Saturday, April 16, 2011

Exerpts from “Johnson & Johnson's Quality Catastrophe”, the parent company of Depuy.

After 50-plus product recalls in 15 months, the $60 billion company is fighting to clear its once-trusted name

Excerpts from the cover story of Business Week on 4/4-4/10 Issue.  (Johnson and Johnson is the parent company of Depuy.)

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….

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…...

Hips and knees may sound like an obscure niche next to the marquee brand names coming out of McNeil, but last year DePuy's $5.59 billion in sales accounted for 9.1 percent of J&J's total revenue; over-the-counter pharmaceuticals and nutritional products trailed with 7.4 percent. In hips alone, Warsaw (Ind.)-based DePuy was the market leader last year, with $1.33 billion, or 25.1 percent, of the $5.28 billion global hip market, according to a Feb. 28 report from investment advisory firm BMO Capital Markets.

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