The department enforces the FDCA by prosecuting those who illegally distribute unlicensed, mislabeled, and falsified drugs and medical devices in violation of the law. Since 2009, fines, penalties, and recoveries for these FDCA violations have totaled more than $6 billion. Legal problems are not new for Johnson & Johnson (JNJ 0.06%). In 2020 and 2019, the company spent more than $5 billion on litigation-related expenses. But with deep pockets, Johnson & Johnson was able to absorb those costs. Perhaps the most pressing legal issue today concerns its talc obligations. Sole proprietorships have to allocate different legal responsibilities. Here are the most important ones: «The cases that have gone to court are about the court process, not security. Decades of independent scientific reviews confirm that Johnson`s baby powder is safe, contains no asbestos and does not cause cancer.
Learn more about our position at www.FactsAboutTalc.com. J&J has filed more than 3,000 lawsuits not only against manufacturers, but also against doctors and pharmacists. The companies agreed to pay a combination of up to $26 billion to settle the lawsuits; J&J would be responsible for $5 billion. «Taking responsibility comes with a legal and financial responsibility that, on the scale of the problem with these talc-based products, could put a company out of business. In this case, there is also the continued likelihood that other dissenting judgments from Johnson & Johnson – so it`s probably far from over. I would expect a big class action lawsuit sooner rather than later,» Sawan predicted. J&J, which also makes products such as Tylenol and Band-Aid, assigned legal responsibility for the claims to the spin-off company, which immediately filed for bankruptcy — a move dubbed «Texas Two-Step.» Johnson & Johnson found a way to limit its losses by placing its talc liabilities in a new company, LTL Management, and then bankrupting it. The move is legal under Texas law and is called the «Texas Two-Step.» While plaintiffs protested its use, a federal judge allowed the company to proceed in February. This prevents Johnson & Johnson from incurring an insurmountable amount of legal fees. The responsibility for regulating the eighty-five billion-dollar cosmetics industry rests with the FDA`s cosmetics division, which has only thirty employees and an annual budget of less than ten million dollars: a rounding error in the agency`s six-billion-dollar budget and one-twentieth of what it spends regulating pet food and drugs. The marginal status of cosmetics with the FDA stems in part from the difference between acute and chronic risk: it is easier to postpone regulation of products that cause injury or death only after years of cumulative exposure. But another reason cosmetics are barely regulated is that the industry has been successfully fighting for more than eighty years to prevent Congress from updating the rules that cosmetics companies must follow.
Today, these companies are not required by law to test the safety of their products before selling them. They don`t have to report to the FDA or ingredient claims, and they don`t have to submit their safety records for review or report adverse events, whether it`s rashes or headaches, early puberty, or even cancer. If a cosmetic product is life-threatening, the agency cannot recall that product or suspend production. This can only encourage a company to do so. «These are some of our most broken laws,» said Scott Faber, who leads government affairs at the Environmental Task Force, a nonprofit research organization. According to the E. W.G., more than eighty countries, from the United Kingdom to Cambodia to Myanmar, have adopted stricter cosmetic regulations than the United States. And while regulators in some countries have banned more than twenty-four hundred cosmetic ingredients, from parabens to formaldehyde, the FDA has banned or restricted fewer than a dozen.
Even if those 38,000 lawsuits cost an average of only $9.5 million (10% of the previous average), it could result in staggering premiums of $361 billion, not including other legal fees. That`s almost as big as the company`s market capitalization, which is about $460 billion. Johnson & Johnson said in its statement: «The court`s decision not to consider the Ingham case leaves important unresolved legal issues that state and federal courts will continue to face regarding due process rights and personal jurisdiction. The Supreme Court has repeatedly said that its decision to refuse to hear a case does not express an opinion on the merits, and we continue to believe that our views on the law and the facts will eventually prevail. However, it can be difficult (if not impossible) to estimate how many of these lawsuits would be dismissed and how many could result in nominal costs only. And there is significant leeway for the company to avoid declaring such a large liability, thus warning investors. Johnson & Johnson announced in its latest annual report that it «recognises provisions for risks of loss related to legal matters, including talc, when it is probable that a liability will be incurred and the amount of the loss can reasonably be estimated.» And then, quietly, the company pursued a strategy to bypass juries altogether. Johnson & Johnson, a nearly half-trillion-dollar company with a credit score higher than the U.S. government, filed for bankruptcy in a legal maneuver first used by Koch Industries. As a result of this decision, the fate of forty thousand pending lawsuits and the possibility of future claims by cancer victims or their survivors now rests with a single bankruptcy judge in the company`s home state of New Jersey. If Johnson & Johnson wins and, as Berg puts it, «makes its way out of everything,» the case could usher in a new era in which the government has reduced its power to enforce consumer protection laws, citizens will not be able to bring their case before a jury of their peers if those laws fail.
And even companies with a long history of documented damage will be able to decide. How much, if any, they owe to their victims. However, this estimate could not have mattered. Critics say the goal of the Plato project was to create a company with limited assets: specifically, two billion dollars so far to settle current and future claims. That number is less than half of what Johnson & Johnson allegedly offered ovarian cancer plaintiffs in the MDL last summer, let alone what they owed to all mesothelioma plaintiffs. And, of course, it`s also much less than the company`s assets. Johnson & Johnson has already spent nearly a billion dollars — half the value of the compensation fund — on its own legal defense. The company`s bankrupt subsidiary, meanwhile, has its own legal fees, including fees paid to Neal Katyal, the former attorney general and current partner at law firm Hogan Lovells, who charged $2,465 an hour. Johnson & Johnson continues to deny the allegations and that its split had nothing to do with it.
Regardless of this new spin-off of the company, J&J announced in October the creation of a separate subsidiary called LTL Management, which would inherit most of the powdered baby lawsuits. Immediately after its creation, it filed for Chapter 11 bankruptcy. According to the Washington Post, «The company faces thousands of lawsuits over talcum powder, and last year it said it would stop selling the product in the U.S. and Canada. The company continues to sell a starchy version of corn. In a civil lawsuit filed in the Northern District of California in 2009, the government claimed that shortly after Natrecor`s approval, Scios launched an aggressive campaign to market the drug for serial scheduled ambulatory infusions for patients with less severe heart failure — a use not included in FDA-approved labeling and not covered by federal health programs.