Why Johnson & Johnson Would Like to Forget 2016: QuickTake Q&A

Johnson & Johnson had a year for the record books -- it lost six of 2016’s seven largest jury verdicts in the U.S. over product defect claims. This year may be no better. The company is facing at least 17 trials in state and federal courts in the U.S. over hip implants, talcum powder, pelvic mesh, an anti-psychotic drug and a blood thinner. And beyond these trials, there are tens of thousands more potential claims over those five products.

1. Just how bad was 2016 for J&J in court?

Pretty bad. Companies rarely get hit with more than two or three product defect verdicts above $20 million in any given year. J&J lost six of more than $50 million. The company was hit with two hip implant verdicts: one for $1 billion (the seventh-largest product-defect award in U.S. history) and another for $500 million. The company lost all three talc cases that went to trial in 2016, for verdicts of $72 million, $70 million and $55 million, each by St. Louis juries. A Philadelphia jury in July awarded the largest-ever Risperdal verdict -- $70 million to a Tennessee teenager -- that dwarfed the previous $2.5 million record for such claims.

J&J’s 2016 Trial Losses
Six of the seven largest product-defect verdicts in the U.S. were against J&J:

  • Hip implant, Dallas: for $1 billion
  • Hip implant, Dallas: $502 million
  • Talc, St. Louis: $72 million
  • Risperdal, Philadelphia: $70 million
  • Talc, St. Louis: $70 million
  • Talc, St. Louis: $55 million

(The third-biggest product liability verdict of 2016 was against Audi, $124 million in Texas over a seat-back failure.)

2. What was wrong with J&J’s products?

Women with ovarian cancer blame J&J’s baby powder and Shower to Shower talc products for their illnesses, alleging J&J has withheld information on a link between talcum powder and cancer. (J&J sold its Shower to Shower brand in 2012.) The Risperdal suits are being brought by boys and young men who said they developed female breasts after taking the anti-psychotic drug. The plaintiffs in the hip implant cases claim the company’s Pinnacle products fail, causing pain and requiring replacement surgeries. The company also has thousands of claims over Xarelto, alleging the blood thinner can cause uncontrolled bleeding, and pelvic mesh inserts, claiming the implants erode.

3. How has J&J responded to the claims?

The company’s defenses vary. Ultimately, it denies liability for injuries. In talc, for instance, J&J says there’s no scientific evidence pointing to a link between mineral in talcum powder and ovarian cancer. With Risperdal and other drugs, J&J contends that patients and doctors were sufficiently warned about possible side effects.

4. So how many lawsuits are there?

J&J said in its most recent U.S. Securities and Exchange Commission filings that it’s facing more than 100,000 claims over these five products, and the numbers are continually rising. That includes almost 55,000 over mesh and more than 18,000 Risperdal claims. In the past year, claims over Xarelto have more than tripled, from 5,000 to 16,900. Those numbers are likely to grow, particularly with plaintiffs’ lawyers nationwide advertising for more clients. The pattern is typical for product-defect litigation -- unless judges toss out claims or a defendant starts winning at trial, it’s a feeding frenzy.

5. Why doesn’t J&J just settle?

J&J’s tactics are tried and true for a company facing mass litigation: the longer and harder it fights, the better the chance of whittling down the claims or discouraging other plaintiffs. While big verdicts grab the headlines in product-defect cases, defendants often get claims thrown out before they reach a jury or win at trial, usually with less fanfare. While J&J lost three talc cases at trial in 2016, it won the first jury verdict this year. And J&J won dismissal last year of some talc claims filed in New Jersey, when the judge agreed that scientific proof was lacking. Also, what a jury decides isn’t written in stone. Judges and appeals courts may reduce awards or reverse verdicts. That $1 billion implant verdict has already been cut to $500 million. What happens in these initial trials, including appeals, will affect the ultimate cost, if any, for settlements. That said, at least six of this year’s trials are set in state court in the City of St. Louis, a venue called a “judicial hellhole’’ by the American Tort Reform Association because of its plaintiff-friendly reputation.

6. How much have the lawsuits cost the company?

J&J’s stock dipped when a couple of the verdicts hit in 2016 but generally hasn’t suffered. Analysts believe the litigation risk is baked into the price, though some consider the lawsuits a drag on the stock. The ultimate cost of settlements or judgments isn’t known and may not be known for years. But fighting so many lawsuits on so many different products at the same time is expensive, counting lawyers’ fees, payments for experts and other trial and court costs. Companies typically don’t reveal the price tags for fighting specific claims and J&J is no different. But the longer the cases drag on, if juries keep up 2016’s pace, expect the company to be earmarking billions of dollars for fighting claims over the next few years.

The Reference Shelf

  • Johnson & Johnson’s 2016 annual report.
  • A Bloomberg Businessweek article on J&J’s baby powder problem.
  • The American Cancer Society notes that findings have been mixed on the links between talcum powder and cancer.
  • The American Tort Reform Foundation’s report, “Judicial Hellholes.”
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