Two Johnson & Johnson ($JNJ) consumer health plants that operate under a consent decree from the FDA will no longer need to be monitored by outsiders, and the plant that was ground zero for the company's consumer health quagmire is expected to go back online after being sidelined for 5 years to regain standing with the FDA.Johnson & Johnson CEO Alex Gorsky
That was the word from J&J CEO Alex Gorsky and Sandra Peterson, who Gorsky brought in in 2013 to set things right at the embattled McNeil Consumer Healthcare unit. Peterson said reduced costs from getting the plants in Fort Washington, PA, and elsewhere out from under some of the more onerous provisions of the consent decree will cut costs and build profits at the revamped, relaunched OTC operation.
"We have made significant progress in meeting consent decree requirements," Peterson said during the Q2 earnings call Tuesday, according to a transcript from Seeking Alpha. "The FDA has certified our manufacturing facilities in Las Piedras, Puerto Rico and Lancaster, PA. We recently had a successful FDA inspection in Fort Washington and are awaiting final notification."
A spokesperson told the Wall Street Journal that the FDA will no longer require regular inspections at the Las Piedras and Lancaster plants by an outside observer, but there will be spot inspections. The company does not know when the FDA will return for a reinspection of the Fort Washington plant.
Peterson told analysts as J&J is "sunsetting the consent decree, it enables us to improve the productivity of our manufacturing footprint," bringing down its cost of goods sold. And while it will not reduce spends on brand-building, "you will see improved leverage in our manufacturing footprint and actually how we are spending those dollars to drive improved profitability across the sector."
J&J closed the Fort Washington plant in 2010 after FDA inspectors found that it had essentially ignored consumer complaints about "black specks" discovered in bottles of Infants' Tylenol that turned out to be particles of nickel and chromium coming off of machinery. There were no reports of consumers being harmed, but the company recalled more than 100 million units of its most popular OTC products and found itself in the middle of a public relations nightmare. Lost sales from having to strip retailer shelves and being unable to quickly find suppliers to help it rebuild its portfolio cost the drugmaker billions of dollars. The company pleaded guilty to a federal misdemeanor charge earlier this year tied to the problems and paid $25 million in fines and penalties. It also invested more than $100 million in the Fort Washington plant.
But most of that is behind it now, Gorsky said. It has about 80% of its brands back on the market and regained about 60% of the market share in areas like pain products after losing ground to private-label offerings that came in behind to reap the rewards of J&J's manufacturing missteps.