Johnson & Johnson Settlement Calls For Improved Oversight

Johnson & Johnson has agreed to put more stringent quality control oversight in place, as part of a settlement reached with investors, who sued the company after a cascade of recalls and lawsuits in recent years over problems that allegedly could have been prevented with better management. 

The world’s largest manufacturer of health products, Johnson & Johnson has been wracked with regulatory problems since 2010, resulting in recalls and charges of illegal marketing.

To settle claims brought by investors that the company is mismanaged, new corporate governance measures will be put in place, including the creation of a new board designed specifically to assure the company’s regulatory compliance.

The company’s new board-level Regulatory, Compliance and Government Affairs Committee will be made up of independent directors, who will have regulatory oversight company-wide and will provide an annual report to shareholders on the company’s compliance efforts. The settlement will resolve the investors’ claims.

National attention was focused on Johnson & Johnson’s quality control problems after an April 2010 recall of Tylenol, Benadryl and Motrin, which affected affected 136 million bottles of children’s medications. That recall resulted in the shutdown of the company’s Ft. Washington, Pennsylvania, plant and the suspension of the production of all children medications manufactured by their McNeil subsidiary.

Inspectors found a number of problems at the facility that included poor quality control measures, and inadequate and sometimes disjointed tracking and responses to consumer complaints.

The company has also been the focus of U.S. government investigations into illegal marketing of their Risperdal medication for unapproved uses. Recent reports suggest that the company has agreed to pay $2.2 billion to settle the Risperdal charges.

Investors claimed that the board of directors ignored clear signs of illegal conduct regarding the Risperdal marketing and production issues that led to the drug recalls.