Johnson & Johnson may face up to $1 billion in lawsuits, analysts say

July 11, 2011 by MassDevice staff

Johnson & Johnson may be on the hook for $1 billion in liability and other costs associated with allegations that its subsidiary Depuy Orthopaedics sold metal-on-metal hip replacement systems that it knew to be faulty.

MassDevice On Call

MASSDEVICE ON CALL — Johnson & Johnson (NYSE:JNJ) could shell out up to $1 billion for lawsuits concerning its subsidiary DePuy Orthopaedics and the metal-on-metal hip implants that were found to shed minute metal particles into a patient's bloodstream over time.

Lawsuits over the ASR implant have piled up across the country, accusing DePuy of manufacturing a defective product, failing to warn patients and doctors of problems with the implant and negligence in designing, manufacturing and selling the product.

DePuy, which introduced the ASR in the U.S. in 2005 after winning 510(k) clearance from the Food & Drug Administration, allegedly knew of design problems with the cup but failed to adequately warn physicians, according to the lawsuits.

Analysts at Wells Fargo estimated that JNJ could be on the hook for around $1 billion in liability and other costs for the approximately 1,000 cases that have piled up against Depuy, The Street reported.

JNJ said it hiked its product-liability reserves to $570 million last year and allotted $280 million for medical costs of patients directly affected by the recalled hips.

DePuy discontinued the cup and had phased it out by March of this year, sending a letter to doctors that month warning that data from the Australian medical device registry showed a "higher-than-expected" failure rate in traditional hip replacements, especially in smaller patients or those with weak bones. Lawsuits had already started piling up by June 2010.

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