With billions of dollars at stake in potential legal liabilities, the life sciences giant is exploring a possible solution – bankruptcy of a sort.
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Johnson & Johnson has been in the crosshairs of multiple lawsuits over its opioid-based products, as well as its talc-based products that plaintiffs claim have included cancer-causing carcinogens. With billions of dollars at stake in potential legal liabilities, the life sciences giant is exploring a possible solution – bankruptcy of a sort.
Citing people “familiar with the matter,” Reuters reported that Johnson & Johnson could spin out a company that was solely responsible for the talc-based products and have it undergo bankruptcy in order to protect a significant bulk of its assets.
The company would be able to do this under a “divisive merger” rule found in the Texas legal system. This legal maneuver allows a company to split into at least two different entities. This will enable Johnson & Johnson’s new talc-based entity to file for bankruptcy to halt additional litigation.
“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,” Reuters said.
In addition to this Texas two-step, the life sciences giant could explore other options.
Johnson & Johnson has already been hit with several verdicts, including $750 million in punitive damages awarded to four people who alleged the talc led to their cancer diagnoses in 2020. That isn’t the only verdict that has gone against Johnson & Johnson over talc.
Over the past several years, BioSpace has reported multiple legal defeats for Johnson & Johnson, including a 2018 verdict where a jury sided with an elderly woman who was diagnosed with mesothelioma that was linked to her use of Johnson & Johnson’s talc product. In that case, the woman was awarded more than $21 million in damages after it was noted that asbestos found in the talc was linked to her development of mesothelioma.
That same year, a jury awarded almost $4.7 billion in damages to 22 women and their families following the determination that the company’s talc products contributed to the development of ovarian cancer in the plaintiffs. Six of those plaintiffs died from the disease.
In all, Johnson & Johnson is faced with nearly 30,000 different lawsuits related to its talc products, which is a central part of the company’s consumer identity. Talc is a naturally occurring mineral used in multiple products, including baby powder. According to the American Cancer Society, “in its natural form, some talc contains asbestos, a substance known to cause cancers in and around the lungs when inhaled.”
A 2018 Reuters report showed the company knew that its talc products could contain carcinogenic asbestos and opted to prevent that information from becoming known to regulators and the general public. Citing internal Johnson & Johnson data, Reuters reported that between 1972 and 1975, three different laboratories discovered asbestos in the company’s talcum powder. Despite that discovery, Johnson & Johnson did not report it to the U.S. Food and Drug Administration.
With the massive number of lawsuits on court dockets, the company is hoping to mitigate potential losses with the bankruptcy plan. An attorney with Johnson & Johnson said the company could opt for the bankruptcy plan as a means of lowering payouts for court cases that are not settled out of court. Additionally, attorneys for the plaintiffs could not prevent the life sciences giant from following this bankruptcy type of decision. However, it could be challenged later.
What this bankruptcy could mean for the thousands of plaintiffs who do not settle out of court is they will likely have to not only deal with the slow-moving bankruptcy court, but also take on a different company that has less financial depth than the parent company.
A spokesperson for Johnson & Johnson said the company has not settled on any particular legal plan of action related to the talc litigation other than “continue to defend the safety of talc and litigate these cases” in the courts.
