Johnson & Johnson has been ordered to pay $532 million for its role in the opioid crisis in Oklahoma — and that could have some significant consequences in the pharmaceutical industry.
While the company is attempting to appeal this decision, the case is a notable attempt to hold the pharmaceutical industry accountable for the current national epidemic. This could have far-reaching ramifications for drug companies as a whole.
But is it fair to blame the company for what has been called the worst addiction scourge in recent American history? Let’s dig a bit deeper into Johnson & Johnson’s alleged role in the crisis itself.
Complicit in a Crisis
The suit alleges that Johnson & Johnson misrepresented the risks of their opioid medications, telling doctors that the risks of addiction were lower than they were, and consequently leading to a larger number of addicted patients. The fine levied was a percentage of the money that the state is currently using to battle opioid addiction.
This is an important case, because Oklahoma is far from the only state in the country suffering from an opioid epidemic. If this case stands, then the other 49 states in the country can also request that Johnson & Johnson pay penalties for misrepresenting their medications. The entire nation is currently experiencing issues with opioid abuse.
Johnson & Johnson argues that there is no direct evidence that the company is responsible for the opioid problem in the state, and that the state failed to build a compelling case against them. Shares of Johnson & Johnson fell by 2% following the ruling.
America’s Growing Opioid Problem
It’s estimated that opioid abuse costs the United States $78.5 billion every year. Many of those addicted to opioid medications began with legitimate prescriptions that were given them to manage pain, but due to the highly addictive nature of the medication, many could not be weaned off the medication later on.
In the United States, opioid abuse is the most dangerous type of drug abuse. In 2017, there were 15,482 overdoses on heroin, and 10,333 overdoses on meth. There were 47,600 deaths involving opioid medications. Opioid medications are often used in conjunction with other drugs, which makes them more dangerous, and makes individuals more prone to overdose.
Opioid deaths are also rising considerably from year to year. In 2007, the amount of opioid-related deaths was 18,515. This number was able to increase by more than 200% by 2017.
Consequences for Johnson & Johnson
Gross profit for Johnson & Johnson rose by over 6 percent from 2017 to 2018. In 2018, Johnson & Johnson grossed $54.49 billion. While $500 million is a considerable sum, it doesn’t necessarily put a dent in Johnson & Johnson’s profits, and it can still be overturned. And while the company’s stock price did go down following the ruling, it didn’t go down by a large amount.
Johnson & Johnson has been a strong company for a long time. To win an appeal, the company only needs to argue that the state of Oklahoma is unable to provide evidence that it caused direct harm through the opioid epidemic. This isn’t an impossible case for them to win. On the other hand, if they lose their appeal, it does set a dangerous precedent, and one that could lead to additional suits.
Purdue Pharma Settles for $10 to $12 Billion
Johnson & Johnson isn’t the only pharmaceutical company being held responsible for the opioid epidemic. Purdue Pharma has been defending itself against some 2,000 lawsuits dating back to 2007 — also for the opioid crisis. As of August 27th, Purdue Pharma has reported that it intends to settle these lawsuits for between $10 to $12 billion.
Like Johnson & Johnson, lawsuits allege deceptive business practices, and that opioid medications were misrepresented to both doctors and patients as a method of selling them. Rather than continuing to fight these lawsuits in court, Purdue Pharma has settled out of court, hoping to save on the future costs of litigation.
Johnson & Johnson’s stock has had a tumultuous year, but most stocks have. With other pharmaceutical companies such as Purdue Pharma also in the cross hairs, it could be an interesting year ahead for the pharmaceuticals industry as a whole.