U.S. bankruptcy judge halts 40,000 Johnson & Johnson talc and cancer lawsuits

Story by Annika Kim Constantino • Yesterday 

A federal bankruptcy judge halted roughly 40,000 of lawsuits alleging Johnson & Johnson's baby powder and other talc products caused cancer.

Judge Michael Kaplan put a temporary hold on the suits that will last through mid-June, The Wall Street Journal reported.

The decision is part of J&J subsidiary LTL Management's second attempt to settle talc cases in bankruptcy proceedings.


In this photo illustration, a container of Johnson and Johnson baby powder is displayed on April 05, 2023 in San Anselmo, California.© Provided by CNBC

A federal bankruptcy judge on Thursday halted roughly 40,000 lawsuits that allege Johnson & Johnson's baby powder and other talc products caused cancer.

The decision is part of J&J's second attempt to settle thousands of talc cases in bankruptcy proceedings.

J&J in 2021 spun off its subsidiary, LTL Management, to carry its talc-related liabilities and file for Chapter 11 bankruptcy protections.

Judge Michael Kaplan during a hearing Thursday in U.S. Bankruptcy Court in Trenton, New Jersey, put a temporary hold on the suits that will last through mid-June, The Wall Street Journal reported.

J&J won't have to go to trial over any other talc claims during the pause, but new lawsuits can still be filed against the company, The Journal reported.

Kaplan said during the hearing that J&J has an "uphill battle" ahead, according to the newspaper.

The pause will give J&J time to reach a permanent settlement with plaintiffs in the talc cases. The company recently proposed an $8.9 million settlement for current and future talc-related claims and said it expects to bring that plan to bankruptcy court in mid-May.

J&J in a statement called Kaplan' decision "a win for claimants" because it brings them "one step closer" to being able to vote on the proposed settlement.

The New Brunswick, New Jersey-based company also said it believes claimants will overwhelmingly support the proposal.

J&J previously said more than 60,000 claimants have already committed to voting in favor of the plan.

"When presented with a clear and complete explanation and the opportunity to make an informed choice, we firmly believe the claimants will approve the plan," said Erik Haas, J&J's worldwide vice president of litigation.

Kaplan's decision is narrower than the one he made after LTL Management first filed for Chapter 11 in 2021.

The judge ruled in February 2022 that J&J can use the bankruptcy system to resolve talc allegations, enabling the company to avoid fighting thousands of individual lawsuits.

Kaplan essentially affirmed J&J's use of a strategy known as the "Texas two-step," which allows companies to split valuable assets from liabilities through a so-called divisive merger.

But in January, the U.S. Court of Appeals for the 3rd Circuit overturned that ruling. The appeals court said that neither LTL nor J&J had a legitimate need for bankruptcy protection because they were not in "financial distress."

Amid the ongoing legal fights, J&J has continued to deny the allegations that its talc products caused cancer.

Chief Financial Officer Joseph Wolk said on an earnings call Tuesday that it was "unfortunate" that J&J has to "put dollars towards quite frankly baseless scientific claims."

The suits allege J&J's talc products were contaminated with the carcinogen asbestos, which caused ovarian cancer in thousands of individuals.

Some lawsuits link several deaths to J&J's talc products.

US judge halts most talc lawsuits against J&J, stops trials

Story by By Mike Spector • Yesterday 


FILE PHOTO: Bottles of Johnson & Johnson baby powder line a drugstore shelf in New York© Thomson Reuters

NEW YORK (Reuters) - A U.S. judge on Thursday halted most of the tens of thousands of lawsuits alleging Johnson & Johnson’s baby powder and other talc products caused cancer and stopped any trials as part of a company subsidiary’s second attempt to settle cases in bankruptcy proceedings.

U.S. Bankruptcy Judge Michael Kaplan put most of the litigation temporarily on hold during a hearing in Trenton, New Jersey. The decision, for the most part, granted a request from J&J to freeze cases while it attempts to reach a permanent settlement with current plaintiffs that would also set aside money for future lawsuits.

J&J says it has broad support for a proposed $8.9 billion settlement, a contention disputed by lawyers representing talc claimants who oppose it.

The J&J subsidiary, LTL Management, filed for bankruptcy a second time earlier this month to help finalize the latest deal, despite a federal appeals court’s decision in January that invalidated its first Chapter 11 filing, on the grounds the J&J unit was not in financial distress.

“I have more questions than answers,” Kaplan said during Thursday's court hearing, referring to arguments made to him about the second bankruptcy case earlier this week.

The judge halted roughly 38,000 talc lawsuits consolidated in a federal district court in New Jersey. He allowed other cases to proceed as long as no trials commence.

He said he would revisit the ruling in late May.

Erik Haas, J&J’s worldwide vice president of litigation, in a statement called the ruling “a win for claimants” and expressed confidence they would ultimately approve the proposed settlement.

LTL Management argued that allowing litigation against J&J to continue would imperil current settlement efforts. J&J previously used a complex legal maneuver, known as a Texas two-step, to shift responsibility for the lawsuits to LTL.

Leigh O’Dell, one of the lead lawyers for plaintiffs in cases consolidated in the New Jersey federal court, said prohibiting trials limits pressure on J&J.


Related video: J&J talc unit asks judge to halt cancer lawsuits as it pursues $8.9 bln settlement (WION)  Duration 1:12  View on Watch

“We continue to believe that this bankruptcy effort is illegitimate … and that stance will be affirmed through the appellate process,” she said in a statement.

The judge’s ruling kept in legal limbo consumers alleging J&J talc caused their ovarian cancer or mesothelioma. Some plaintiffs allege asbestos in the talc sickened them. For now, none can test their claims before juries.

J&J has said its talc is safe, asbestos-free and does not cause cancer.

The healthcare conglomerate has not filed for bankruptcy itself. In October 2021, J&J divided its consumer business in two and offloaded the talc lawsuits onto a newly created subsidiary, LTL, which then declared bankruptcy.

In January, the 3rd U.S. Circuit Court of Appeals in Philadelphia invalidated LTL's bankruptcy filing. Kaplan dismissed the bankruptcy earlier this month, only for LTL to file for Chapter 11 again in his court about two hours later.

'UPHILL BATTLE'

Talc plaintiffs opposing J&J's proposed settlement plan to file a motion to dismiss the second bankruptcy filing, one of their lawyers said in court on Tuesday.

They portray J&J’s actions as an abuse of the bankruptcy system by a multinational conglomerate valued at more than $400 billion and in little danger of running out of money to pay cancer victims.

A U.S. Department of Justice official charged with monitoring the case has also pushed back against the second bankruptcy.

“Undoubtedly, the debtor has an uphill battle,” Kaplan said, referring to LTL’s settlement and reorganization prospects.

J&J and its subsidiary have argued bankruptcy delivers settlement payouts more fairly, efficiently and equitably than a “lottery” offered by trial courts, where some litigants get large awards and others nothing.

Jim Murdica, a lawyer tasked with resolving talc cases for J&J, testified in a deposition last weekend that as many as 80,000 claimants support the company’s settlement offer - enough to meet a bankruptcy threshold requiring agreement from 75% of all claimants, he said.

Lawyers representing opposing talc plaintiffs contend those figures reflect mostly unfiled claims and that people behind them have not yet agreed to the settlement. J&J and LTL argue their settlement process is typical.

LTL terminated a funding agreement with its parent company that the appeals court found insulated it from the financial distress necessary to legitimately declare bankruptcy.

Its lawyers now argue that new financing agreements leave LTL Management in financial distress. At the same time, they contend the agreements provide enough funds to pay plaintiffs and avoid rendering LTL insolvent, countering arguments from plaintiffs' lawyers that the transactions were fraudulent.

(Reporting by Mike Spector; Editing by Bill Berkrot)

U.S. court rejects J&J bankruptcy strategy for tens of thousands of talc lawsuits

Mon, January 30, 2023 

By Tom Hals, Mike Spector and Dan Levine

(Reuters) -A U.S. appeals court upended Johnson & Johnson's attempt to offload into bankruptcy tens of thousands of lawsuits over its talc products, ruling the healthcare conglomerate improperly placed a subsidiary into Chapter 11 proceedings even though it did not face financial distress.

The decision by the U.S. 3rd Circuit Court of Appeals in Philadelphia on Monday dismissed a Chapter 11 petition filed by a recently created J&J subsidiary in October to address more than 38,000 lawsuits from plaintiffs alleging the company’s baby powder and other talc products caused cancer.

Before the bankruptcy, J&J faced costs from $3.5 billion in verdicts and settlements, including one in which 22 women were eventually awarded a judgment of more than $2 billion, according to bankruptcy-court records.

Several major companies, including J&J and 3M Co, have turned to bankruptcy court to manage their mass tort liabilities. Plaintiff attorneys have called the cases an improper manipulation of the bankruptcy system, while the companies say the Chapter 11 filings are aimed at compensating claimants fairly and equitably.

J&J’s maneuver is known as a Texas two-step for a state law used to create a subsidiary that shoulders litigation and then declares bankruptcy. The Third Circuit’s opinion allows talc litigation to resume against the company.

J&J said it would challenge the ruling and that its talc products are safe.

Its shares fell more than 3% - the biggest one-day percentage decline in two years.

The New Jersey-based company, valued at more than $400 billion, said its subsidiary’s bankruptcy was initiated in good faith and designed to equitably resolve talc claims for the benefit of all plaintiffs. J&J initially pledged $2 billion to the subsidiary to resolve talc claims and entered into an agreement to fund an eventual settlement approved by a bankruptcy judge.

A three-judge panel on the appeals court rejected J&J’s argument, finding the company’s subsidiary, LTL Management, was created solely to access the bankruptcy system and not because it faced financial distress.

"Good intentions - such as to protect the J&J brand or comprehensively resolve litigation - do not suffice alone," the judges said in a 56-page opinion.

The decision throws into doubt J&J’s long-planned strategy for disposing of talc litigation after it lost a bid to reverse a watershed verdict that eventually awarded more than $2 billion to 22 women who blamed their ovarian cancer on baby powder and other talc products.

More than 1,500 talc lawsuits have been dismissed without J&J having to pay anything, and the majority of cases that have gone to trial have resulted in defense verdicts, mistrials or judgments for the company on appeal, according to the J&J subsidiary's court filings.

'PROJECT PLATO'

A December 2018 Reuters investigation revealed that the company knew for decades of tests showing its talc sometimes contained traces of carcinogenic asbestos but kept that information from regulators and the public.

“As we have said from the beginning of this process, resolving this matter as quickly and efficiently as possible is in the best interests of claimants and all stakeholders,” J&J said in a statement. “We continue to stand behind the safety of Johnson’s Baby Powder, which is safe, does not contain asbestos and does not cause cancer.”

Facing unrelenting litigation, J&J enlisted law firm Jones Day, which had helped other companies execute Texas two-step bankruptcies to address asbestos lawsuits.

J&J’s effort, which Reuters detailed last year, was internally dubbed “Project Plato”, and employees working on it signed confidentiality agreements warning them to tell no one, including their spouses, about the plan.

The Texas two-step strategy has garnered criticism from Democratic lawmakers, and inspired legislation that would severely restrict the practice.

Jones Day did not immediately respond to a request for comment.

Critics contend the strategy is an improper use of the bankruptcy system by solvent corporations wishing to escape jury trials in state courts. Bankruptcy filings typically pause litigation, forcing plaintiffs into often time consuming settlement negotiations while leaving them unable to pursue their cases in the courts where they originally sued.

“Bankruptcy courts are for honest companies in financial distress, not billionaire mega-corporations like J&J,” said Jon Ruckdeschel, a lawyer representing talc plaintiffs.

Plaintiffs and other legal experts urged U.S. Bankruptcy Judge Michael Kaplan last year to dismiss the J&J subsidiary’s bankruptcy, arguing it was filed in bad faith and risked becoming a blueprint for large corporations seeking to avoid undesirable litigation.

Kaplan, though, denied the request, finding the J&J unit did face financial distress and that a bankruptcy court was a better forum for resolving the litigation then America’s tort system.

(Reporting by Tom Hals in Wilmington, Delaware; Mike Spector in New York; and Dan Levine and San Francisco; Additional reporting by Dietrich Knauth and Chuck Mikolajczak in New York; Editing by Bill Berkrot)

CRIMINAL CAPITALI$M THAT'S LEGAL
J&J mulls offloading lawsuits from Baby Powder to new company and bankrupting it: sources

By Mike Spector, Jessica DiNapoli and Dan Levine Reuters
Posted July 18, 2021 

WATCH ABOVE: Health Canada finds talcum powder may cause cancer, lung damage – Dec 5, 2018

Johnson & Johnson is exploring a plan to offload liabilities from widespread Baby Powder litigation into a newly created business that would then seek bankruptcy protection, according to seven people familiar with the matter.

During settlement discussions, one of the healthcare conglomerate’s attorneys has told plaintiffs’ lawyers that J&J could pursue the bankruptcy plan, which could result in lower payouts for cases that do not settle beforehand, some of the people said. Plaintiffs’ lawyers would initially be unable to stop J&J from taking such a step, though could pursue legal avenues to challenge it later.

J&J has not yet decided whether to pursue the bankruptcy plan and could ultimately abandon the idea, some of the people said. Reuters could not determine whether J&J has retained restructuring lawyers to help the company explore the bankruptcy plan.

J&J faces legal actions from tens of thousands of plaintiffs alleging its Baby Powder and other talc products contained asbestos and caused cancer. The plaintiffs include women suffering from ovarian cancer and others battling mesothelioma.

READ MORE: Johnson & Johnson asks U.S. Supreme Court to void $2B baby powder verdict

“Johnson & Johnson Consumer Inc. has not decided on any particular course of action in this litigation other than to continue to defend the safety of talc and litigate these cases in the tort system, as the pending trials demonstrate,” the J&J subsidiary housing the company’s talc products said in a statement provided to Reuters. J&J declined further comment.

Should J&J proceed, plaintiffs who have not settled could find themselves in protracted bankruptcy proceedings with a likely much smaller company. Future payouts to plaintiffs would be dependent on how J&J decides to fund the entity housing its talc liabilities.

J&J is now considering using Texas’s “divisive merger” law, which allows a company to split into at least two entities. For J&J, that could create a new entity housing talc liabilities that would then file for bankruptcy to halt litigation, some of the people said.

The maneuver is known among legal experts as a Texas two-step bankruptcy, a strategy other companies facing asbestos litigation have used in recent years.

0:53Johnson & Johnson to pay $72M in suit linking baby powder to ovarian cancerJohnson & Johnson to pay $72M in suit linking baby powder to ovarian cancer – Feb 24, 2016

J&J could also explore using another mechanism to effectuate the bankruptcy filing besides the Texas law, some of the people said.

A 2018 Reuters investigation https://www.reuters.com/investigates/special-report/johnsonandjohnson-cancer found J&J knew for decades that asbestos, a known carcinogen, lurked in its Baby Powder and other cosmetic talc products. The company stopped selling Baby Powder in the U.S. and Canada in May 2020, in part due to what it called “misinformation” and “unfounded allegations” about the talc-based product. J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.

The blue-chip company, which boasts a roughly $443 billion market value, faces legal actions from more than 30,000 plaintiffs alleging its talc products were unsafe. In June, the U.S. Supreme Court declined to hear J&J’s appeal of a Missouri court ruling that resulted in $2 billion of damages awarded to women alleging the company’s talc caused their ovarian cancer.

0:22Health Matters: Johnson & Johnson being investigated for possible asbestosHealth Matters: Johnson & Johnson being investigated for possible asbestos – Feb 21, 2019

Plaintiffs’ lawyers view the two-step bankruptcy strategy as one that skirts potentially expensive settlements or judgments. Companies view it as a way to corral numerous lawsuits in one court for efficient negotiations that bankruptcy law dictates for asbestos liabilities. The company outside bankruptcy can reach a funding agreement with the entity navigating a court restructuring to cover future settlement payments.

In 2017, Brawny paper towels manufacturer Georgia-Pacific used the Texas law to move asbestos liabilities to an entity that later filed for bankruptcy in North Carolina.

READ MORE: Talc poses health risk in forms like baby powder, bath bombs: Health Canada

Bankruptcy cases filed to resolve litigation, including those related to asbestos, often take years, and almost never fully repay creditors. OxyContin maker Purdue Pharma LP, for instance, is near resolving thousands of opioid lawsuits after two years of bankruptcy negotiations with a plan valued at more than $10 billion to address trillions of dollars in claims.

Another company, DBMP LLC, filed for bankruptcy last year to resolve asbestos liabilities and said the case could take up to eight years, according to a company press release.

J&J also faces litigation alleging it contributed to the U.S. opioid epidemic and recently recalled certain spray sunscreen products after discovering some of them contained low levels of benzene, another carcinogen.

The company in June agreed to pay $263 million to resolve opioid claims in New York. It has denied wrongdoing related to its opioids.

(Additional reporting by Nate Raymond; editing by Vanessa O’Connell and Edward Tobin)

J&J Must Pay $18.8 Million to California Cancer Patient in Baby Powder Suit

By Reuters
July 18, 2023

A bottle of Johnson and Johnson Baby Powder is seen in a photo illustration taken in New York

Mike Segar/Illustration

By Brendan Pierson

(Reuters) -Johnson & Johnson's must pay $18.8 million to a California man who said he developed cancer from exposure to its baby powder, a jury decided on Tuesday, a setback for the company as it seeks to settle thousands of similar cases over its talc-based products in U.S. bankruptcy court.

The jury ruled in favor of Emory Hernandez Valadez, who filed suit last year in California state court in Oakland against J&J, seeking monetary damages. Hernandez, 24, has said he developed mesothelioma, a deadly cancer, in the tissue around his heart as a result of heavy exposure to the company's talc since childhood. The six-week trial was the first over talc that New Brunswick, New Jersey-based J&J has faced in almost two years.

The jury found that Hernandez was entitled to damages to compensate him for his medical bills and pain and suffering, but declined to award punitive damages against the company. Hernandez will not be able to collect the judgment in the foreseeable future, thanks to a bankruptcy court order freezing most litigation over J&J's talc.

J&J vice president of litigation Erik Haas said in a statement that the company would appeal the verdict, calling it "irreconcilable with the decades of independent scientific evaluations confirming Johnson's Baby Powder is safe, does not contain asbestos and does not cause cancer."

A lawyer for Hernandez could not immediately be reached for comment.

Reuters watched the trial through Courtroom View Network.

In closing arguments to the jury on July 10, J&J's lawyers said there was no evidence either linking Hernandez's kind of mesolthelioma to asbestos or proving that Hernandez was ever exposed to tainted talc. Hernandez's lawyers during closing arguments accused J&J of a "despicable" decades-long coverup of asbestos contamination.

Hernandez testified in June, telling jurors that he would have avoided J&J's talc if he had been warned that it contained asbestos, as his lawsuit alleges. Jurors heard from Hernandez's mother, Anna Camacho, who said she used large amounts of J&J's baby powder on her son when he was a baby and through childhood. She cried as she described Hernandez's illness.

Tens of thousands of plaintiffs have sued, alleging that J&J's baby powder and other talc products sometimes contained asbestos and caused ovarian cancer and mesothelioma. J&J has said its talc products are safe and do not contain asbestos, which has been linked to mesothelioma.

J&J subsidiary LTL Management in April filed for bankruptcy in Trenton, New Jersey, proposing to pay $8.9 billion to settle more than 38,000 lawsuits and prevent new cases from coming forward. It was the company's second attempt to resolve talc claims in bankruptcy, after a federal appeals court rejected an earlier bid.

Most litigation has been halted during bankruptcy proceedings, but U.S. Chief Bankruptcy Judge Michael Kaplan, who is overseeing LTL's Chapter 11, let Hernandez's trial proceed because he is expected to live only a short time.

Hernandez's form of mesothelioma is extremely rare, making his case different from the vast majority pending against J&J.

Asbestos plaintiffs are seeking to have LTL's latest bankruptcy filing dismissed. They have argued the filing was brought in bad faith to insulate the company from litigation.

J&J and LTL have argued that bankruptcy delivers settlement payouts to plaintiffs more fairly, efficiently and equitably than trial courts, which they have likened to a "lottery" in which some litigants get large awards and others nothing.

J&J said in bankruptcy court filings that the costs of its talc-related verdicts, settlements and legal fees have reached about $4.5 billion.

(Reporting By Brendan Pierson in New York; Editing by Will Dunham and Sandra Maler)

J&J Offered Talc Victims $4 Billion to Settle Claims Months Before Unit’s Bankruptcy

Jef Feeley
Thu, October 21, 2021, 

In this article:

(Bloomberg) -- Months before putting one of its units into bankruptcy, Johnson & Johnson offered $4 billion to settle with victims of its talc-based powder -- twice the amount it’s now proposing to pay through a forced resolution, according to people familiar with the matter.

The $4 billion offer was aimed at ending more than seven years of litigation over claims its iconic baby powder caused different types of cancers. J&J faces nearly 40,000 suits targeting its talc-based products, and has agreed to about $3.5 billion in settlements so far, according to court filings.

The world’s largest maker of health-care products wanted to split the $4 billion between trusts established to settle current and future suits, said the people, who asked not to be identified because they weren’t authorized to speak publicly. The trusts would have been created as part of the 2019 bankruptcy case filed by Imerys Talc America Inc., J&J’s talc miner, the people said. Representatives for J&J and Imerys declined to comment.

Lawyers representing a substantial number of talc plaintiffs rejected the $4 billion settlement offer as part of the Imerys case as too low, the people said. Plaintiffs would have each received about $40,000 for their cases on average, the people added.J&J last made the proposal in March. After it was rebuffed, the company’s attorneys told their counterparts to prepare for a bankruptcy filing by a J&J unit later in the year, the people said.

Bankruptcy Filing

On Oct. 14, a newly created J&J subsidiary filed for bankruptcy protection after arguing it was struggling to contain more than 38,000 suits blaming its iconic baby powder and other talc-based products of causing cancer. It’s planning to put $2 billion into a trust as part of the unit’s bankruptcy to resolve all of its talc liability.

J&J Baby Powder Bankruptcy Brings 50 Angry Lawyers to CharlotteIn a hearing this week in Charlotte, North Carolina, J&J lawyer Greg Gordon told U.S. Bankruptcy Judge Craig Whitley that the $2 billion is the company’s opening bid in a new effort to settle the talc litigation. Gordon said the $2 billion is not intended to “set a ceiling” for any talc accord.J&J officials argue they had no choice but to turn to the bankruptcy process to corral the litigation, warning it could take decades to resolve all the cases. The company has said it’s already paid $1 billion in talc-related legal fees over the last five years. Last year, it pulled the talc version of its baby powder off the U.S. and Canadian markets.The New Brunswick, New Jersey-based company proposed using the Imerys case for the deal because it’s currently battling with the talc miner over its claims that indemnity agreements put the baby-powder maker on the hook for Imerys’ talc exposure. J&J offered to take over Imerys’ talc defenses and negotiated settlements of suits against both companies, according to court filings.

Trust Fund

J&J wants to use federal laws allowing companies to file for bankruptcy to deal with litigation that poses a threat. Once in Chapter 11, companies can set up trusts to pay current and future claims and plaintiffs’ are required to participate in the process.Such trusts were made popular during decades-long litigation over asbestos, a cancer-causing material used as insulation in construction and car brake pads. Some talc plaintiffs contend J&J’s baby powder was tainted with asbestos, which can cause a variety of cancers. Others say talc -- by itself -- can cause ovarian cancer.Elizabeth Burch, a University of Georgia law professor who follows talc litigation, said $4 billion wouldn’t provide proper payouts for women fighting an often-fatal disease such as ovarian cancer.

“That wouldn’t even cover most people’s economic damages,” such as health costs and lost wages, she said.J&J’s decision to turn to bankruptcy is also questionable, Burch added.

“J&J is trying to cram down a settlement that will give these folks pennies-on-the-dollar for their damages,” she added.

The case is LTL Management LLC, 21-30589, U.S. Bankruptcy Court for the Western District of North Carolina (Charlotte).

CRIMINAL CAPITALI$M
J&J Renews Fight to Halt Baby Powder Suits Using Bankruptcy

Steven Church
Fri, November 5, 2021



(Bloomberg) -- Johnson & Johnson is seeking to revive its strategy for resolving tens of thousands of lawsuits alleging its baby powder caused ovarian cancer and other health problems in women.

The company ended a two-day trial in Charlotte, North Carolina, on Friday to decide whether to temporarily halt 38,000 lawsuits aimed at J&J and about 250 retailers and insurance companies. The judge said he would announce his ruling next week when J&J’s bankrupt unit returns to court.

Stopping the suits is a key part of J&J’s strategy to pay at least $2 billion to end all current and future claims related to baby powder and other talc-based products. To do so, J&J executed a legal strategy known as the Texas Two Step, creating a unit in Texas to hold all of the lawsuits, then transferring that unit to North Carolina and placing it in bankruptcy.

If the lawsuits continue “outside of this court, it will effectively end this reorganization in its infancy,” company attorney Greg Gordon said.

The company decided earlier this year to employ the tactic in order to deal with the lawsuits now, in one place, instead of spending millions every month for decades fighting in courts around the country, said John Kim, the J&J lawyer leading the company’s effort.

One of the main reasons: it often takes many years for some of the diseases caused by asbestos and other harmful substances allegedly in baby powder to develop, he told U.S. Bankruptcy Judge Craig Whitley.

“If litigation continues for the next 60 years,” and victims keep winning huge awards, “no company could survive that,” Kim said.

Day in Court

The move angered lawyers for alleged baby powder victims, who say J&J is trying to block cancer victims from having their day in court. The lawsuits against J&J’s bankrupt unit, LTL Management as well as the operating company that once sold baby powder in the U.S., have already been halted as part of standard Chapter 11 bankruptcy rules.

It also caught the attention of Congress. The House Judiciary Committee voted Wednesday to advance a bill banning the strategy.

Now, Whitley must decide whether to stop the cases against J&J as well. Under certain circumstances, a non-bankrupt parent company can benefit from a bankrupt unit’s lawsuit stay. Last month, Whitley declined to immediately protect J&J from the lawsuits and asked the company to return to present more evidence.

Next week LTL Management will be back in Charlotte for a hearing about whether its case should be moved to a different bankruptcy court. Last month, just days after the Chapter 11 was filed, Whitely said he was considering sending the case to Delaware or New Jersey, in part because he has so many other, big Texas Two Step cases.

At that hearing, Whitely will say if he intends to issue an injunction protecting J&J from the lawsuits while LTL is in bankruptcy.

Whether he moves the case “could have an impact on what we do with the injunction and how long it lasts,” Whitley said.

If Whitley refuses to halt the cases, J&J will lose a key benefit of the Texas Two Step. Under the strategy, which is being employed in Charlotte by several other companies, victims are pressured to negotiate a deal that would set up a trust fund to pay them, instead of allowing any lawsuits to continue.

J&J attorneys argue a bankruptcy trust fund is more fair because it gives all victims a payout, instead of subjecting some victims to court losses that pay nothing, while others win huge jury verdicts. Earlier this year, the company paid $2.5 billion to about 20 women who blamed J&J’s baby powder for their ovarian cancer. And some of the cases against J&J, whose stock is valued at more than $430 billion, are nearing a jury verdict.

A lawsuit halt would be an opening move in what is likely to be a long court fight. Whitely has said he may send the case to New Jersey or Delaware, where the Texas Two Step has never been tried.

The case is LTL Management LLC, 21-30589, U.S. Bankruptcy Court, Western District of North Carolina (Charlotte).

(Adds comment from judge about when he will rule in second paragraph, company attorney comment in fourth.)

The 'Texas two-step' is back as J&J tries to shed talc lawsuits for a third time


Alexis Keenan · Senior Legal Reporter
Sun, October 20, 2024 at 9:00 AM MDT 6 min read

Johnson & Johnson (JNJ) is taking a controversial legal argument to court for a third time in hopes of containing a barrage of lawsuits alleging its baby powder caused cancer.

Judges have denied J&J’s previous attempts to resolve such claims using a maneuver known as the "Texas two-step," where a company tries to use the bankruptcy of an affiliate or subsidiary to settle mass liabilities.

J&J's third attempt at bankruptcy protection involves a subsidiary called Red River Talc that would cap settlement damages at $8 billion. The company maintains that none of the talc-related claims against it have merit.

J&J’s CFO Joseph Wolk told Yahoo Finance this time the bankruptcy court result should be different, in part because a large majority of talc claimants signed on to the company's settlement offer.

“The difference this time … I'd say, is 83% of the claimants actually support the current offer that's on the table,” Wolk said. “So we think that's something that was not present in the prior filings.”

The current proposal seeks to resolve all current and future claims related to ovarian cancer alleged to be caused by the company's cosmetic talc.

But a plaintiffs' lawyer who represents 11,434 of approximately J&J's roughly 100,000 talc claimants said the company's figure is inflated, and its latest bankruptcy petition is "fraught with problems."

The lawyer, Andy Birchfield of Beasley Allen, said J&J "stuffed the ballot box" in a tally held to determine the percentage of plaintiffs on board with J&J's latest settlement proposal.

A container of Johnson & Johnson baby powder is displayed in 2023 in San Anselmo, Calif. (Justin Sullivan/Getty Images) · Justin Sullivan via Getty Images

Birchfield said in addition to counting no votes as votes in support of the deal, J&J counted votes from claimants who should not have been included because they have not been diagnosed with disease and therefore have only non-compensable claims.

The lawyer said 69 of his clients voted in favor, and his firm has asked the court for a re-tabulation.

"We're confident that J&J’s 83% number that it floated … that that's wrong," Birchfield said. "Once those [inaccurate votes] are sifted out, I don't know where it will be, but it'll be significantly less than 70%."


The claims being made by both sides set up a new legal battle that will now unfold inside a Houston bankruptcy court.

J&J's worldwide vice president of litigation Erik Haas told Yahoo Finance that Beasley Allen "misstates the record in a failed attempt to explain away the blatantly false certification submitted by its partner Andy Birchfield."


Haas said Birchfield falsely certified under oath that he contacted and secured informed consent to oppose the plan from claimants who affirmatively voted in favor of the deal that was certified by an independent claims administrator.

"We look forward to the full discovery of this malfeasance before the Bankruptcy Court in Houston,” Hass said.

Earning the support of at least 75% of claimants may be an important threshold for J&J.

Bankruptcy courts have permitted companies to move forward with resolving large numbers of injury claims through bankruptcy when at least 75% of the outstanding creditors, including claimants, agree to the deal.
How it works

The "Texas two-step" strategy takes advantage of state laws that allow for the transfer of liabilities through a so-called divisive merger, which is a way to separate a company's operations into discreet business entities.

Texas was the first state to allow this, in 2006, which helps explain why the strategy came to be known as the "Texas two-step."

The first step is the division. The second is that the liability-retaining entity gets limited funding from its solvent parent, files for bankruptcy, and then manages mass tort litigation with the limited funds.


The benefits are that further litigation is paused, capping costs, and the assets of the solvent company are walled off from the reach of plaintiffs. The hope is that the solvent parent can also absolve itself of secondary liability for the claims.

But critics of the strategy see it as a subversion of the US Bankruptcy Code. Courts have become increasingly skeptical of attempts by companies to use bankruptcy court law to protect assets from plaintiffs.

Aden McCracken Tyrone of Pennsylvania holds a sign in honor of his parents outside of the Supreme Court in December as the Supreme Court heard arguments regarding a nationwide settlement with Purdue Pharma, the manufacturer of OxyContin. (Michael A. McCoy/For The Washington Post via Getty Images) · The Washington Post via Getty Images

In June, the US Supreme Court took a step that will make it more difficult for companies to do so in the future.

In a 5-4 decision, the court held that billionaire members of the Sackler family, longtime owners of the now-bankrupt opioid maker Purdue Pharma, could not shield their personal assets from opioid claims using the corporation's bankruptcy proceedings.

The Sacklers, the court said, engaged in a "milking program" by withdrawing from Purdue approximately $11 billion — roughly 75% of the firm’s total assets.


The court said that no provision within the US Bankruptcy Code permits the type of agreement that the Sacklers and the company tried to reach by limiting plaintiff recoveries to a $6 billion settlement fund.

Other attempts by companies like 3M, Avon, and Georgia Pacific to use the two-step strategy have had varying outcomes. Those inconsistent court decisions are leading some legal experts to predict that the US Supreme Court may review the tactic's legality.
'No financial distress'

In J&J's latest attempt at the two-step, it is asking for the latest vote from claimants to support a “channeling injunction.”

That would cap its liability for all existing and future talc claims at the $8 billion it agreed to place in a settlement trust. J&J agreed to fund the proposed settlement trust over 25 years.

Birchfield expects J&J's latest bankruptcy attempt could run into roadblocks no matter how many claimants vote in favor of a broad settlement because the two-step would strip especially future claimants from their constitutional rights to demand that J&J face jury trials.

"Our view is J&J isn’t entitled to bankruptcy relief because there is no financial distress,” he said. “They’re a $400 billion company."


“If they would pay reasonable compensation and do it on reasonable terms, they could put this behind them,” Birchfield added.

J&J's Wolk said its proposed bankruptcy would provide more recourse to claimants and more quickly resolve cases that would take years to be adjudicated.

Juries have handed down multimillion-dollar awards related to talc litigation risks.

On Tuesday, a Connecticut jury returned a $15 million verdict in favor of a man who said the company's talc-based powder caused him to develop mesothelioma, a cancer that impacts lung and other tissue.

The jury also held that J&J should pay punitive damages to punish it for including talc in its products.

Yahoo Finance Senior healthcare reporter Anjalee Khemlani contributed to this report.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.

CRIMINAL CAPITALI$M
Factbox-J&J's legal strategy for Baby Powder, talc liability

Fri, November 12, 2021
By Mike Spector

NEW YORK (Reuters) - Johnson & Johnson on Friday said it would split into two companies, hiving off its consumer health division that sells Band-Aids and Baby Powder from its pharmaceuticals and medical devices business.

The historic breakup comes as J&J faces nearly 40,000 lawsuits alleging its Baby Powder and other talc products contained asbestos and caused cancer, which the company denies. The plaintiffs include women suffering from ovarian cancer and others battling mesothelioma.

Chief Executive Alex Gorsky told The Wall Street Journal that the talc litigation did not play a role in the decision to break up J&J. The company is aiming to complete the separation in 18 to 24 months.

In October, J&J undertook a separate corporate reshuffling aimed squarely at tackling its talc liabilities. Here is what J&J did:

TEXAS TWO-STEP

Using Texas’s divisional merger law, the company's Johnson and Johnson Consumer Inc business split in two, offloading talc liabilities into a newly created subsidiary. The subsidiary, called LTL Management LLC, then moved to North Carolina.


Within days of those moves, LTL filed for bankruptcy protection in Charlotte. In legal circles, the series of transactions is known as a “Texas two-step.”

J&J has offered to contribute $2 billion toward resolving remaining talc litigation as part of the newly created subsidiary’s bankruptcy reorganization.

CONTROVERSIAL LEGAL MOVE

Earlier this week, a North Carolina bankruptcy judge overseeing the proceedings transferred the case to New Jersey, where J&J is headquartered. He also halted talc litigation against J&J for 60 days, extending to the healthcare conglomerate a legal shield already provided to LTL, the entity under bankruptcy protection.


Plaintiffs’ lawyers have decried J&J’s latest move to grapple with talc liabilities, accusing the financially healthy company of manipulating the bankruptcy system without filing for Chapter 11 protection itself.

In Washington, Congressional Democrats have introduced legislation that would ban the use of divisional mergers to offload liabilities as J&J did, and also limit the ability of companies that have not filed for bankruptcy from obtaining legal protections extended to those under Chapter 11 court protection.

J&J, a blue-chip company with a market value exceeding $400 billion, has spent close to $1 billion defending against the talc litigation. Settlements and verdicts have cost the New Brunswick, New Jersey-based company about $3.5 billion more, although it has prevailed in some cases.

REUTERS INVESTIGATION

A 2018 Reuters investigation found J&J knew for decades that asbestos, a known carcinogen, lurked in its Baby Powder and other cosmetic talc products. The company stopped selling Baby Powder in the U.S. and Canada in May 2020, in part due to what it called “misinformation” and “unfounded allegations” about the talc-based product. J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.

In June, the U.S. Supreme Court declined to hear J&J’s appeal of a Missouri court ruling that resulted in $2 billion of damages awarded to women alleging the company’s talc caused their ovarian cancer.


(Reporting by Mike Spector; additional reporting by Maria Chutchian; editing by Edward Tobin)

Company at heart of J&J vaccine woes has series of citations


BY RICHARD LARDNER AND LINDA JOHNSON ASSOCIATED PRESS
MARCH 31, 2021 

FILE - In this March 25, 2021 file photo, a box of the Johnson & Johnson COVID-19 vaccine is shown in a refrigerator at a clinic in Washington state. A batch of Johnson & Johnson’s COVID-19 vaccine failed quality standards and can’t be used, the drug giant said late Wednesday, March 31, 2021. The drugmaker didn’t say how many doses were lost, and it wasn’t clear how the problem would impact future deliveries. (AP Photo/Ted S. Warren) TED S. WARREN AP


The company at the center of quality problems that led Johnson & Johnson to discard an unknown amount of its coronavirus vaccine has a string of citations from U.S. health officials for quality control problems.

Emergent BioSolutons, a little-known company at the center of the vaccine supply chain, was a key to Johnson & Johnson's plan to deliver 100 million doses of its vaccine to the U.S. by the end of May. But the company has been cited repeatedly by the Food and Drug Administration for problems such as poorly trained employees, cracked vials and mold around one of its facilities, according to records obtained by The Associated Press through the Freedom of Information Act. The records cover inspections at Emergent facilities since 2017.

Johnson & Johnson said Wednesday that a batch of vaccine made by Emergent at its Baltimore factory, known as Bayview, can't be used because it didn't meet quality standards. It wasn't clear exactly how many doses were involved or how the problem would affect future delivers of J&J's vaccine. The company said in a statement it was still planning to deliver 100 million doses by the end of June and was “aiming to deliver those doses by the end of May.”


J&J locked arms with Emergent in April 2020, enlisting the lesser-known company to manufacture the vaccine J&J was developing with federal funding. At the time, Emergent’s Bayview facility wasn’t scaled for making millions of doses of a potential COVID-19 vaccine, according to the FDA records that describe the plant as a contract testing laboratory that “did not manufacture products for distribution.” Upgrades in technology and personnel were required before Bayview could begin making what’s known as “drug substance” material for the vaccine, a two-month process during which the required biological cells are grown.

The FDA inspected Emergent’s Bayview plant in April 2020, just as the agreement with J&J was being announced. The federal agency criticized the company for problems with its testing of a potential treatment for anthrax, according to the records obtained by the AP. The FDA’s lead investigator cited the company for failing to train employees “in the particular operations they perform as part of their function and current good manufacturing practices.”

On the same day, Johnson & Johnson, in a separate news release, heralded its partnership with Emergent as a step toward the pharmaceutical giant’s goal of supplying more than 1 billion doses of the vaccine globally by the end of 2021.

Other problems cited by the FDA during the April 2020 inspection included failures by the Bayview plant “to ensure that electronically held data generated during analytical testing” of material “was protected from deletion or manipulation.” The FDA’s lead investigator, Marcellinus Dordunoo, wrote that Emergent hadn’t investigated what he described as “data integrity concerns.”

The inspection was the most recent in a series of critical reports from the FDA about Emergent, including one following a December 2017 inspection at a plant in Canton, Massachusetts, in which the FDA said the company hadn’t corrected “continued low level mold and yeast isolates” found in the facility. Nearly a year later, agency investigators questioned why Emergent had “an unwritten policy of not conducting routine compliance audits” at a separate plant in Baltimore, known as Camden, where an anthrax vaccine is filled into vials.

Emergent’s revenues skyrocketed during the Trump administration, jumping from around $523 million in 2015 to more than $1.5 billion in 2020. The company has invested heavily in lobbying the federal government, according to disclosure records, which show the company spent $3.6 million on lobbying in 2020 alone.

Emergent is one of about 10 companies that Johnson & Johnson is using to speed up manufacturing of its recently approved vaccine, the company said. The Bayview factory where the tainted vaccine ingredient was found had not yet been approved by the FDA, so no vaccine in circulation is affected. Emergent declined to comment.

President Joe Biden has pledged to have enough vaccines for all U.S. adults by the end of May. The U.S. government has ordered enough two-dose shots from Pfizer and Moderna to vaccinate 200 million people to be delivered by late May, plus the 100 million single-dose shots from J&J.

A federal official said Wednesday evening the administration’s goal can be met without additional J&J doses.

A J&J spokesman said earlier Wednesday that the company met the end-of-March goal, and the Centers for Disease Control and Prevention’s online vaccine tracker showed J&J had provided about 6.8 million doses to the U.S. vaccine effort. J&J has been shipping finished vaccines from its factory in the Netherlands to the U.S.

J&J said it was putting more of its manufacturing and quality experts inside Emergent’s factory to supervise production of the COVID-19 vaccine, a move meant to enable delivery of an additional 24 million vaccine doses through April.

J&J said it still expects to deliver more than 1 billion vaccine doses globally by the end of the year.

The J&J vaccine has been viewed as crucial for vaccination campaigns around the world, because only one shot is required and it can be shipped and stored at standard refrigeration temperatures, unlike some other vials that must be kept frozen. The company also has pledged to sell the vaccine without a profit, but only during the pandemic emergency.

The problem with the vaccine batch was first reported by The New York Times. The FDA said it was aware of the situation but declined further comment.

___

Johnson reported from Fairless Hills, Pennsylvania, and Lardner from Washington. Associated Press writers Matt Perrone and Zeke Miller in Washington and Jason Dearen in New York contributed to this report.

___



Contact AP’s global investigative team at Investigative@ap.org. Follow Richard Lardber on Twitter at @RPLardner.

The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Department of Science Education. The AP is solely responsible for all content.




PROMOTED

Johnson & Johnson Puts Talc Injury Claims Into Bankruptcy

“Their decision to file this amounts to corporate fraud at its worst”

Jeremy Hill, Steven Church and Jef Feeley
Thu., October 14, 2021


(Bloomberg) -- Johnson & Johnson is turning to bankruptcy court in a controversial attempt to resolve billions of dollars in legal liabilities tied to its talc products, placing a new subsidiary holding the claims into Chapter 11 protection.

The unit, LTL Management LLC, filed for bankruptcy in Charlotte, North Carolina, on Thursday, listing as much as $10 billion of assets and up to $10 billion in liabilities, according to court documents. Johnson & Johnson itself did not file for bankruptcy.

“We are taking these actions to bring certainty to all parties involved in the cosmetic talc cases,” Michael Ullmann, executive vice president of Johnson & Johnson, said in a statement. “While we continue to stand firmly behind the safety of our cosmetic talc products, we believe resolving this matter as quickly and efficiently as possible is in the best interests of the Company and all stakeholders.”

J&J is the latest profitable company to try to use bankruptcy court to resolve asbestos-related claims instead of fighting lawsuits one case at a time in courts around the country. Lawyers who represent talc victims have been so concerned about J&J’s legal plans that they tried, unsuccessfully, to have a federal judge in Delaware block any future corporate restructuring.

‘It’s Laughable’

“Their decision to file this amounts to corporate fraud at its worst,” said Joseph Satterley, a California-based plaintiffs’ lawyer currently in the midst of a talc trial against J&J in Oakland. “This is a company that had a $472 billion market cap as of August of this year. There’s no way this litigation presents a material threat to this company. It’s laughable.”

Under federal law, a company filing for bankruptcy protection can have all litigation against it put on hold while officials come up with a plan to resolve the Chapter 11 case. In asbestos bankruptcies, the goal is to set up a trust fund big enough to pay off all current and future cases. The company then forces all asbestos victims to apply to the trust for compensation instead of fighting in court.

“This stinks,” Andy Birchfield, an Alabama-based plaintiffs’ lawyer representing women who blame J&J’s talc-based powders for their ovarian cancers, said in a statement. “They claim their product is safe and then attempt to hide behind bankruptcy. J&J can run but it can’t hide.”

Texas Two Step

The strategy J&J is using is known in legal circles as the Texas Two Step because under a business-friendly law in that state, a company can conduct a so-called divisive merger to break itself into two parts. One part has nearly all the operations and assets, while the other gets all of the asbestos liabilities. The asbestos company then files for bankruptcy and forces everyone suing to negotiate a settlement.

Lumber giant Georgia-Pacific was one of the first companies to use the strategy when it put its Bestwall unit into bankruptcy in 2017. The company is still fighting asbestos victims in that Chapter 11 case.

Johnson & Johnson is fighting nearly 35,000 suits blaming its iconic baby powder and other talc products for causing cancer, according to a July securities filing. The number of suits increased 28% from last year and the company said in the filing that new lawsuits continue to appear.

Earlier this year, J&J was forced to pay about $2.5 billion to 20 women after the Missouri Supreme Court and U.S. Supreme Court refused to throw out a St. Louis jury’s finding that J&J’s baby powder was contaminated with cancer-causing asbestos.

Nonetheless, J&J executives have said that the company had “strong legal grounds to contest” its losses.

J&J has settled some cases during the more than seven-year litigation over its baby powder, which the company withdrew from the U.S market last year.

To get a handle on the talc litigation, J&J will establish a $2 billion trust to pay amounts the bankruptcy court determines its talc-claim subsidiary owes, and will divert royalty payments worth $350 million to the unit.

The case is LTL Management LLC, 21-30589, U.S. Bankruptcy Court for the Western District of North Carolina (Charlotte).

Johnson & Johnson is pushing to settle baby powder cases linked to asbestos

Jef Feeley, Bloomberg News on Dec 4, 2023


Johnson & Johnson is making a push to resolve lawsuits claiming its talc-based Baby Powder causes cancer linked to asbestos exposure to avoid facing some jury trials next year, according to people familiar with the effort.

A trio of law firms have reached agreements for settlements covering about 100 cases, said the people, who declined to be identified because they weren’t authorized to speak publicly. The financial size of the accords are being kept private, the people added.

The deals may be mentioned Tuesday as part of J&J’s investor presentation at the New York Stock Exchange if company officials update shareholders about the plan for corralling the decadelong talc litigation, the people said. The session’s main focus is the company’s long-term growth outlook and product pipeline.

The company is striving to find a way to resolve all current and future baby powder cases after a judge nixed its attempt to settle them for $9 billion as part of a unit’s bankruptcy filing. The deals are part of the manufacturer’s multipronged strategy to deal with the lawsuits, which have created a drag on its shares.

J&J declined to comment.

‘Hammered by Juries’

“It looks like they are finally stepping up to the plate and acknowledging they are going to have to settle cases to be done with this,” said Carl Tobias, a University of Richmond professor who teaches mass-tort law. “Ridding themselves of trial settings can only work in their favor since they’ve been getting hammered by juries.”

The New Brunswick, New Jersey-based company pulled its talc-based powders off the market in the United States and Canada in 2020, citing slipping sales. The world’s largest maker of health care products replaced talcum with a cornstarch-based version. J&J vowed to remove all its baby powders containing talcum powder worldwide by the end of this year.

J&J faces a spate of jury trials early next year over allegations that its executives knew since the early 1970s that talc contained trace amounts of asbestos, which can cause a cancer called mesothelioma, but failed to alert consumers or regulators. J&J contends that its talc-based products don’t cause cancer and it has marketed Baby Powder appropriately for more than 100 years.

The company faces more than 50,000 suits accusing it of concealing baby powder’s cancer risk to protect its iconic product. Most of those claims are from women with ovarian cancer. The majority of the cases are consolidated before a federal judge in New Jersey.

Inventory Settlements

J&J has reached agreements to do so-called inventory settlements with law firms such as Kazan, McClain Satterley & Greenwood, and Levy Konigsberg to resolve all their mesothelioma cases, the people said. The company has come to similar terms with the Motley Rice firm, the people added.

Joe Satterley, a Kazan lawyer who has won and settled multiple talc cases against J&J, declined to comment on whether he’s settled his inventory of mesothelioma cases. Joe Rice, Motley Rice’s co-founder, also declined to comment. Moshe Maimon, a Levy Konigsberg lawyer who has won talc cases at trial, didn’t immediately respond late Monday to phone and email messages seeking comment.

The settlements resolved a case that was already on trial in state court in Oakland, California, in November and will head off trials that were supposed to start in January and March in state court in New Jersey, the people said. J&J still faces a mesothelioma case in state court in Minnesota later this month, the people added.

Besides getting trials off the calendar, J&J is trying to clear the way for a third bankruptcy filing to resolve the talc litigation in its entirety. Erik Haas, J&J’s lawyer overseeing the talc litigation, said in an October earnings call that the company was “pursuing a consensual resolution of the talc claims through another bankruptcy.”

The consolidated case is In Re Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Liability Litigation, 16-md-2738, U.S. District Court for the District of New Jersey (Trenton).


©2023 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.

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CRIMINAL CAPITALI$M BIG PHARMA
Company producing J&J vaccine had history of violations

The company at the centre of quality problems that led Johnson & Johnson to discard 15 million doses of its coronavirus vaccine has a string of citations from U.S. health officials for quality control problems.

© Provided by The Canadian Press

Emergent BioSolutions, a little-known company vital to the vaccine supply chain, was a key to Johnson & Johnson's plan to deliver 100 million doses of its single-shot vaccine to the United States by the end of May. But the Food and Drug Administration repeatedly has cited Emergent for problems such as poorly trained employees, cracked vials and problems managing mould and other contamination around one of its facilities, according to records obtained by The Associated Press through the Freedom of Information Act. The records cover inspections at Emergent facilities since 2017.

Johnson & Johnson said Wednesday that a batch of vaccine made by Emergent at its Baltimore factory, known as Bayview, cannot be used because it did not meet quality standards. It was unclear how the problem would affect future deliveries of J&J's vaccine. The company said in a statement it was still planning to deliver 100 million doses by the end of June and was “aiming to deliver those doses by the end of May.”

“Human errors do happen," Dr. Anthony Fauci, the nation’s top infectious disease expert, said Thursday in an interview on CBS' “This Morning.” "You have checks and balances. ... That’s the reason why the good news is that it did get picked up. As I mentioned, that’s the reason nothing from that plant has gone into anyone that we’ve administered to.”

White House press secretary Jen Psaki said Thursday that none of the J&J vaccine doses on the market are affected and the company was on track to deliver 24 million doses in April and 100 million doses by the end of May.

“These are doses that the U.S. government has purchased, but we also have plenty of doses from Pfizer and Moderna, regardless, Psaki said.”

J&J locked arms with Emergent in April 2020, enlisting the lesser-known company to manufacture the vaccine J&J was developing with federal money. At the time, Emergent’s Bayview facility wasn’t scaled for making millions of doses of a potential COVID-19 vaccine, according to the FDA records, which describe the plant as a contract testing laboratory that “did not manufacture products for distribution.” Upgrades in technology and personnel were required before Bayview could begin making what is known as “drug substance” material for the vaccine, a two-month process during which the required biological cells are grown.

The FDA inspected Emergent’s Bayview plant in April 2020, just as the agreement with J&J was being announced. The federal agency criticized Emergent for problems with its testing of a potential treatment for anthrax, according to the records obtained by the AP. The FDA’s lead investigator cited the company for failing to train employees “in the particular operations they perform as part of their function and current good manufacturing practices.”

On the same day, Johnson & Johnson, in a separate news release, heralded its partnership with Emergent as a step toward the pharmaceutical giant’s goal of supplying more than 1 billion doses of the vaccine globally by the end of 2021.

But the FDA’s inspection of Emergent’s Bayview plant had faulted the company for a series of quality control shortcomings, according to the records. Although the inspection was not triggered by work on a COVID-19 vaccine, the issues listed by agency inspectors stand out due to the large role Emergent would soon have to combat the pandemic.

The FDA criticized the Bayview plant for failing to ensure that electronic data generated through testing of drug ingredients “was protected from deletion or manipulation.” A closer review found 202 deletions and 543 reprocessed files, yet the company had not investigated how those alterations had occurred or their possible impact, according to the records. The FDA’s lead investigator, Marcellinus Dordunoo, wrote that Emergent had not investigated what he described as “data integrity concerns.”

Emergent also did not follow proper testing and lab procedures at Bayview, the FDA said, noting that “deviations from test methods are not investigated, and are manually corrected days after performance, with no supporting data or documented justification.”

The FDA also criticized Emergent for carelessness in the handling of rejected materials in the Bayview plant. An inspector observed items in a “reject cage” that did not have reject labels, and wrote that “separate or defined areas to prevent contamination or mix-ups are deficient.”

The inspection was the most recent in a series of critical reports from the FDA about Emergent, including one following a December 2017 inspection at a plant in Canton, Massachusetts, in which the FDA said the company had not corrected “continued low level mould and yeast isolates” found in the facility.

In September 2018, agency investigators questioned why Emergent had “an unwritten policy of not conducting routine compliance audits” at a separate plant in Baltimore, known as Camden, where an anthrax vaccine, BioThrax, is filled into vials.

A few months earlier, FDA inspectors noted that the company's processes there were flawed. “Your firm received 3 complaints for residue on the outside of the vials for 3 different lots,” the FDA's inspection report said. Tests on that residue confirmed it was vaccine, according to the June 2018 report.

The agency, in another finding from that inspection, noted Emergent's ongoing problems managing contamination at the Camden facility: “Procedures designed to prevent microbiological contamination of drug products purporting to be sterile are not adequately established and followed.” FDA's inspectors also noted that Emergent staff filling vials of vaccine held “their hands directly above open vials” in a way that violated sterility safeguards.

The FDA declined repeated requests to discuss the inspections at Emergent’s facilities. A spokesman said the agency “cannot comment on any particular company or any potential or ongoing compliance matters.”

In an emailed statement, Emergent spokesman Matt Hartwig said the company’s “rigorous quality checks” identified a batch of drug substance that did not meet its standards.

“Discarding a batch of bulk drug substance, while disappointing, does occasionally happen during vaccine manufacturing, which is a complex and multi-step biological process,” he said.

Emergent’s revenues skyrocketed during the Trump administration, from about $523 million in 2015 to more than $1.5 billion in 2020. Emergent has invested heavily in lobbying the federal government, according to disclosure records that show the company spent $3.6 million on lobbying in 2020 alone.

Emergent is one of about eight companies that Johnson & Johnson is using to speed up manufacturing of its recently approved coronavirus vaccine, the company said. The Bayview factory where the tainted vaccine ingredient was found had not yet been approved by the FDA, so no vaccine in circulation is affected.

President Joe Biden has pledged to have enough vaccines for all U.S. adults by the end of May. The U.S. government has ordered enough two-dose shots from Pfizer and Moderna to vaccinate 200 million people to be delivered by late May, plus the 100 million single-dose shots from J&J.

A federal official said Wednesday evening that the administration’s goal can be met without additional J&J doses.

A J&J spokesman said earlier Wednesday that the company met the end-of-March goal. The Centers for Disease Control and Prevention’s online vaccine tracker showed J&J had provided about 6.8 million doses to the U.S. vaccine effort. J&J has been shipping finished vaccines from its factory in the Netherlands to the U.S.

J&J said it was putting more of its manufacturing and quality experts inside Emergent’s factory to supervise production of the COVID-19 vaccine, a move meant to enable delivery of an additional 24 million vaccine doses through April.

J&J said it still expects to deliver more than 1 billion vaccine doses globally by the end of the year.

The J&J vaccine has been viewed as crucial for vaccination campaigns around the world because only one shot is required and it can be shipped and stored at standard refrigeration temperatures, unlike some other vials that must be kept frozen. The company also has pledged to sell the vaccine without a profit, but only during the pandemic emergency.

The problem with the vaccine batch was first reported by The New York Times. The FDA said it was aware of the situation but declined further comment.

___

Lardner reported from Washington, Dearen from Gainesville, Florida, and Johnson from Fairless Hills, Pennsylvania. Associated Press writers Matthew Perrone and Zeke Miller in Washington contributed to this report.

___

Contact AP’s global investigative team at Investigative@ap.org. Follow Richard Lardner on Twitter at @RPLardner. Follow Jason Dearan on Twitter at @JHDearen and Linda Johnson at @LindaJ_onPharma

___

This story has been corrected to show the name of the company is Emergent BioSolutions, not Emergent BioSolutons.

Richard Lardner, Jason Dearen And Linda A. Johnson, The Associated Press

Big Pharma's Johnson & Johnson under investigation in South Africa over 'excessive' drug prices

GERALD IMRAY
Fri, September 15, 2023 

FILE - A Johnson & Johnson logo on the exterior of a first aid kit in Walpole, Mass., Feb. 24, 2021. South Africa-Johnson & Johnson-Investigation. U.S.-based pharmaceuticals company Johnson & Johnson is being investigated in South Africa for allegedly charging “excessive” prices for a key tuberculosis drug. The government-appointed commission that regulates business practices in the country announced the investigation on Friday, Sept. 15, 2023. 

(AP Photo/Steven Senne, File) 

CAPE TOWN, South Africa (AP) — U.S.-based pharmaceuticals company Johnson & Johnson is being investigated in South Africa for allegedly charging “excessive” prices for a key tuberculosis drug, the country's antitrust regulator said Friday.

J&J's Belgium-based subsidiary Janssen Pharmaceuticals is also under investigation, South Africa's Competition Commission said.

The commission, which regulates business practices, said it opened the investigation this week based on information that the companies “may have engaged in exclusionary practices and excessive pricing” of the tuberculosis drug bedaquiline, which is sold under the brand name Sirturo.

The Competition Commission declined to give further details of its investigation, but health advocacy groups in South Africa say the country is being charged more than twice as much for bedaquiline than other middle- and low-income countries.

Bedaquiline was approved in 2012 and is used to treat drug-resistant TB. It is desperately-needed by South Africa, where the infectious disease is the leading cause of death, killing more than 50,000 people in 2021. South Africa has more than 7 million people living with HIV, more than any other country in the world. The World Health Organization says that nearly one-third of deaths among people who have HIV/AIDS are due to tuberculosis.

Globally, TB cases increased in 2021 for the first time in years, according to the WHO.

J&J has previously faced calls to drop its prices for bedaquiline and said last month that it would provide a six-month course of the drug for one patient through the Stop TB Partnerships Global Drug Facility at a cost of $130.

The South African government purchases its bedaquiline directly from J&J and Janssen and not through the Stop TB facility and was paying around $280 for a six-month course for a patient, according to Professor Norbert Ndjeka, who leads the national department of health's TB control and management.

Ndjeka said that South Africa had recently concluded a new two-year deal with J&J for bedaquiline at a slightly higher price than $280 per course, according to a report on the News24 website.

The Competition Commission said it was confirming the investigation due to heightened media interest, but would not respond to requests for comment or more information about the probe.

It comes a week after a health advocacy group released details of South Africa's COVID-19 vaccine purchase contracts with numerous pharmaceutical companies, including J&J and U.S.-based Pfizer. They were obtained after the group, the Health Justice Intiative, won a freedom of information case in court.

The group says the contracts show J&J charged South Africa 15% more per vaccine dose than it charged the much richer European Union. Pfizer charged South Africa more than 30% more per vaccine than it charged the African Union, even as South Africa struggled to acquire doses while having more COVID-19 infections than anywhere else on the continent.

In the contract, South Africa was required to pay Pfizer $40 million in advance for doses, with only $20 million refundable if the vaccines weren't delivered, the Health Justice Initiative said. J&J also required a non-refundable downpayment of $27.5 million.

Pfizer reported record revenues of $100.3 billion in 2022. J&J made $94.9 billion in sales last year.