DePuy Hip Problems Contribute to $3B Charge for Johnson & Johnson

Problems with recalled DePuy hip replacements are beginning to cut heavily into Johnson and Johnson profits.

This week, the medical product giant reported only $218 million in net earnings for the last quarter of 2011, which was far below 2010’s fourth-quarter earnings of $1.9 billion.

The drop was primarily attributed to a $2.9 billion charge, which included expenses from DePuy ASR hip lawsuits, costs associated with a recall for tens of thousands of defective hip implants and the company’s planned acquisition of Synthes, Inc.

This charge follows a nearly $1 billion set aside in the fourth-quarter 2010 for costs associated with DePuy hip problems, including funds for potential DePuy ASR settlements and costs associated with the recall program.

A recent report by Forbes suggests that DePuy and other manufacturers of similar implants could ultimately face $5 billion in legal costs and settlement fees associated with problems from metal-on-metal hip replacements.

In August 2010, a DePuy ASR recall was issued after the system was linked to a higher-than-expected failure rate. However, by the time the DePuy hip implant was removed from the market, about 93,000 of the devices had already been sold worldwide, including about 37,000 that were used in the United States.

At the time of the recall, Johnson & Johnson indicated that the DePuy ASR failure rate was about 12%. However, some experts have suggested that the actual percentage of people who are likely to experience problems with their implant, including loosening, metal poisoning and possible revision surgery, is going to be substantially higher as more time passes.

Since the recall, a growing flood of lawsuits over the DePuy ASR hip have been filed against Johnson & Johnson in state and federal courts throughout the United States. The federal DePuy ASR litigation has been consolidated for pretrial proceedings in the U.S. District Court for the Northern District of Ohio as part of an MDL, or multidistrict litigation. About 3,500 DePuy ASR metal hip recipients have sued the company so far.