Johnson & Johnson: A Long Way from Tylenol

If you read almost any public relations textbook that mentions crisis management, the odds are it will include praise for how Johnson & Johnson handled its Tylenol product tampering in 1982.  Johnson & Johnson made an immediate recall showing their concern for customers and claimed the actions was guided by its Credo.  Probably no other crisis management case has been used more often as a shining example of effective crisis management.  Experts warn that organizations learn very little from their crisis management efforts.  Johnson and Johnson seem to be proving that observation in how poorly they have handled not one but a series of product recalls in 2010 and 2011.  The situation became so problematic that the Federal government has essentially taken oversight over three Johnson and Johnson facilities in March of 2011.  More specifically, those facilities are part of McNeill-PPC, Inc., a subsidiary of Johnson & Johnson.  The government continues its investigation into the product defects that are at the center of the recalls and have been critical of how slowly Johnson & Johnson has acted in the recalls.  The products in the recall include a number of children’s products  You can visit the recall web site to learn more about the number and types of products involved in the recall.  Click here to see a copy of the consent decree.

This is a serious situation when the Food and Drug Administration (FDA) takes oversight over a company’s operations.  The action was taken because the FDA found continuing problems at the facilities and did not think Johnson & Johnson were capable of resolving the problems on their own.  Moreover, the FDA is saying the facilities were not complying with federal laws.  These are serious concerns for products that people ingest and believe will make them feel better rather than worse.  The recalls center on quality and effectiveness of the products rather than the products being a danger to those who take them.  As Douglas Steam from the FDA noted:  “We’ve had a long engagement with McNeil over the last year with regard to their quality system.  We think this represents necessary important steps to assuring quality across the board.”

Here is part of the news release from the FDA:

The U.S. Food and Drug Administration announced today that a consent decree of permanent injunction has been filed against McNeil-PPC and two of its officers for failing to comply with current good manufacturing practice requirements as required by federal law. The action prevents McNeil, a subsidiary of Johnson & Johnson, from manufacturing and distributing drugs from its Fort Washington, Pa., facility until the FDA determines that its operations are compliant with the law.

McNeil Consumer Healthcare Division’s Vice President of Quality and the company’s Vice President of Operations for OTC Products also were named defendants in the consent decree, filed with the U.S. District Court for the Eastern District of Pennsylvania in Philadelphia on March 10, 2011.

The decree also requires McNeil to adhere to a strict timetable to bring its facilities in Las Piedras, Puerto Rico, and Lancaster, Pa., into compliance.

Dara A. Corrigan, the FDA’s associate commissioner for regulatory affairs said, “This FDA drug safety enforcement action is aimed at protecting the public health.”

FDA inspections at McNeil’s Fort Washington, Las Piedras, and Lancaster facilities from 2009 to 2010 found violations of the Federal Food, Drug, and Cosmetic Act. The Act requires drug companies to follow current good manufacturing practice requirements.

“This is a strong, but necessary, step to ensure that the products manufactured by this company meet federal standards for quality, safety and purity,” said Deborah Autor, director of the Office of Compliance in the FDA’s Center for Drug Evaluation and Research.

Manufacturing deficiencies at McNeil’s facilities have resulted in several extensive recalls, including an April 30, 2010, recall of lots of several liquid products such as children’s Tylenol, Motrin, Zyrtec, and Benadryl products. In January 2010, the FDA issued a Warning Letter to McNeil’s Consumer Healthcare Division regarding violations identified at McNeil’s Las Piedras facility.

Here is sample from the Johnson & Johnson news release:

FORT WASHINGTON, Pa., March 10, 2011 /PRNewswire/ — McNEIL-PPC, Inc. announced today that the company has finalized the terms of a Consent Decree of Permanent Injunction (Consent Decree) with the U.S. Food and Drug Administration (FDA) for manufacturing facilities operated by the McNeil Consumer Healthcare Division of McNEIL-PPC, Inc. in Las Piedras, PR, Fort Washington, PA, and Lancaster, PA. The Consent Decree is subject to approval by the United States District Court for the Eastern District of Pennsylvania.

In July 2010, McNeil submitted to the FDA and has been diligently implementing a Comprehensive Action Plan (CAP) to improve quality systems at its U.S. manufacturing facilities. McNeil believes that the terms of the Consent Decree recognize the progress made in remediation efforts to date, and are consistent with the commitments the company has made as part of the CAP. The Consent Decree allows McNeil to continue the work already initiated under the CAP, and identifies procedures that will help provide additional assurance of product quality to the FDA.

Under the terms of the Consent Decree, the company will continue to operate the manufacturing facilities in Las Piedras, PR and Lancaster, PA. The company will work with an independent expert who will inspect these sites and issue recommendations. Based on these findings, the company will develop remediation plans to address observations identified by the independent expert. These plans will be submitted to the FDA and are subject to the agency’s approval. In addition, the company and the FDA have agreed on a plan to have the independent expert review certain manufacturing records at the two sites while remediation is ongoing to ensure that products released from the sites continue to meet quality standards. The company expects that the Consent Decree will govern the company’s operation of the facilities for a period of at least five years following the completion of the remediation plan.

Chairman and Chief Executive Officer Bill Weldon sent out an internal note to all Johnson & Johnson employees about the announcement.  Here is the message:

I am writing to let you know that one of our companies, McNEIL-PPC, Inc., today will enter into what is known as a “Consent Decree” with the U.S. Food and Drug Administration (FDA). The Consent Decree is an agreement we have reached with the FDA to govern certain McNeil Consumer Healthcare manufacturing operations until McNeil completes the remediation of its facilities to the FDA’s satisfaction. The Consent Decree is subject to approval by the court.

There are other outstanding legal matters involving Johnson & Johnson companies that have been discussed in past public filings and covered in the media. We will keep you advised of critical developments in these matters just as we are now providing information about this Consent Decree and McNeil.

We are a company that strives to do the right thing, and we succeed far more often than not. When we don’t succeed, it’s painful. But, consistent with Our Credo, we take responsibility for our actions, and we learn from our mistakes. By moving to resolve the FDA’s concerns about McNeil Consumer Healthcare US manufacturing facilities, we are able to look to the future and focus on what is most important to us: serving the millions of people around the world who rely on our products every day to meet their health care needs.

The Consent Decree applies to manufacturing facilities in Fort Washington, Pennsylvania; Lancaster, Pennsylvania; and Las Piedras, Puerto Rico. Under the terms of the agreement, McNeil will continue to operate the facilities in Las Piedras and Lancaster, working with an independent expert who will develop a plan for improving operations and will conduct reviews of certain production records while remediation is ongoing. McNeil also has agreed that it will not re-open the Fort Washington manufacturing facility – which it voluntarily closed in April 2010 – until it is certified by an outside expert and approval is given by the FDA.

Under its Comprehensive Action Plan, McNeil has made important progress toward improving quality and compliance, such as accelerating changes in organization and culture, and conducting a thorough review of how the company operated its manufacturing plants. We believe the terms of the Consent Decree recognize this progress and are consistent with the work underway. At the same time, the Consent Decree requires additional quality assurance measures, and is a reminder that important work remains to be done. We will commit whatever time and resources are necessary for McNeil to address the issues raised by the Consent Decree.

While the particular issues involved in the Consent Decree are limited to McNeil, all of us across the Johnson & Johnson Family of Companies should take this opportunity to re-dedicate ourselves to working hard every day to do the right thing for patients and ensuring their trust.

The above statement appeared on an Internet site liked to Johnson & Johnson.  Here is one response posted below the statement:

Thank you for posting this highly-sanitized note from your lawyers. Legal-speak to avoid further class action lawsuits is not the same thing as real, meaningful communication with your stakeholder audience. You can take a lesson from your colleague Caroline Pavis on what a real, genuine communication might look like.

Although, given the lack of coverage on JNJBTW.com over the past few months to the mounting manufacturing crisis at the J&J family of companies, I was extremely surprised to see you stepping up and posting this note at all. It’s better than nothing…but it’s still not a meaningful.

It’s not too late – you can return the Credo and the principles that made you a once-great company. But the public is running out of patience…

Here is a statement by Johnson & Johnson about its  Credo:

The values that guide our decision making are spelled out in Our Credo. Put simply, Our Credo challenges us to put the needs and well-being of the people we serve first.

Robert Wood Johnson, former chairman from 1932 to 1963 and a member of the Company’s founding family, crafted Our Credo himself in 1943, just before Johnson & Johnson became a publicly traded company. This was long before anyone ever heard the term “corporate social responsibility.” Our Credo is more than just a moral compass. We believe it’s a recipe for business success. The fact that Johnson & Johnson is one of only a handful of companies that have flourished through more than a century of change is proof of that.

Follow this link the full Credo.

Question to Consider

1.  How do the news releases from the FDA and Johnson & Johnson for the same event seem to differ?  What are the reasons for those difference?

2.  What is the most damaging statement in the FDA news release and why would it harm Johnson & Johnson?

3.  What would you as a consumer think when you here that the government is taking oversight over a facility to insure product quality?

4. Have the statements from Johnson & Johnson helped to reassure customers?  Why or why not?

5.  How else might Johnson & Johnson responded in order to reassure stakeholders?

6.  What does the response to the CEO’s statement say about stakeholder reactions?

7.  Did Johnson & Johnson has lived up to their Credo in this case?  Provide a rationale for your answer.

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