J&J board panel: Reject shareholder litigation

AP News
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Posted: Jul 18, 2011 10:24 PM
J&J board panel: Reject shareholder litigation

Johnson & Johnson will take steps to get shareholder lawsuits brought on behalf of the company against its management and directors dismissed and create a board committee to oversee the health care product maker's quality compliance issues, according to court documents filed Monday.

The strategy stems from recommendations in a report authored by a special committee of Johnson & Johnson's board of directors and filed with the U.S. District Court in Trenton, N.J.

The court is overseeing consolidated shareholder lawsuits claiming that some of Johnson & Johnson's current and former managers and directors breached their fiduciary duty by allowing a spate of kickback charges, product recalls and other instances of alleged wrongdoing by the company to occur on their watch.

Specifically, the shareholder complaints reference allegations that Johnson & Johnson paid improper kickbacks to Omnicare Inc., a pharmacy company that caters to nursing-home patients, in order to get the company to buy its drugs. The plaintiffs also contend that the company promoted drugs for uses not approved by the Food and Drug Administration and had insufficient quality controls at several of its manufacturing plants, leading to a rash of product recalls, among other claims.

In a 127-page report, the special committee concluded that there were no red flags or indications that the company's system for monitoring its compliance with laws and regulations failed to work as intended. When problems arose, they were addressed and resolved, the panel said.

In addition, the committee concluded that, with the possible exception of one former company officer and one former officer at the company's DePuy subsidiary, no Johnson & Johnson officer or director breached their fiduciary duty.

The committee members ultimately concluded that it's not in the best interests of the company to pursue the shareholder lawsuits and recommended that the company reject shareholders' claims and move to get the litigation dismissed.

It also recommended the creation of a new board committee to oversee the company's health care and quality compliance on recalls and other issues.

Johnson & Johnson's board of directors met Monday and unanimously approved the recommendations in the report, according to the court documents.

Spokeswoman Carol Goodrich said the special committee's findings stand on their own, and declined to comment further, citing the pending litigation.

A phone message left after hours with one of the plaintiffs' attorneys was not immediately returned Monday.

Last year, two Johnson & Johnson subsidiaries agreed to pay more than $81 million stemming from their allegedly illegal promotion of Topamax for psychiatric uses. Federal drug regulators had only approved Topamax as an anti-epileptic drug and for prevention of migraines.

Since September 2009, Johnson & Johnson has had a string of more than 25 product recalls, including its widely used epilepsy pill Topamax, HIV medicine Prezista, schizophrenia drug Risperdal and Tylenol caplets.

All four were blamed on a nauseating chemical smell linked to wooden shipping pallets _ the cause of many of the recalls. Others, though, were due to far more serious problems, from metal shards in liquid medicines to the wrong level of active ingredient.

The company is now operating under a consent decree allowing extra government oversight of a factory in Pennsylvania, closed since April 2010, where many of the nonprescription drugs recalled were made.

Shares in Johnson & Johnson added 6 cents to $67.15 in aftermarket trading. The shares ended the regular session down 36 cents to $67.09.