Setback for Johnson & Johnson in Ongoing Talc Litigation

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News Summary

A U.S. bankruptcy court judge has denied Johnson & Johnson’s settlement plan related to its talc baby powder, complicating the company’s ongoing legal battles.

Setback for Johnson & Johnson in Ongoing Talc Litigation

In a significant ruling, a U.S. bankruptcy court judge has denied Johnson & Johnson’s settlement plan linked to its controversial baby powder containing talc. This decision marks yet another hurdle for the pharmaceutical giant as it struggles to resolve various claims associated with its talc products, which have been at the center of legal battles over allegations of causing cancers such as ovarian cancer and mesothelioma.

The Background of the Case

This ruling represents the third bankruptcy case involving a Johnson & Johnson subsidiary in connection to the baby powder controversy, which has led to widespread public outcry and numerous lawsuits. Red River Talc LLC, a subsidiary of Johnson & Johnson, had sought confirmation for a prepackaged Chapter 11 bankruptcy plan designed to address the litigation surrounding its products.

Had it been approved, the plan would have formed one of the largest mass tort settlements in history, offering a staggering $9 billion to resolve a multitude of claims against J&J concerning ovarian cancer and associated gynecological issues linked to its talc-based items.

Judge’s Ruling

Judge Christopher Lopez ruled against the proposed settlement, stating that Johnson & Johnson’s method for soliciting votes from personal injury claimants was flawed. Following the ruling, Johnson & Johnson confirmed it would not appeal the decision, opting instead to return to the civil law system to contest what it considers “meritless” claims.

Impact on Financial Reserves

As a direct consequence of this ruling, the pharmaceutical company plans to reverse approximately $7 billion from a previously established reserve that was intended for these claims. Additionally, J&J had previously settled about 95% of filed mesothelioma lawsuits and resolved all state consumer protection claims, alongside disputes with talc suppliers.

Previous Settlement Attempts

This setback follows last year’s proposal from a J&J subsidiary, which aimed to establish a $6.48 billion settlement over a span of 25 years regarding the allegations that using talc powder for feminine hygiene contributed to ovarian cancer. Lawsuits claim the talcum powder not only caused ovarian cancer but is also linked to mesothelioma, a serious form of cancer that targets the lungs and other organs.

Declining Sales and Future Plans

The controversy surrounding J&J’s talc products has led to a decrease in sales, prompting the company to halt the sales of talc-based baby powder products as early as 2020. Most recently, in 2022, Johnson & Johnson announced intentions to cease global sales of baby powder.

Looking Ahead

The reorganization plan proposed by Red River Talc was described as markedly different from its prior filings. Even after this significant legal setback, the latest plan sought to resolve an astounding 99.75% of all pending talc-related lawsuits against Johnson & Johnson and its affiliates within the United States. However, personal injury lawsuits specifically related to mesothelioma would need to be addressed outside of this bankruptcy framework.

The bankruptcy court’s decision had immediate implications for Johnson & Johnson’s stock market performance, as shares fell more than 3% just before the market opened, marking the largest decline recorded in five years. As a result of this ruling, J&J may find itself obligated to allocate significantly more than the $9 billion initially set aside for settlement agreements.

Currently, approximately 60,000 claims are pending against Johnson & Johnson, with many women alleging that the use of the company’s baby powder has led to ovarian cancer and other related illnesses. The legal battles surrounding these allegations show no signs of abating, and developments such as this will continue to shape the future of the company.