In a thorough look at Johnson & Johnson's evolving corporate culture, Fortune magazine says the firm's decision to shift its McNeil business into its consumer products group led to a noticeable drop in quality control in favor of cost savings.
The article posted online Aug. 19 says after J&J acquired the Pfizer Consumer Healthcare portfolio in 2006 and integrated it with McNeil, it subsequently moved McNeil from the pharma group to consumer products, which focused more on marketing than manufacturing, according to former J&J employees interviewed for the story.
To meet merger spending targets, execs allegedly leveraged McNeil's healthy profit margins to achieve greater manufacturing efficiencies. As a result, manufacturing staff and equipment budgets were downsized and QC suffered, Fortune claims.
Fortune says J&J CEO William Weldon has admitted to co-workers "he didn't understand the consumer division" and both the leadership and Wall Street analysts generally treat the business as an afterthought.
Last week, Weldon internally announced plans for a new QC framework encompassing all of J&J (reported by the Wall Street Journal here).
Presumably, J&J's restoration of reliable manufacturing practices is the minimum expected by FDA and Congress, both of which continue investigating the company. Whether anything can be done to assuage disenchanted and fearful consumers remains another story.
Whereas J&J's response to the Tylenol cyanide tampering cases in 1982 is hailed as a model corporate response, Fortune says the firm's present demeanor regarding its mistakes and recalls is characterized more by "disclaimer and evasion" than heartfelt apology and plans for action.
Will consumers return to paying premium prices for Tylenol, Benadryl, Motrin and Zyrtec products once the recalls are resolved and merchandise returns to retail? Perhaps. But now more than ever, they have less reason to do so. Perrigo is betting on many consumers making a permanent switch to its private-label products, while Novartis and Prestige Brands have introduced their own OTCs to fill the void left by recalled liquid Children's Tylenol.
It's going to take more than Band-Aids to heal J&J's consumer business wounds.
(As J&J's quality control and recall issues continue to reverberate across the OTC industry, keep current with updates and analysis from "The Tan Sheet". Start your subscription with a free issue by clicking here.)
- Dan Schiff (d.schiff@elsevier.com)
