J&J sales plunge as new drug recall announced
July 8, 2010
© AP Photo/Paul Sakuma, file
In this June 30, 2009 file photo, Tylenol Extra Strength is shown in a medicine cabinet at a home in Palo Alto, Calif. Johnson & Johnson is expanding a recall of over-the-counter drugs Thursday, July 8, 2010, including Tylenol and Motrin IB because of a musty or moldy smell.
Sales of Johnson & Johnson pain relievers are collapsing as a string of recalls appears to have made consumers wary of once-sterling brands such as Tylenol and Benadryl.
An eighth recall, announced Thursday, could worsen consumer reaction. That wariness and the huge amount of products pulled off store shelves together look to be costing J&J tens of millions of dollars a month.
Thursday's recall by Johnson & Johnson's McNeil consumer health care unit covers 21 lots of products, including Children's Tylenol. Those were recalled because of a musty or moldy smell, extending a large Jan. 15 recall tied to a nauseating chemical on shipping pallets.
The company said the new lots were added to the recall as a precaution after an internal review found those lots, shipped and stored before Jan. 15, had been on the same type of wooden pallets.
An April 30 recall of more than 130 million bottles of children's and infants' liquid medicines involved products J&J said "may not meet required quality standards," may contain tiny metal particles or may have too much active ingredient.
The string of recalls is an embarrassment for a company that set the standard on how to do it correctly when it rushed to pull bottles of Tylenol -- deliberately poisoned by someone who was never caught -- off store shelves in the early 1980s.
This time, the culprit appears to be a lack of internal quality control. That's harder to forgive, particularly given that the public has little tolerance for mistakes or carelessness involving products for children, said analyst Steve Brozak of WBB Securities.
"This is pain by a thousand cuts," Brozak said of the repeated recalls.
Erik Gordon, a professor and analyst at the University of Michigan's Ross School of Business, said J&J has been too conservative about replacing those responsible.
"Heads should have rolled" and longtime CEO Bill Weldon should be taking responsibility, Gordon said. "If I were on the board, I think I would be looking for his resignation."
Weldon has turned the gold standard for handling an unsafe product "into the tin standard," he added.
Data from market research firm SymphonyIRI you Group show sales of New Brunswick, N.J.-based J&J's pain reliever pills fell 56 percent in the four weeks ending June 13, compared to a year earlier.
Its figures show that U.S. sales of pain-relieving tablets, gelcaps and other types of pills, including multiple strengths of Tylenol and Motrin, plunged to $20.9 million in that four-week period, putting the company behind rivals Bayer Consumer Health and Wyeth Labs. Sales of private-label, or store brands, benefited the most from Johnson & Johnson's fall, jumping 23 percent to $51.9 million.
Meanwhile, sales in the smaller category of liquid pain relievers, such as Children's Tylenol, fell 96 percent, to just $630,000. Those figures do not include sales at Walmart, gas station stores and club stores.
Together, that amounts to tens of millions of dollars in revenue lost in just one month -- and a big hit to the reputation of the maker of iconic products such as Johnson & Johnson's baby shampoo and Band-Aids. Gordon said sales of any product with Johnson & Johnson on it will be hurt.
CathyJo Andrews threw out 10 bottles of children's medicines earlier this summer after a prior recall.
"It scared me," she said. "It's my kids."
Since then the mother of two, who lives in the Chicago suburb of Oak Lawn, has received coupons from Johnson & Johnson to reimburse her, but doesn't plan to use them soon.
Andrews said when her 6-year-old developed a fever and had an allergic reaction, she opted instead to take a trip to the pediatrician.
"I'd much rather pay for a doctor's visit and a prescription from the pharmacy than have to freak out and worry about it," the 28-year-old said.
A Johnson & Johnson spokeswoman said the company had no comment beyond its announcement of the latest recall.
Food and Drug Administration spokeswoman Elaine Gansz Bobo said the agency continues to work with McNeil on all the product recalls.
"We do not see any serious health risk to the public from this additional recall," she said.
Gansz Bobo said she did not know of any other company that had eight medicine recalls in less than a year.
"It certainly is quite a few, and something that we hope is not repeated by other companies," she told The Associated Press.
The repeated recalls are particularly surprising at a company where executives regularly repeat the 67-year-old corporate credo, which begins: "We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services."
Gordon noted that besides the announced recalls, congressional investigators say J&J paid another company to quietly buy up packages of Motrin with potency problems in 2008.
"I think it's unfathomable that a longtime J&J guy could do something so un-J&J-like," he said of Weldon.
Gordon said he sees parallels to the repeated recalls by Toyota, another company "renowned for quality having quality problems. You have to wonder if global cost pressures have changed the game even for the best of the best."