DePuy Orthopaedics is starting to hurt earnings for parent company Johnson & Johnson as litigation, healthcare, and marketing expenses involving the company’s two recalled hip-implant devices – the ASR XL Acetabular and ASR Hip Resurfacing Systems — pile up.
Johnson & Johnson’s earnings dropped nearly 20 percent in the second quarter from a net income of $2.8 billion ($1 per share) from $3.5 billion ($1.23 per share) in the same period last year. The company blames the decline primarily on strong economic headwinds (more and more consumers are postponing certain nonessential medical procedures), but also on the costs of recalling DePuy’s defective hip implants.
DePuy recalled its ASR hip implants last August after clinical studies found the devices failed prematurely. Patients who received one of the recalled devices often complain of intense and persistent pain, grinding and cracking sounds, diminished ability or inability to walk, bone fractures, and a spectrum of ailments associated with metal poisoning. About 93,000 patients worldwide received the recalled hip implants since they first became available in 2003, including some 37,000 patients in the United States alone.
In addition to paying for all “reasonable” expenses for patients who need their DePuy hip implants removed and replaced (such as travel, surgery, medication, and check-ups), Johnson & Johnson has spent $223 million in litigation costs so far.
Patients seeking compensation from DePuy for pain and suffering, lost wages, and other damages accuse the company of marketing and selling the defective implants while sitting on knowledge that the hip devices were prone to fail prematurely.
But DePuy’s hip-implant recalls aren’t the only thing dragging Johnson & Johnson’s profits down. Some of the other products Johnson & Johnson has recalled in recent months include Tylenol and St. Joseph Aspirin, which people complained emitted a stench and made them sick; Rolaids, because they contained wood and metal fragments; Benadryl and Zyrtec, after their formulas were botched; Motrin, Benadryl, and Simply Sleep for a number of other quality-control issues, and many more.
The company’s massive consumer products division lost millions in sales when the U.S. Food and Drug Administration found its Fort Washington, Penn., plant deficient and forced it closure. FDA inspectors also found two other plants in Lancaster, Penn., and Puerto Rico to be so shoddy that they will stay under the agency’s oversight for five years.
Meanwhile, Johnson & Johnson’s pharmaceutical division has been accused of marketing certain drugs for off-label use. Last spring, for example, the company agreed to pay $81 million to settle a probe of its unlawful Topamax promotions, including $6.1 million in criminal fines. In that case, subsidiary company Ortho-McNeil Pharmaceutical promoted the drug for psychiatric uses when it was approved only for the treatment of epilepsy and migraine headaches.