Now playing in Fortune, a honey of a probe into pharma icon Johnson & Johnson. Written by Mina Kimes, it is a virtual case study in the deterioration of a once-exemplary corporate culture and one of the better-reported business stories you’ll see.
Through a relentless presentation of facts, laid one on top of the other, the piece unsparingly shows how feckless leadership allowed the company’s prized over-the-counter unit, McNeil Consumer Healthcare, to stumble into no less than eight recalls, including the biggest children’s drug recall of all time—136 million bottles of children’s Tylenol, Motrin, Benadryl, and Zyrtec potentially contaminated with dark particles—and the temporary shutdown of a big plant after a “scalding” inspection report by the FDA. McNeil’s once-elite quality assurance division—ramped up after the famous 1982 Tylenol recall—is shown to crumble under the weight of cutbacks, a disastrous reorganization, and corner-cutting, some of it, according to former employees, deliberate. It reached the point, Fortune reports, that the company hired a contractor to secretly buy up defective Motrin shipments at retail stories rather than face a public recall.
Check this out:
J&J says the FDA “was informed that McNeil would be retrieving product.” But a memo written by one of the contractors (and released by Towns’ committee) seems unambiguous: “You should simply ‘act’ like a regular customer while making these purchases. THERE MUST BE NO MENTION OF THIS BEING A RECALL OF THE PRODUCT!” (Emphasis in the original.)
How about that?
Worse, executives still won’t own up to the extent of the problems. Here’s Fortune’s tart summary of recent Congressional testimony by McNeil head Colleen Goggins:
Goggins apologized to “the mothers, the fathers, and the caregivers for the concern and inconvenience caused by the recall.” She then spent most of her sworn testimony downplaying the situation. “Unfortunately there has been some confusion in the media with respect to this recall,” she went on, stressing that the recalled drugs have not been shown to cause illness.
Goggins’s approach — one part apology and promise to do better to three parts disclaimer and evasion — embodies J&J’s recipe for addressing the crisis.
CEO Bill Weldon, meanwhile, is described as “largely invisible.”
Though the story doesn’t say so explicitly, a key source appears to have been the Food and Drug Administration, whose records and inspection reports provide a wealth of information, and which comes across as effective and on-the-ball. Ah, the virtuous symbiosis of investigative reporting and active regulation.
A strong point of the story is its nuance, as in this description of how McNeil’s quality culture shifted after the retirement of a key executive in 2002 (my emphasis):
With that program in place, McNeil’s quality-control department thrived for a few years. Then, not long after Larsen retired in 2002, it began to slowly weaken. The culprit was a familiar one — cost cutting — but in a subtler form. There were no wholesale layoffs in quality control. Instead experienced staffers were repeatedly laid off and replaced with newbies who mostly lacked technical pharmaceutical experience. By 2008 the analytical laboratory, formerly staffed almost entirely by full-time scientists, was half-full of contract workers, according to a former manager there.
Once stricter than a schoolmarm, the department grew lax. The team that tested the production lines was dubbed the “EZ Pass system,” according to a former quality-control employee. In one instance an engineering flaw on a line made it difficult to clean liquid-medicine bottles. Rather than find a way to fix the problem, an engineer says, the team instead tried to simply eliminate that check from the test. “They were trying to take a lot of short cuts,” she says.