Johnson & Johnson's Quality Catastrophe

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"This is a real American tragedy," says Erik Gordon, a professor at the University of Michigan's Ross School of Business in Ann Arbor who studies the biomedical industry. "They really have blown one of the great brands."


"A Huge Disappointment"
New Brunswick, N.J., nestles along the south bank of the Raritan River, a city of little more than 50,000 people where the jury still seems to be out on the success of efforts at urban renewal. Two institutions dominate—Rutgers University and J&J, the latter's headquarters built in the early 1980s from a design by the firm of architect I.M. Pei. As befits a company that got its start selling surgical supplies, the 16-story tower and surrounding low-rise buildings, with their alternating horizontal bands of bare white wall and reflective glass, could be mistaken for a hospital. Inside hang photos of some of the many beneficiaries of J&J's philanthropy over the years, and in the main lobby, two looming limestone slabs greet visitors. On them is carved the 308-word credo J&J executives are wont to invoke, penned in 1943 by legendary CEO Robert Wood Johnson II.

The company's "first responsibility," the credo states, "is to the doctors, nurses, and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality." It next lays out J&J's responsibilities to its employees, and then to the communities "in which we live and work and to the world community as well." The company's "final responsibility" is to shareholders, who "should realize a fair return," so long as J&J abides by its credo.

In an 11th-floor conference room—a generic space but for the sword in a display case on the wall, a replica of the one used by Scottish nationalist William "Braveheart" Wallace—the credo comes up often during a Bloomberg Businessweek interview with CEO Weldon. The 62-year-old Brooklyn native concedes that the recalls have tarnished his brand and that events of the past year "have been just a huge disappointment." He sticks to his story, however, that the problems have been confined almost exclusively to the McNeil Consumer Healthcare group, specifically the three factories that produced most of the recalled over-the-counter products.

"What this is really about is the first tenet of our credo, and that's about patients," Weldon says. "The most unfortunate part of everything that happened last year is that there are people who need these products who can't get them. ... I don't want to say it's not an embarrassment. It's painful. And we're going to fix it."

Weldon, who joined J&J in 1971 and worked his way up through sales, marketing, and management positions in the device and drug segments, refuses to admit any culpability. The DePuy voluntary hip recall, in his view, affirms J&J's commitment to caring. "DePuy made a decision to protect patients," he says. On Mar. 4, DePuy Orthopaedics' president, David Floyd, announced his resignation.

Citing litigation, Weldon wouldn't comment further on details of DePuy's recall. DePuy spokeswoman Lorie Gawreluk describes the recent data suggesting failure rates as high as 49 percent, which haven't been published in a peer-reviewed journal, as "difficult to interpret." She points out that these data have "not been verified and validated." Despite the recall, Gawreluk adds, "the benefits of metal-on-metal technology often outweigh the risks for many patients who suffer from severe osteoarthritis."

For his part, Weldon most regrets that "there are children who need" the Motrin and other McNeil products absent from drugstore shelves, but then: "There has never been a serious injury resulting from everything that happened here to any patients, as opposed to the circumstances in 1982. It's a very different situation."