In a move to settle nearly all outstanding lawsuits in the United States related to its talc-based products, Johnson & Johnson (J&J) has announced a $6.5 billion settlement plan over 25 years, pending approval by the claimants.
J&J has faced financial and public relations challenges for decades due to these lawsuits, which allege that its talc baby powder and other talc products caused ovarian cancer. The company, however, maintains that its talc products are safe for consumers. About 99% of the talc-related lawsuits against J&J and its subsidiaries are related to ovarian cancer.
To cover these settlements, J&J recorded a charge of approximately $2.7 billion in the first quarter, increasing its reserve for talc claims to about $11 billion.
The proposed settlement plan involves a third bankruptcy filing of a subsidiary company, LTL Management, through which J&J aims to resolve the lawsuits. Previous attempts to resolve the lawsuits through the bankruptcy of this subsidiary were rejected by the courts. This time, J&J will initiate a three-month voting period for claimants, seeking a 75% support threshold needed for a bankruptcy settlement that would conclude the litigation and prevent future lawsuits. Claimants were not able to vote in LTL Management’s prior bankruptcy cases, according to J&J executives.
J&J claims to have garnered significant support from the majority of claimants based on conversations with their legal representatives. Erik Haas, J&J’s worldwide vice president of litigation, stated during an investor call that the settlement offers claimants a better recovery than they might expect from a trial, noting the lengthy timeline trials would entail.
While some claimants have been awarded significant verdicts in the past, such as a $2 billion award in favor of 22 women blaming their ovarian cancer on asbestos in J&J’s talc products, J&J’s shares rose more than 2% in premarket trading following the settlement announcement.
The settlement plan excludes remaining lawsuits related to mesothelioma, a rare cancer, which will be addressed separately. J&J stated that it has already resolved 95% of mesothelioma lawsuits filed to date.
Additionally, J&J announced final settlements to resolve an investigation by a coalition of over 40 states into claims that the company misled patients about the safety of its talc baby powder and other talc-based products. The company has also reached an agreement in principle to settle claims brought by suppliers of its talc, including Imerys Talc America and Cyprus Mines Corporation, and their related parties.
(Source: The Hill | Fierce Pharma | CNN)
