Mike Blake / Reuters
In the health care system, few brands are known more than Johnson & Johnson. The Band-Aids consumer shoe manufacturer's baby shampoo manufacturer has faced a number of controversies in its 133-year history. Now it is contradictory that it contributed to the nation's opioid epidemic.
The shares of Johnson & Johnson took a blow last week when an attempt is being made in Oklahoma. State officials claiming the giant company triggered a fatal public health crisis. The company's shares fell 4% yesterday Wednesday and recovered less than 1% the following day.
The state of Oklahoma has accused the company of creating a "public genes" by overseeing prescription painkillers.
"If you are over busy, people will die," said lawyer Brad Beckworth, representing the state.
Johnson and Johnson refuse to make any mistakes.
Wednesday's stock market beaten about $ 20 billion of J & J's market value – a significant downturn for the company.
Credit Suisse analyst Vamil Divan believes the market is overreacted. He noted that J & J was responsible for a small portion of prescription painkillers sold in Oklahoma, and the company's drugs were mainly prescribed to patients who were already using other opioids.
"Obviously, the opioid epidemic is a major epidemic," Divan said. "I certainly don't try to minimize it. And I don't think the company is either. But the role Johnson and Johnson played specifically here seems to be relatively limited."
Divan said Johnson & Johnson could have more exposure from another series of lawsuits involving their baby powder. Last year, a St. Louis Johnson and Johnson jury ordered $ 4.7 billion for women who developed ovarian cancer after using their talcum powder. The company is appealing.
The efforts in this and similar cases are particularly high for the company because they threaten their credibility. Consumers know Johnson and Johnson best through their range of baby products – baby oil, baby shampoo and baby powder – that have been around for generations.
In December, Reuters reported that Johnson & Johnson had known for decades that the raw material in Talcum powder may be contaminated with asbestos and attempted to cover it up. The report triggered a 10% decline in the company's share price. J & J called the report "fake and inflammable".
"We undoubtedly believe that our talcum, our baby powder, does not contain asbestos," says CEO Alex Gorsky to CNBC.
Several decades ago, Johnson & Johnson were at the center of another, more dramatic health hazard. In 1982, seven people died after taking extra strength Tylenol capsules, someone had laced with cyanide.
Johnson and Johnson, who make Tylenol, ordered a nationwide recall and redesigned their packaging to prevent future manipulation. The costly and proactive response is often held as a model for corporate social responsibility.
"The Tylenol episode created what can still be characterized as the standard for dealing with a crisis," said Professor Stephen Greyser, Harvard Business School, who documented the episode.
He said the company was ruled by its official credo, which states that Johnson and Johnson's first responsibility is for patients, doctors, nurses and mothers and fathers using their products.
"Credo has historically made it clear that if you focus on customers, down the road, profits will come," Greyser said.
Tylenol is recovered and is now one of the most sold over-the-counter painkillers.
Over the years, Johnson & Johnson has grown far beyond its roots in consumer medicine. Household goods, including Listerine and Lubriderm, accounted for only 14% of the company's US sales last year. Half of the turnover now comes from drugs used to treat everything from depression to blood clots.
These products are not identified with Johnson & Johnson as tape aids or baby powders. But they are much larger moneymakers. And even though the drug company packs its own challenges – including generic competition, government and litigation are like those in Oklahoma – Credit Suisse analyst Divan bullish on Johnson & Johnson's future.
"Nothing is 100%. There is always some uncertainty," he said. "But you have relatively comfort that this is a company that can handle some of these things that can come up along the way. And if you look at track tracks also over one year, three years, five years, 10 years, this company has generally delivered . "
The famous Johnson & Johnson credo concludes that when companies operate according to principles, shareholders should realize a reasonable return.