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J&J Legal Battles

Product-liability lawsuits against pharmaceutical companies in the US are a terrible scourge. Fuelled by idiot juries awarding gargantuan punitive awards and contingency lawyers chasing big paydays, the number of plaintiffs keeps rising.

Our recommended stock and pharma giant, Johnson & Johnson (J&J), has spent $900 million on litigation in the first half of this year, according to an article that I read recently on Axios.

J&J is fighting thousands of legal battles over the safety of its prescription drugs and medical devices. A jury recently awarded $8 billion to a man who claimed he got enlarged breasts from taking the J&J's antipsychotic drug Risperdal. An Oklahoma judge ruled that J&J has to pay $572 million for its role in creating the opioid crisis and billions more could be on the line for the company in the 2 000 other opioids cases. J&J paid $1 billion earlier this year to settle cases tied to defective metal hip implants.

A trial is underway in California over J&J's allegedly faulty pelvic mesh devices. The Federal Trade Commission is investigating whether J&J's contracting practices for Remicade, a treatment for autoimmune and inflammatory diseases, violate federal antitrust laws. The company is appealing a $4.7 billion verdict tied to claims that its talc powder caused cancer in women.



This sounds like a lot of problems, so why do we still own the stock? First of all, J&J is very big, making a profit of $9.4 billion in the first half of this year. So it can afford to take some hits. Secondly, it is fighting these claims because many of them are spurious, and it would be a travesty to settle early. There is upside in the share price if they win some big ones, once the cases come in front of sensible judges who actually look at the science.

J&J is approaching the litigation "with an eye to managing this onslaught overall, and not creating false incentives for lawyers to file even more claims that are marginal at best," said John Beisner, a partner with Skadden, Arps, Slate, Meagher & Flom LLP who is defending J&J in litigation over talc and some other products.

Johnson & Johnson reports its third quarter earnings later today, before the opening bell.

More here in the Wall Street Journal (may require a log in process): Johnson & Johnson's Legal Challenges Mount


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