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Stocks Don’t Lie: J&J Loses $50B after Report Shows They Knew of Asbestos Contamination in Baby Powder

by Sokolove Law

Amid all of the chaos surrounding Johnson & Johnson (J&J) and the recent discovery that the company allegedly knew its talc products likely contained asbestos, people are asking: Could this finally be the straw that breaks the camel’s back?

For decades, Johnson & Johnson has withstood a litany of profit-threatening claims and regulations designed to keep the company’s sometimes reckless corporate behavior in check. This, of course, includes claims against the safety of J&J’s Tylenol, transvaginal mesh, metal-on-metal hip replacements, breast implants, Baby Powder, and dozens of other drugs and medical devices manufactured by J&J or one of its subsidiaries.

On Friday, December 14, 2018, however, the massive pharmaceutical giant worth an estimated $350 Billion saw a single-day loss to its market value that was the largest in 15 years. According to CNBC, their stock plunge may have cost the company $50 Billion.

The company’s market value loss comes after a bombshell investigation by Reuters dubbed “Powder Keg,” which found detailed evidence showing Johnson & Johnson knew for decades of the asbestos contamination in its talc-based products. Asbestos, of course, is a known carcinogen linked to fatal diseases such as mesothelioma.

Asbestos in Johnson & Johnson’s Talc

In its report, Reuters detailed how now – some 19 years after the original talc-asbestos lawsuit against Johnson & Johnson – memos, internal reports, and other classified documents are becoming accessible to the attorneys representing the 11,700 people who claim J&J’s talc-based products led to their developing cancer (both mesothelioma and ovarian cancer).

Among the documents released by J&J to plaintiff lawyers, Reuters discovered evidence that shows the company’s talc had tested positive for small amounts of asbestos. Positive tests dated as far back as 1957 and carried on through the early 2000s. Despite the small amounts of asbestos discovered in their tests, the World Health Organization (WHO) maintains that there is no safe level of exposure to asbestos.

Memos obtained by Reuters demonstrate J&J executives, scientists, mine managers, doctors, and lawyers discussing asbestos contamination in their talc and how they might address the concern with the public.

However, instead of ever making their knowledge of these tests available to regulators such as the Food and Drug Administration (FDA), J&J kept it to themselves.

Documents and early court testimony also display J&J’s lobbying efforts to influence federal agencies like the FDA, and the FDA’s plans to limit the amount of trace asbestos in talc-based products. Lobbying efforts were also made to stem the widespread scientific research on the adverse health effects of talc.

Still, one wonders: How was all of this knowledge possibly kept from the public? According to Reuters, “Many [of these documents] were shielded from public view by court orders that allowed J&J to turn over thousands of documents it designated as confidential.”

What the World Knows about Talc and Asbestos

Talc is the softest naturally occurring mineral on Earth, and it is found in nature alongside another mineral — the stringy and fibrous tremolite, which is 1 of 6 recognized forms of asbestos. The 2 minerals exist together, and it can be awfully hard to separate them.

Asbestos is a deadly mineral. Before the carcinogenic nature of asbestos was widely known, it was used across dozens of industries from shipbuilding to electricity to automobile. Known for its natural strength and resistance to fire, asbestos was thought to be a “miracle mineral.”

That was, of course, before the public came to know the truth: Asbestos, when inhaled or ingested, can lead to an extremely rare and incurable cancer known as mesothelioma. Even though asbestos-using companies knew of the risks associated with asbestos, they chose to keep using it in their products. Unfortunately, by the time the association became widely known to the public, thousands of people who had worked in industries that used asbestos had died from mesothelioma or lung cancer.

This story is old, and many Americans believe that asbestos has been eliminated from commerce in the United States. In fact, the truth is just the opposite. While over 55 countries have banned all forms and uses of asbestos, there are only restrictions on the use of asbestos in the U.S. — the mineral continues to be imported each year by the metric ton. Last year, Americans saw the largest increase in the importation and use of asbestos in years.

Is There Asbestos in Johnson & Johnson’s Baby Powder?

In the past year alone, Johnson & Johnson has been embroiled in many lawsuits claiming the company’s talc-based products contained trace amounts asbestos that, in turn, led to some people developing asbestos-related diseases. In 2018 alone, Johnson & Johnson lost 2 such cases, which required them to fork over big sums of money in damages to plaintiffs.

Despite all of the evidence of asbestos-contamination in their talc, including many of their own tests, and the nearly 12,000 injured, dead, or dying plaintiffs and estates that await trial, Johnson & Johnson has not relented. It continues to claim that its talc products are asbestos-free. Any talc-asbestos verdict that has been levied against the company has been or will be appealed.

Following Reuters’s report, Johnson & Johnson’s Chairman and CEO, Alex Gorsky, issued his latest echo of the same statement he has been giving throughout the year:

“We unequivocally believe that our talc, our baby powder, does not contain asbestos. And that’s demonstrated in thousands of studies, studies not only conducted by J&J, but studies conducted by independent authorities, well-respected authorities, where we work closely with regulators who are overlooking the methodology”

Meanwhile, talc-based J&J products continue to draw incredible profits for the multinational corporation based out of New Brunswick, NJ. For more than 100 years, they have remained the largest talc-based product supplier in the world. Last year alone, $420 Million in revenue was generated from J&J talc.

Johnson & Johnson Market Value at Year-Long Low

On Wednesday, Indian health authorities, deeply concerned with the findings of Reuters’s investigation, made unannounced visits to Johnson & Johnson talc processing and manufacturing facilities in 9 Indian cities, including Mumbai, Chennai, Kolkata, Ahmedabad, Hyderabad, Bengaluru, Indore, Chandigarh, and Ghaziabad. The “raids,” conducted by the Central Drugs Standard Control Organization (CDSCO), will serve to test the company’s talc to see if results warrant any regulatory and/or disciplinary actions.

The Big Pharma company is already feeling the repercussions of the recent report, as its market value continues to fall. While Johnson & Johnson stated it plans to buy back up $5 Billion of its stock, it does not change the fact that December has been a particularly bad month for business. Friday, when Reuters’s report broke, the market responded – and Johnson & Johnson saw its shares plunge a whopping 10 percent, making for the company’s single-worst trading day in 15 years.

Monday, the company lost another 2 percent, making for a total of roughly $50 Billion in market value losses. To put it another way: before the report, Johnson & Johnson’s individual stocks were trading at $148.16/share; less than a week later, however, individual stock prices have dropped by over $21, to a price of $127.58/share.

In the world of Big Pharma, where companies like Johnson & Johnson rule the day, money is always what talks. Following the estimated $50-Billion loss, Johnson & Johnson stocks continue to lose value.

For average American consumers, one can only hope this is exactly the message that Johnson & Johnson needs to hear. When the money talks – and right now it is screaming – companies have but 1 of 2 choices: to accept their losses and move on, or to shape-up, re-strategize, and reform past missteps to avoid a future riddled by the same mistakes.

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