J&J Reorganizes; More Recalls

It must have been a pretty rough day at J&J headquarters today. After a day like today, it’s no wonder the State of New Jersey put up suicide prevention posters around the J&J headquarters in New Brunswick. First, the company initiated yet another recall – the second in a week. The culprit this time is more toxic Tylenol 8-Hour capsules. The 35,000 bottles had, you guessed it, the same musty, moldy smell – no doubt caused by the same pesticide 2,4,6-tribromoanisole. This batch of toxic Tylenol was also made the same Fort Washington plant that was closed down last year as all the other toxic Tylenol. It makes one ask the question – if the McNeil plant in Fort Washington was closed almost exactly one year ago, why did J&J wait to recall this batch of contaminated medication? Oh, and in addition to recalling the 35,000 bottles of toxic Tylenol, the company also decided to recall over 715,000 packages of various drugs because of sanity problems with the production equipment. On most days, yet another J&J recall would barely register a ripple with the media. However, today, it was just an appetizer to the main event. As predicted here on this very blog nearly a year ago: J&J has reorganized the McNeil Healthcare group. Instead of reporting into the existing J&J Consumer Healthcare business, it will now stand on its own. This does two things for J&J. First, William Weldon can stand up at the shareholders meeting and claim he took decisive steps to fix the problems (yeah, he created the problems in the first place and, yeah, it took him a year to pay attention, but hey – it’s J&J and they like to say they’re “slow cooking”). Of course, we’ll all smirk when it does it, but if it lets the disgraced CEO save a little face, well, the J&J Board of Directors will be all for it. Of course, back in my day we used to say, “You can paint a pile of shit and it may look different, but you and I both know what it is.” Second, this creates a number of strategic options for J&J with respect to McNeil. It gives the company the ability to bucket the financial losses into one underperforming organization (and perhaps some creative accounting), while also looking at other options – including the possible sale of the McNeil organization. McNeil is a tremendous drain on J&J right now and it remains to be seen how loyal consumers will be to Tylenol. As a company, J&J is like those cocaine addicts on the A&E show Intervention – you keep waiting for it to hit rock bottom so it can get better. But J&J keeps falling deeper and deeper into the hole. Maybe J&J needs an Intervention.