Johnson & Johnson, Under Fire, Has Track Record Of Weathering Trouble The health care giant faces multiple lawsuits, including one over opioids. A reputation for corporate responsibility, dating back to the Tylenol scandal, offers some protection but no guarantee.
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Johnson & Johnson, Under Fire, Has Track Record Of Weathering Trouble

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Johnson & Johnson, Under Fire, Has Track Record Of Weathering Trouble

Johnson & Johnson, Under Fire, Has Track Record Of Weathering Trouble

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RACHEL MARTIN, HOST:

The lawsuit against Johnson & Johnson for its role in the opioid crisis is a test for a company that has faced them before. The pharmaceutical firm is on trial in Oklahoma. It's a company that has lasted more than 130 years, and NPR's Scott Horsley reports on how it has handled crises in the past.

SCOTT HORSLEY, BYLINE: The state of Oklahoma has accused Johnson & Johnson of creating a public nuisance by oversupplying prescription painkillers. Attorney Brad Beckworth says that helped fuel a deadly epidemic of opioid addiction.

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BRAD BECKWORTH: If you oversupply, people will die.

HORSLEY: Johnson & Johnson denies any wrongdoing. Last Wednesday, a stock drop knocked some $20 billion off the company's market value - a pretty big haircut for the company behind iconic brands like Johnson's Baby Shampoo. Credit Suisse analyst Vamil Divan thinks the market overreacted. He notes Johnson & Johnson is responsible for a tiny fraction of the prescription painkillers sold in Oklahoma.

VAMIL DIVAN: Obviously, the opioid epidemic is a major epidemic, and I'm certainly not trying to minimize that. And I don't think, you know, the company is, either. But the role that Johnson & Johnson specifically played here seems to be relatively limited.

HORSLEY: Divan says Johnson & Johnson could have more exposure from a different series of lawsuits involving its baby powder. Last year, a jury in St. Louis ordered Johnson & Johnson to pay more than $4 1/2 billion to women who developed ovarian cancer after using its talcum powder. The company is appealing.

The stakes in this and similar lawsuits are particularly high for the company because they threaten its trustworthiness. Consumers know Johnson & Johnson best through its array of baby products - baby oil, baby shampoo and baby powder - which have been around for generations of babies. In December, Reuters reported that Johnson & Johnson had known for decades that the raw material in talcum powder could be contaminated with asbestos and sought to cover it up. The report triggered a 10% drop in the company's stock price. CEO Alex Gorsky went on CNBC to do damage control.

(SOUNDBITE OF TV SHOW, "MAD MONEY")

ALEX GORSKY: We unequivocally believe that our talc, our baby powder, does not contain asbestos.

HORSLEY: Decades ago, Johnson & Johnson was at the center of another more dramatic health scare.

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DAN RATHER: A bizarre and terrifying story today in the Chicago suburbs of Arlington Heights and Elk Grove Village...

HORSLEY: It was 1982 when Dan Rather reported on a poisoning case that to this day has never been solved.

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RATHER: A 12-year-old girl and two men who are brothers are dead after taking poisoned capsules of extra strength Tylenol.

HORSLEY: Johnson & Johnson, which makes Tylenol, ordered a nationwide recall and redesigned its packaging to prevent future tampering. The costly and proactive response is often held up as a case study in corporate responsibility.

STEPHEN GREYSER: The Tylenol episode created what might still be characterized as the standard for how to deal with a crisis.

HORSLEY: Professor Stephen Greyser wrote that case study at Harvard Business School. He says the company was guided by its official credo, which says Johnson & Johnson's first responsibility is to patients, doctors, nurses and the mothers and fathers who use its products.

GREYSER: The credo has historically made it clear that if one focuses on customers, down the road, profits will come.

HORSLEY: Tylenol recovered and is now one of the top-selling over-the-counter pain medications. In the years since, Johnson & Johnson has grown far beyond its roots in the consumer medicine cabinet. Household brands like Listerine and Lubriderm accounted for just 14% of Johnson & Johnson's U.S. sales last year. Fully half the company's revenue now comes from pharmaceuticals used to treat everything from depression to blood clots.

(SOUNDBITE OF AD)

UNIDENTIFIED ACTOR: Once-daily Xarelto, a latest-generation blood thinner.

HORSLEY: These products are not as identified with Johnson & Johnson as Band-Aids or baby powder, but they're much bigger moneymakers. And even though the drug business packs its own challenges, including lawsuits like the one in Oklahoma, Credit Suisse analyst Vamil Divan is bullish on Johnson & Johnson's future.

DIVAN: Nothing's ever 100%. There's always some uncertainties. We have relative comfort that this is a company that can deal with some of these things that may come up along the ways. I think if you look at this track record also over one year, three year, five year, 10 year, you know, generally, this company has delivered.

HORSLEY: That famous Johnson & Johnson credo concludes, when the company operates according to its principles, stockholders should realize a fair return.

Scott Horsley, NPR News, Washington.

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