Editors: Andrew Dunn, Andrew Pollack.

To contact the reporter on this story: Andrew M. Harris in Chicago at aharris16@bloomberg.net; Meg Tirrell in New York at mtirrell@bloomberg.net.

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