J&J Execs to Be Grilled Over Recall

It's been nearly a month since Johnson & Johnson (JNJ) issued the largest recall of children's medicine in the history of the U.S. Food and Drug Administration, and the fallout may be just beginning.

Documents obtained by DailyFinance ahead of a House of Representatives committee hearing on the recall show lawmakers are concerned about the way J&J and FDA handled the recall and events leading up to it.

The Committee on Oversight and Government Reform "finds all the facts surrounding the recall particularly troubling," a spokesperson told DailyFinance.

Recalled Products Represent 70% of Market

The hearing, set for May 27, will examine the circumstances surrounding the recall started April 30 by J&J's McNeil Consumer Healthcare unit of over 40 varieties of over-the-counter medicines. The Committee estimates the recalled products represent 70% of the market, including popular brands such as Children's Tylenol, Infant's Tylenol, Children's Motrin, Children's Zyrtec and Children's Benadryl.

This was the third major recall made by McNeil in the last eight months over quality problems. The FDA had inspected the plant and uncovered what some called "shocking" problems surrounding the quality, purity and potency of these products. Production at the plant has since been suspended.

The hearing is likely to focus in part on who knew what and when. The problems go as far back as April 2008, when McNeil started receiving complaints about odors in its products. It started investigating in August of that year, but the FDA found that to be "unjustifiably delayed and terminated prematurely."

J&J Failed to Address Issues

Not only that, but J&J failed to share some of the issues and investigation results with the FDA. The agency expressed its concerns to the company, which weren't always addressed. It said in its January 2010 warning letter to J&J that "Neither upper management at J&J nor at McNeil Consumer Healthcare assured timely investigation and resolution of these issues."

When the FDA finally inspected the plant in April 2010, it found that McNeil didn't properly test its products, didn't properly train its employees, failed to maintain equipment and lacked other important quality controls. The FDA also found that McNeil failed to sufficiently investigate problems in its manufacturing and drugs. The most alarming findings were that McNeil products had the potential to be super potent, and to be contaminated with bacteria and particulate matter.

There may be questions about FDA conduct as well. The agency has known about the problem at least since last September, and the Committee will want to hear what steps it took once it found out the products were contaminated, the Committee spokesperson said.

Deaths and Other Adverse Events

According to the FDA, 775 adverse events were reported for the recalled products, including 30 deaths, from Jan. 1, 2008, through April 30, 2010 -- and there have been several hundred additional adverse events, including seven deaths, since then. None of that shows a spike or a pattern, the FDA says.

The Chairman and other members of the committee have gone through internal documents of J&J and the FDA and will no doubt grill the witnesses. Meanwhile, Senator Tom Harkin (D-Iowa), chairman of the U.S. Senate's health committee, sent a letter to the FDA late Monday, asking the agency's commissioner for more information on the nationwide recall.

And the FDA is now getting tougher as well, calling for further inspections and an outside audit of McNeil Consumer Healthcare. On Monday, the FDA fined Genzyme (GENZ) $175 million for manufacturing defaults. So while J&J shares haven't reacted much to the recall, the recent fine to Genzyme as well as the investigations by Congress mark a time of uncertainty for Johnson & Johnson.