J&J CEO Relied on Experts for Baby Powder Safety Claims

(Bloomberg) -- Johnson & Johnson Chief Executive Officer Alex Gorsky says he relied on internal experts when he went on national TV to insist the company’s baby powder was safe and didn’t contain asbestos.

Gorsky testified Monday for the first time in court in a case involving claims that J&J’s talc-based products cause cancer because they’re tainted with asbestos.

With J&J facing almost 17,000 lawsuits from users of talc-based powders, Gorsky testified in the punishment phase of a trial in the company’s hometown of New Brunswick, New Jersey. In October, a separate jury awarded $37.2 million in damages to four people.

Gorsky told jurors his public statements defending the product weren’t based on his personal knowledge of the science but rather he relied on “experts with deep knowledge” about testing, including a company analysis that showed no traces of asbestos, a known carcinogen.

Still, the CEO acknowledged he can no longer say that, because the U.S. Food and Drug Administration found traces of asbestos in one lot of Baby Powder three months ago. The world’s largest maker of health-care products recalled 33,000 bottles. J&J said its own tests later disputed the agency’s findings, but regulators stood by their conclusion.

Chris Panatier, a lawyer for the former talc users in the New Jersey case, noted Gorsky’s earlier assertion that “regulators have tested our talc and found it to be asbestos free,” was still on the company’s website in a 2019 message from the CEO to employees.

FDA officials scheduled a public hearing for Feb. 4 to discuss different methods for testing talc in consumer products. An agency advisory panel has endorsed tougher testing standards opposed by talc makers.

Trace Amounts

Plaintiffs’ lawyers claim internal J&J documents show officials knew since the late 1960s that talc mined in places such as Vermont and Italy contained trace amounts of asbestos, but failed to alert consumers or regulators. Asbestos is often found intertwined with talc when mined. The listed ingredients in J&J’s Baby Powder are talc and fragrance.

Gorsky was ordered to testify about statements he made in print and on TV -- including on Jim Cramer’s “Mad Money” program on CNBC -- that tests on baby powder over the years showed the product “never contained asbestos.”

The New Jersey case is just one of thousands that may eventually cost the company as much as $10 billion, according to Bloomberg Intelligence. Though the product accounts for only a small fraction of J&J’s annual revenue, it’s been a core brand for the company for more than a century.

What Bloomberrg Intelligence Says

J&J could face headline risk when its CEO testifies in the punitive-damages phase of a personal-injury trial over talcum powder. The jury already found in four plaintiffs’ favor in 3Q, and J&J could lose the punitive damages trial as well. Still, J&J has the edge in 16,800 cases overall. Total settlement value could be $5-$10 billion or less.

--Holly Froum, analyst

Click here to read research

While the company could be forced to pay punitive damages in the New Brunswick trial, it has been on a roll in court recently in talc cases. It won eight trials last year, while losing five. It has appealed all its losses.

In the punitive-damages hearing, Douglas Barden, 65, David Etheridge, 57, D’Angela McNeill-George, 41, and Will Ronning, 46, want jurors to force J&J to pay millions for allegedly hiding the health risks of its Baby Powder and Shower-to-Shower products.

The former users said they faced long-term exposure to carcinogens as children because their parents used asbestos-laced talc-based powders on them. All have been diagnosed with mesothelioma, a specific cancer linked to asbestos. It can take years for the disease to appear.

Shower to Shower used to be made by J&J. Valeant Pharmaceuticals Inc., bought the rights to the product in 2012 for $150 million. Valeant -- renamed Bausch Healthcare Co. -- reformulated the product in 2018 to replace talc with cornstarch.

Gorsky also faced questioning from plaintiffs’ lawyers about his $22 million sale of stock in 2018, two days after a Reuters reporter emailed J&J with her findings that internal company documents showed company officials knew small amounts of asbestos had been found in its talc for decades. The story wound up knocking nearly $50 billion in value from the company’s shares.

Gorsky told jurors he followed company policy in making the stock sales. “My trade took place at a time when I did not have” knowledge of the story’s findings. At the time, company officials dismissed the piece as “one-sided and false.”

The case is Barden vs. Brenntag North America, L-1809-17, New Jersey Superior Court, County of Middlesex (New Brunswick).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider

©2020 Bloomberg L.P.