For Johnson & Johnson: Recalls Keep Piling Up
Since 2009, Johnson & Johnson (NYSE:JNJ) has faced a series of quality issues that have resulted in numerous recalls, withdrawing products ranging from certain hip-replacement parts to contact lenses to glucose meters to birth-control pills. A recall is never a decision that a healthcare company wants to make, especially as lawsuits can stream stream in afterwards and sales are likely to collapse. But, after discovering that a key ingredient of the company’s Cilest birth-control pills was not releasing into the body according to specifications, Johnson & Johnson had to pull 32.2 million packets off store shelves in Latin America.
The company told The Wall Street Journal Tuesday, that the problem does not affect the safety or efficacy of the prescription pills, and customers were not asked to return the medication. Only pharmacies and distributors in countries like Argentina, Germany, and Thailand were told to ship back their inventories. A company spokeswoman informed the publication that, given how quickly consumers use the product, Johnson & Johnson has estimated that fewer than 800,000 of the 32.2 million recalled packs remain on store shelves or in distributor warehouses.
This particular birth-control pill is not sold in the United States.
It will be difficult for analysts to calculate the effect of this recall on the company’s finances as Johnson & Johnson does not break out Cilest sales individually, the spokeswoman said. However, excluding its top-selling drugs, the healthcare company’s pharmaceutical business generated $2.6 billion in sales outside the United States last year. To give further perspective on how destructive recalls can be, manufacturing problems have cost the company hundreds of millions of dollars in lost sales, while also damaging its reputation with consumers and leading the U.S. Food and Drug Administration to monitor some of its manufacturing plants.
Johnson & Johnson’s recall of Children’s Tylenol was one of the more damaging recalls. Bottles of the medication were found to have excessive concentrations of its key ingredient and metal shavings, forcing the company to take the product of store shelves in the United States. Later, the medication was also found to have faulty bottle cap, which caused yet another recall. Back in April, the company recalled all bottles of Children’s Tylenol, about 1.7 million in total, on sale in South Korea, after the company once again found high levels of the main ingredient.
When Johnson & Johnson recalled 93,000 all-metal hips worldwide in 2010, including 37,000 in the United States, the company cited the device’s high failure rate; approximately 12 percent of all hips malfunctioned in the first five years of use. Patients who sued over the problems alleged the device caused pain, joint dislocations, infections, and bone fractures. Plaintiffs even claimed that metal fragments from the hips caused tissue death around the joints. That recall resulted in more than 10,000 lawsuits.
Cilest was recalled by the company’s Janssen unit on May 27, after the company discovered through quality-control testing that one of the two hormones used in the pills — norgestimate — was not releasing at the specified rate. The plant in Schaffhausen, Switzerland that makes the pill will stop production until a company investigation determines the cause of the problem.
Here’s how shares of Johnson & Johnson finished trading this week:
Follow Meghan on Twitter @MFoley_WSCS
Investing Insights: Will UnitedHealth Group See Its Stock Surge Higher?