No one will be surprised that Johnson & Johnson (JNJ)'s lawyers have cleared the board of directors of wrongdoing in the Tylenol recalls that have cost the company more than $1.4 billion in lost sales. You might be surprised, however, at the lawyers' alternative explanation for the "phantom recall" of Motrin in 2009, in which J&J hired a company that secretly bought up packets of defective Motrin from store shelves so as to avoid staging a full-blown recall: It was all a misunderstanding on the part of the FDA, and the secret recall occurred "unbeknownst" to J&J.
This whitewash occurred after J&J's board asked the law firm Lowenstein Sandler to investigate following a series of shareholder demands and litigation alleging the company's corporate governance was too weak. The report doesn't provide much new information, mostly because it limited itself to reviewing documents that were already available and the team only interviewed 57 people, 23 of whom were other lawyers. A lot more than 57 people were involved in the fiascos covered by the report, which also includes quality control at J&J's DePuy medical device unit, the Acuvue contact lens recall, off-label promotion of Risperdal and the payment of kickbacks to the nursing home pharmacy chain Omnicare and foreign officials in Greece, Romania and Poland.
It does, however, add some more information on how J&J's McNeil Consumer Healthcare unit managed to stage a "secret shopper" program to buy up defective Motrin rather than making a full-blown recall of the product, which would have created negative publicity. Here's the timeline as described in the report:
- March 23, 2009: J&J alerts the San Juan, P.R., office of the FDA that it would begin a statistical sampling of Motrin on storeshelves to see if any defective product was actually on sale. If the sampling found no defective packets, no recall would be needed as it would appear that the defective Motrin either never made it, or was no longer, on the shelves. But J&J adds, "otherwise a recall of these Motrin batches will be recommended to be performed."
- April 20, 2009: "According to a McNeil Record of Regulatory Quality Authority Contact, the Las Piedras QA Manager called the Director of the San Juan District Office 'to confirm the strategy to be followed to complete the product retrieval due to the Motrin dissolution failure on two batches.' The QA Manager informed the Director that it was McNeil's 'intention . . . to continue visiting the retail stores to collect all the product and that decision was based on the low volume .. . [The Director] agreed with the strategy.'"
- May 27 2009: McNeil vp/quality Bob Miller wrote to McNeil president Peter Luther in an email: "we have negotiated an agreement with FDA not to formally conduct a recall for Motrin 8's but rather conduct a 'soft market withdrawal'. This was a major win for us as it limits the press that will be seen."
Unbeknownst to McNeil, Inmar Field Analysts retained a subcontractor to purchase the Motrin 8's remaining on the retail shelves. That subcontractor's instructions to the field (of which McNeil was unaware) provided in pertinent part: "THERE MUST BE NO MENTION OF THIS BEING A RECALL OF THE PRODUCT! If asked, simply state that your employer is checking the distribution chain of this product and needs to have some of it purchased for the product."The report fails to note that Inmar's instructions were even more specific than that. They began, "You should simply 'act' like a regular customer while making these purchases." J&J kept the FDA in the dark about how it was retrieving the product, the report says:
McNeil did not advise the FDA that the product that had been removed during the initial visits had been purchased by the third party conducting the assessment. Nor did it advise the FDA that the removal of the product during the subsequent visits would also be purchased. Although [CEO William] Weldon in his September 30, 2010 Congressional testimony acknowledged that this was a "mistake," there does not appear to have been any intention to mislead the FDA.A "mistake"? Uh-huh. Between late April and late July J&J had no contact with the FDA, according to the report. When J&J finally did get back in touch after it had finished buying back all the defective Motrin, the FDA said it was expecting to see recall documentation:
- July 2009: "after several attempts to contact the San Juan District Office recall coordinator, McNeil was finally able to establish contact with the recall coordinator. In response to inquiries about how to document the retrieval process, the recall coordinator advised McNeil that the process should be documented as a recall. McNeil therefore submitted recall documentation on August 5, 2009, reporting that its representatives had removed all marketed product found at retail."
J&J has a vested interest in painting this episode as a misunderstanding: It is a crime to make false statements to federal officials.
- Wall Street Ouija: "Psycholinguistic" Analysis of J&J Leads to Short-Sell Rating
- Total Recall: Tylenol Troubles Lose J&J $1.4B as Brands Are "Eradicated"
- A Phantom Returns: Congress Asks Why J&J Delayed Tylenol Recall for 9 Months
- J&J Denies Knowledge of "Mystery Shoppers," But Emails Say Otherwise
- A Phantom Returns to Haunt J&J: Secret Motrin Pullback Is a Lesson in What Not to Do
for more features.