J&J: Corporate Crime Pays

SUMMARY:  The corporate culture at J&J has led to a lot of wrongdoing followed by fines, but these penalties are just a small expense line item for them.

Johnson & Johnson marketed Risperdal aggressively to the elderly and boys while allegedly manipulating and hiding the data about breast development. J&J got caught, pleaded guilty to a crime, and has paid more than $2 billion in penalties and settlements. But that pales next to some $30 billion in sales of Risperdal around the world. In short, crime pays, if you’re a major corporation.

 When the person who was in charge of marketing was rewarded by being elevated to C.E.O. of J&J and earning $25 million in 2014 there is something very wrong. The history of this illegal activity is told in a devastating 58,000-word epic by Steven Brill that was serialized on The Huffington Post. But there is more..a lot more.

-In 2010 J&J subsidiaries Ortho-McNeil Pharmaceutical and Ortho-McNeil-Janssen had to pay $81 million to settle charges that they promoted the epilepsy drug Topamax for uses not approved as safe by the Food and Drug Administration. The following year, J&J subsidiary Scios Inc. had to pay $85 million to settle similar charges relating to its heart failure drug Natrecor.

-Johnson & Johnson and Bayer had agreed to pay $775 million to settle about 25,000 lawsuits involving the blood thinner Xarelto, which they jointly sell. Lawyers for the patients had argued that the companies failed to warn patients that Xarelto, which thins the blood to prevent clots that lead to strokes, could trigger massive bleeding in some people, leading to deaths and serious injury. The bleeding episodes didn’t always respond to standard treatments and, for years, there was no specific antidote to bleeding caused by Xarelto and the other new drugs.

The judgment, this week by Oklahoma was so small that J&J’s stock price actually went up on the news even as company lawyers planned to appeal the judgment. According to the Times “as silly as it sounds, a $600 million decision was, relative to expectations, a positive outcome,” said Joshua Jennings, an analyst for Cowen. “It was less onerous than many had expected.”

In a statement on Monday, Johnson & Johnson described the judge’s decision as flawed and said Oklahoma had failed to present evidence that the company’s actions constituted a public nuisance, which was a central question of the trial. Purdue and Teva, had previously settled with Oklahoma and agreed to pay the state $270 million and $85 million, respectively.

“Johnson & Johnson is a corporation under duress on a number of fronts,” said Stephen Hahn-Griffiths, an executive at Reputation Institute, which tracks public perception of companies through regular surveys.

“It’s fair to say that the opioid trial is probably the straw that broke the camel’s back for Johnson & Johnson’s reputation,” he said. “We’ve not in recent years seen Johnson & Johnson’s reputation dip as low as it’s currently tracking.”

I think it’s safe to say that the corporate culture at J&J is beyond broken; it’s a disaster. As long as fines are small bad practices are just the cost of doing business. I would be embarrassed to work for J&J but too many others eem content to collect their paycheck and do what’s wrong.

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