Johnson & Johnson: Where does the beauty giant's legal wrangle over baby powder now stand?

Published: 8-Apr-2019

Johnson & Johnson is facing further litigation over talc asbestos cancer claims. But how many lawsuits is the company facing, how successful are these ultimately likely to be and what does this mean for the industry as a whole? Gemma Handy writes

Embattled Johnson & Johnson (J&J) has launched appeal proceedings against a mammoth US$4.69bn judgement as it fights to salvage its reputation amid claims its Baby Powder causes cancer. The personal care product giant is currently fending off some 13,000 other similar lawsuits across the US.

J&J insists talcum powder used in its iconic product – on sale since 1893 – is safe and does not contain asbestos, a known carcinogen. But that has not stopped a St. Louis judge demanding on 27 December 2018 that the 133-year-old firm set aside $6bn as a safeguard to ensure plaintiffs who successfully argued that it triggered their ovarian cancer are compensated, should the appeal fail.

The July 2018 ruling at the Judicial Circuit Court in St. Louis, Missouri, was the first to successfully link talc and asbestos to the illness.

Also in December, J&J allegedly agreed to pay more than $1.5m to a New York woman who said exposure to asbestos in talc had caused her to contract mesothelioma, a rare form of cancer. The plaintiff, Anna Zoas’, settlement came amid a media firestorm following the release of a Reuters investigation report three weeks earlier alleging J&J chiefs knew asbestos lurked in its Baby Powder for decades.

The US-based company rigorously denies this – despite Zoas’ lawyers saying J&J has agreed to the payout to Zoas (about which J&J has declined to comment) – and says it is confident July’s $4.69bn award will be overturned on appeal.

Speaking on the cases in general, however, a J&J spokeswoman says: “Of all the verdicts against Johnson & Johnson that have been through the appellate process, every one has been overturned.”

J&J has blamed its lawsuit losses on “unfair” court processes, “errors” presented at trial, juror confusion and unscrupulous lawyers looking to cash in on the maelstrom.

It also stated that the “inflammatory” Reuters article ignored that “thousands of tests by J&J, regulators, leading independent labs and academic institutions have repeatedly shown that our talc does not contain asbestos”, as well as ignoring J&J’s open and full cooperation with global regulators and the fact that J&J “has always used the most advanced testing methods available to confirm our cosmetic talc does not contain asbestos”.

Johnson & Johnson: Where does the beauty giant's legal wrangle over baby powder now stand?

The legal angle

However, veteran personal injury attorney Mark Lanier, who represented Zoas, along with the 22 plaintiffs involved in July’s case and who is currently acting for 1,000 more, says J&J’s real fight could be only just beginning.

“This issue is in its young stage; in the asbestos litigation arena in the US, plaintiffs lost the first few cases before they figured out how to fight it.

I expect we will see more and more Baby Powder cases being filed; J&J will have a good winning percentage early and then that will turn. Losses will start to mount up,” Lanier tells Cosmetics Business.

J&J was given 20 days to post the $6bn bond upon filing its notice of appeal in early January. The company had lost a previous motion – also in December – to have the verdict overturned.

Of the total amount awarded, $550m was in compensatory damages, the remainder in punitive damages. And Lanier says he is optimistic the sum, one of the largest ever in a product-defect case, will be upheld.

Analysts at financial information company Bloomberg disagree, however, pointing out in a recent report that “no verdict of that size has survived appeal”, with most reversed or drastically reduced.

Expert witnesses called by Lanier told jurors that microscopic asbestos fibres can enter the body when talcum powder is inhaled or applied to the perineal area as deodorant. Lawyers for J&J said many agencies and testing labs had consistently confirmed its product was asbestos-free.

During the first stage of appeal, at a date yet to be announced, lawyers for both sides will argue their case before a three-judge panel. Of Lanier’s 1,000 other plaintiffs, 22 are set for trial this month and another 22 in September, all in St. Louis, Missouri.

An online search reveals several legal companies representing talcum powder plaintiffs and actively touting for more.

Joel Rochon, a Toronto-based attorney leading a class action from Canada against the company, says it is “beyond disturbing” that Baby Powder was still on the shelves. His company Rochon Genova’s action on behalf of several women diagnosed with ovarian cancer claims the product is “defective”, “inherently dangerous” and “materially increases” the risk of the disease among women who use it for feminine hygiene. It also alleges the defendants knew of said defects and failed to disclose them.

For its part, J&J says “decades of independent scientific testing” proves its products are asbestos-free. In a statement, it said it took allegations that its talc was harmful “very seriously”. Institutions it tasked with testing it include the US Food & Drug Administration (FDA), Harvard T.H. Chan School of Public Health and the Geological Society of America.

What’s the issue?

Talc is a mineral that, in its natural form, can contain asbestos. J&J says it only uses pure, pharmaceutical-grade talc, routinely scrutinised to ensure its safety.

Official advice on talc’s use is divided. The American Cancer Society suggests consumers avoid it “until more information is available”.  But it is precisely these consumers that J&J hopes will remain loyal to the brand, which was built on a reputation as a caring, family-centred entity.

J&J refused to comment on sales figures following the Reuters article, but the personal care giant’s shares took a plunge of almost 12% in the wake of its publication; it was the company’s biggest drop in 15 years.

Exacerbating its plight further were widespread reports of drug inspectors in India, also rattled by the article, seizing Baby Powder from factories in Baddi and Mulund for testing. In February, Indian government-sanctioned investigators announced they’d found no proof of asbestos contamination in the product and production resumed. However, ahead of this announcement, in January, Sri Lanka halted all imports of Baby Powder, a ban that will be kept in place until officials are satisfied the product’s safety has been proven.

Prior to Reuters’ report, J&J share prices last year were up by about 6% compared with 2017 despite the wealth of litigation. And the company’s talc sales still exceed all other brands combined, accounting for around two-thirds of the market in the US.

In 2017, J&J claimed $81.6m in sales in the US talcum powder market, according to Euromonitor International. Talc’s total market value in the US stood at $124.8m the same year, while the global market was cited by Euromonitor to be worth $1.3bn.

J&J is certainly not a company unused to litigation. Indeed, talc cases make up less than 10% of all personal injury lawsuits pending against it, according to figures cited by Reuters.

Talc is a mineral that, in its natural form, can contain asbestos; J&J says it only uses pure, pharmaceutical-grade talc, routinely scrutinised to ensure its safety

The bigger picture

On the whole, researchers predict the lawsuits are unlikely to grossly affect the global talc market, currently being fuelled by increasing demand from the automotive industry for one.

India-based market advisory company Mordor Intelligence anticipates the sector will register a compound annual growth rate (CAGR) of almost 5% by 2023. MarketsandMarket’s CAGR predictions are fractionally lower at 4.6%, estimating the global market could be worth $3.35bn within the same timeframe.

For Johnson & Johnson, one of America’s oldest companies, its 2019 sales forecast announced on 22 January, stands at just over $80bn. Its fourth-quarter sales rose by about 1% to $20.39bn year-on-year, helped by double-digit percentage growth in some of its cancer and Crohn’s disease drugs.

But that positive pharma outlook was tempered by litigation expenses which doubled over the same period to $1.29bn, raising more questions over the future trajectory of one of America’s oldest companies.

At the time of going to press, it was announced that Terry Leavitt, a woman who claims J&J’s talcum powder caused her cancer, was awarded $29m by a jury in Oakland, California. In 11 cases so far, three have resulted in wins for plaintiffs.As reported, J&J has appealed against all of the plaintiff verdicts.

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