Johnson & Johnson announced on Wednesday that, subject to the claimants’ approval, it would pay $6.5 billion over 25 years to settle almost all of the thousands of lawsuits filed in the United States alleging its talc-based products caused ovarian cancer.
For decades, those lawsuits have plagued J&J financially and in the media, despite the company’s insistence that its now-withdrawn talc baby powder and other talc products are safe for use by consumers. Ovarian cancer is the cause of about 99% of the talc-related lawsuits brought against J&J and its affiliates.
To bring its reserve for talc claims to approximately $11 billion, the company recorded a charge in the first quarter of about $2.7 billion.
Assuming the claimants approve the deal, J&J would be able to settle the lawsuits by having a subsidiary company called LTL Management file for bankruptcy a third time. Courts have rejected J&J’s two prior attempts to use the bankruptcy of the subsidiary—which was established to take on the company’s talc liabilities—to settle the lawsuits.
To obtain the 75% support required for a bankruptcy settlement that would completely end the litigation and stop further lawsuits, J&J will start a three-month voting period for claimants. During a call with investors on Wednesday, J&J executives stated that in LTL Management’s prior bankruptcy cases, claimants were not given the chance to vote.
According to the executives, J&J has the “significant support of the overwhelming majority of the claimants” based on discussions with their attorneys or representatives.
Erik Haas, J&J’s worldwide vice president of litigation, stated during the call, “We truly think this plan is in the best for the claimants and ought to get a favorable and right away confirmation from the bankruptcy court.”
He argued that claimants received a far better recovery from the settlement than they would have from a trial.
According to Haas, “that track record demonstrates that the majority of bearing claimants have not recovered and are not expected to ever recover anything at trial.” “The majority of claimants will never have their day in court because the rate at which use cases are being tried would take decades to try the remaining cases.”
Even so, claimants have received some sizable verdicts as a result of litigation. Among them is an award of almost $2 billion given to 22 women who claimed that the asbestos in J&J’s talc products caused their ovarian cancer.
Wednesday’s premarket trading saw a more than 2% increase in J&J shares.
According to J&J, the remaining open cases will be handled independently of the new settlement plan and are associated with a rare cancer known as mesothelioma. According to the massive pharmaceutical company, 95% of mesothelioma lawsuits filed thus far have already been settled.
A coalition of more than 40 states investigated allegations that J&J misled patients regarding the safety of its talc baby powder as well as other talc-based products. On Wednesday, the company announced that it had reached “final and comprehensive” settlements to end the investigation.
The company and Imerys Talc America, Cyprus Mines Corporation, and their affiliated parties, the company’s talc suppliers, have also come to an agreement in principle to settle their claims.