DePuy Hip Recall and Litigation Expenses Hit Johnson & Johnson Profits

Johnson & Johnson has reported to shareholders that the costs associated with litigation and recalls involving its DePuy Orthopaedics unit significantly cut into profits in the second quarter of 2011. 

In its second-quarter earnings results, Johnson & Johnson reported that it paid $223 million in connection with DePuy ASR hip replacement recalls, litigation associated with the defective hip implant and other products. The company reported a net income of $2.8 billion, down from $3.5 billion a year ago.

It has been nearly a year since Johnson & Johnson’s DePuy subsidiary recalled ASR hip implants last August, and more than 1,000 people have already filed a DePuy ASR hip lawsuit against the company over problems experienced when the implant failed.

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More than 90,000 DePuy ASR XL Acetabular Systems and DePuy ASR Hip Resurfacing Systems were sold before the device was pulled from the market. At the time of the recall, the manufacturers acknowledged that an estimated 12% to 13% of these hips were failing within five years. However, more recent estimates have suggested that the DePuy ASR failure rate will be much higher. According to a report issued earlier this year, one group of surgeons indicated that half of all people who received the recalled implant may experience loosening within six years of their hip replacement, with many requiring additional surgery to remove or replace the components.

According to allegations raised in complaints filed against Johnson & Johnson and their DePuy subsidiary, the manufacturer failed to adequately research the metal-on-metal hip implant or warn about the risk of problems caused by metallosis, or metal poisoning, which may occur when the metal parts rub against each other and shed microscopic particals of cobalt and chromium.

Earlier this month, a Wells Fargo analyst estimated that Johnson & Johnson could face $1 billion in liability costs related to the DePuy ASR hip litigation.

The company also faces a growing number of DePuy Pinnacle hip replacement lawsuits filed over another of their metal-on-metal hip implants. Although a DePuy Pinnnacle recall has not been issued, a dozens of complaints have been filed in courts throughout the United States alleging that the older hip system contains similar design defects that increase the risk of early loosening or failure.

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