Originally published on The Defender, Children’s Health Defense’s News + Views website.
Johnson & Johnson (J&J) is exploring a plan to offload liabilities from widespread baby powder litigation by creating a new business that would then seek bankruptcy protection, Reuters reported.
During settlement discussions over its talc-containing baby powder, a J&J legal representative told plaintiffs’ lawyers the company could pursue placing a subsidiary in bankruptcy as part of a strategy to settle thousands of claims linking the product to ovarian cancer.
If executed, the plan could result in lower payouts for cases that do not settle beforehand, according to people familiar with the matter.
According to the Wall Street Journal, bankruptcy can be a powerful tool for companies facing a large number of lawsuits over allegedly defective products, or other mass-tort claims. A chapter 11 filing can pressure claimants into accepting lower settlements by halting ongoing litigation and discovery proceedings, and by creating a centralized forum to value claims.
Plaintiffs’ lawyers would initially be unable to stop J&J from taking such a step, though they could pursue legal avenues to challenge it later.
Ken Starr, a prosecutor representing women who sued J&J, wrote in court briefings that the pharma company “knew for decades that their talc powders contained asbestos, a highly carcinogenic substance with no known safe exposure level.”
Starr said the company could have protected customers by switching from talc to cornstarch as their scientists proposed as early as 1973, but they were unwilling to sacrifice profits for a safer product. ”
J&J claims its baby powder is safe and does not contain asbestos or cause cancer.
The lawsuits linking talc powder to cancer aren’t the first time J&J has been sued over the safety of its products.
Other major J&J lawsuits and recalls for faulty products include:
- 1995: J&J was hit with a $7.5 million fine for destroying documents to cover up an investigation into wrongful marketing of its Retin-A acne cream to remove wrinkles.
- 1996: The company entered into an undisclosed settlement on false claims over condom protection against HIV and other STDs.
- 2001: J&J paid out $860 million in a class action lawsuit for misleading customers about prematurely discarding its 1-Day Acuvue soft contact lens. J&J recommended they should be worn only once, although it was discovered the lenses were no different than the regular Acuvue lens that would last for two weeks.
- 2010: The drug giant was hit with a $81 million settlement for misbranding its anti-epileptic drug Topamax to treat psychiatric disorders and hiring outside physicians to join its sales force to promote the drug for unapproved conditions. The following year, J&J paid $85 million for similar charges against its heart drug Natrecor.
- 2011: Several J&J baby products were discovered to contain carcinogenic ingredients.
- 2013: The U.S. Justice Department charged the company $2.2 billion in criminal fines for marketing its autism and antipsychotic drug Risperdal for unapproved uses. Forty-five states had filed civil lawsuits against J&J in the scandal. Other serious adverse effects from Risperdal reported by the FDA include diabetes mellitus, hyperprolactinaemia, somnolence, depression, anxiety, psychotic behavior, suicide and death.
- 2019: A Philadelphia jury ordered J&J to pay $8 billion in punitive damages to a Maryland man, whose lawyers argued the company illegally marketed antipsychotic drug, Risperdal, and downplayed the side effect that young men using it could grow breasts. At the time, J&J was facing approximately 13,400 claims tied to Risperdal.
- 2020: Four companies, including J&J reached a $26 billion settlement with counties and cities that sued them for damages related to the opioid epidemic in the largest federal court case in American history.
2021: J&J agreed to pay a $230 million settlement with New York state that bars the company from promoting opioids and confirmed it ended distribution of such products within the U.S.