Consumer products company Johnson & Johnson (J&J), best known for making things like laundry soap and Band-Aids, is in legal trouble again.
On Monday, August 26, a district court judge in Oklahoma ordered the company to pay $572 million for promoting highly addictive drugs that contributed to the opioid epidemic in the U.S.
It was the second time in less than a year that J&J has found itself dealing with legal fallout related to the products it sells. At the end of December 2018, 12,000 people filed a class action against the company, claiming it knew that some of its talcum powder had been tainted with asbestos. The class action followed a jury award of $4.7 billion to 22 women who claim they contracted ovarian cancer from J&J baby powder. (You can read more about that here.)
Here are details from the federal ruling:
- An Oklahoma judge ruled that J&J intentionally minimized the addictive aspects of opioid drug products manufactured through its Janssen Pharmaceutical Companies subsidiary.
- The ruling was the first, in thousands of pending legal cases related to the opioid crisis, to find a drug company guilty of wrongdoing. Attorneys were reportedly seeking a much larger payout, however, of $17 billion.
- Attorneys seeking justice for people addicted to opioids are pursuing a novel strategy, according to reports, that J&J violated local public nuisance laws. Such laws generally apply to the destruction of public property through pollution, noise, and poisonous products that harm the environment, according to CNBC.
- J&J reportedly manufactured 60% of the ingredients that made their way into opioid products and aggressively marketed them as safe to doctors and patients, according to the New York Times.
- In a press release following the ruling, J&J said it would appeal the ruling, and that it had operated within the law by distributing products approved by the Food & Drug Administration. It also expressed sympathy for people suffering from opioid addiction.
More about the opioid crisis
More than 700,000 people have died from drug overdoses related to opioid drugs since the1990s, according to reports.
Nearly 50,000 people died from opioid overdoses in the U.S. in 2017, and approximately 1.7 million people had substance use disorders related to opioids, according to the National Institute on Drug Abuse (NIDA). Additionally, addiction to opioids costs the U.S. $78.5 billion annually, for expenses related to health care, lost productivity and addiction treatment.
Earlier in 2019, Teva Pharmaceutical settled a court case related to its role in the epidemic, for $85 million. And on Tuesday, August 27, Purdue Pharma, creator of Oxycontin, agreed to pay between $10 billion and $12 billion in a settlement with 2,000 people.
Opioids include Morphine, Hydrocodone, Oxycodone and Oycontin, and Fentanyl.
Why company ethics matter
Illness, or even the loss of life, related to bad products can have enormous consequences for companies, beyond lawsuits.
For example, Investigators continue to look into aircraft manufacturer Boeing, whose 737 MAX jetliner crashed twice due to a software flaw killing more than 300 people in late 2018 and early 2019. The 737 MAX, which was once Boeing’s most popular plane, is grounded around the world while the investigation continues.
The big lesson is that it’s probably a best practice for public companies to behave ethically, and they are vulnerable to news of investigations when they do not. Not only their stocks, but ultimately the value of the companies themselves, are determined by how responsible companies are to their customers and shareholders.
Further, the ethical values and actions of companies are something that investors might consider before making an investment.
Learn about how to research company stocks.