The closure of Johnson & Johnson's ($JNJ) Fort Washington, PA, OTC plant has reportedly cost the drugmaker more than $1 billion in lost sales, not to mention $100 million in upgrades. But sometimes problems on the plant floor can lead straight to the courthouse and as J&J adds to those other costs, it will pay nearly $23 million to settle litigation with shareholders.
The plant is expected to reopen next year, but the company Wednesday said it had agreed to pay $22.9 million to set aside a lawsuit that claimed its actions three years ago lead to the failings at the Fort Washington plant. The suit also claimed J&J bungled the handling of the recall so badly that Congress was prompted to investigate, consumers fled its brands and the value of shares fell. It had to pull more than 40 OTC brands. According to Reuters, the company was accused of even trying to conceal some of the problems by setting up a "phantom recall," using third-party contractors to strip Motrin off of shelves.
According to Reuters, J&J is not admitting it did anything wrong but settled to be done with the litigation. The agreement must be approved by a federal judge in New Jersey before it can be finalized.
The company closed the plant in 2010 after recalling tens of millions of consumer products, including its popular Tylenol and Motrin products. J&J's McNeil Consumer Healthcare signed a consent decree a year later, and the company has gutted the plant and spent more than $100 million to retool it. Other improvements were made at plants in Lancaster, PA, and Las Piedras, Puerto Rico. In an earnings call this week, CFO Dominic Caruso told reporters J&J expects the Fort Washington plant to be ready for an FDA inspection toward the end of the year. If it passes and a judge says it has met the dictates of its consent decree, the plant will be brought back to life.
- read the Reuters story
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