Johnson & Johnson's McNeil division has a history with removing dangerous Tylenol from the shelves. Flash back to fall 1982:
Wednesday, September 29, 1982--seven people in the Chicago area ingested cyanide laced Extra Strength Tylenol capsules. All died, three of the seven were in the same household. A hospital nurse made the connection based on those three deaths. She went with the police to the home, found the Tylenol bottle and counted out the remaining pills. Six were gone, three adults-two pills apiece, all dead. She sounded the alarm. The media picked it up.
Thursday, September 30--Johnson & Johnson executives learn of the poisonings. It’s estimated 200 million Extra Strength Tylenol capsules were on the shelf or in distribution centers. CEO James Burke started his legendary crisis management effort. He sent the McNeil Consumer Products Chairman to their plant in Fort Washington, Pennsylvania. He formed an Executive Strategy Group, which met twice a day to make decisions on the rapidly developing situation. Based on the bottle lot number, Tylenol recalled 4.7 million capsules.
Friday, October 1--J&J recalled another 8.5 million capsules from their Round Rock, TX plant. McNeil officials urged consumers across the country to discontinue using the capsules pending further investigation. They posted a $100,000 reward for information leading to the arrest and conviction of the person or persons responsible for tampering with the drug. McNeil set up a telephone number with recorded information and another number to call for answers to further questions.
Monday, October 4--J&J announced it halted Tylenol production and advertising.
Tuesday, October 5-J&J recalled all Tylenol products, an estimated 31 million bottles at a cost of $100 million. That happened within a week of the deaths.
What message did the customer get? If J&J can’t sell a safe product, they won’t sell anything.
What happened? At the time of the scare Tylenol’s market share collapsed from 35% to 8%. It rebounded in less than a year, a move credited to J&J's prompt and aggressive reaction. In November, it reintroduced capsules but in a new, triple-sealed package, coupled with heavy price promotions and within several years, Tylenol had become the most popular over-the-counter pain medicine in the US.
Flash forward to the present state of Tylenol, McNeil and Johnson & Johnson. Consider the spate of recalls in the last year:
Recall #1 September 2009--J&J recalled liquid Children’s and Infants’ Tylenol Products due to “an unused portion of one inactive ingredient not meeting all quality standards.” The recall covered 21 products and 57 production lots.
Recall #2 November--The company recalled five lots of its Tylenol Arthritis Pain 100 count with the red EZ-open cap due to reports of an unusual moldy, musty, or mildew-like odor that led to some cases of nausea, stomach pain, vomiting and diarrhea.
Recall #3 December--McNeil expanded that recall to include all available product lots of Tylenol Arthritis Pain caplet 100 count bottles with the red EZ-open cap.
Tylenol conducted three official recalls in 2009 and an unofficial one. In summer 2009 contractors hired by J&J carried out a scheme to secretly recall damaged Motrin by going store by store and quietly buying every packet. Moving on.
Recall #4 January 15, 2010--McNeil recalled an undisclosed number of containers of Tylenol, Motrin and other over-the-counter drugs after consumers complained of feeling sick from an "unusual" odor. The list of recalled products is 15 pages long. The public story is a chemical got transferred to the product from wooden pallets.
Recall #5 April 30--McNeil recalled some 50 children's versions of non-prescription drugs (136 million bottles), including Tylenol, Motrin and Benadryl. Johnson & Johnson suspended production at the Fort Washington, Pennsylvania plant.
The FDA detailed dusty and filthy conditions at the plant, including "incubators with a large amount of visible gray and brown dust/debris, a large hole in the ceiling and thick dust covering the grill inside a filtered cabinet."
In addition, the FDA said some drums used to transport raw materials to the Fort Washington facility were contaminated with a bacteria identified as B. cepacia. It’s dangerous to people with weak immune systems. However, no bacteria was found in the final product.
McNeil failed to follow up on 46 consumer complaints received from June 2009 to April 2010 "regarding foreign materials, black or dark specks."
The FDA stated the plant "does not maintain adequate laboratory facilities for the testing and approval (or rejection) of components of drug products." (CNN)
These FDA findings are serious. They speak to problems with suppliers and processes.
May 4—-J&J said it is working in close consultation with the FDA.
May 27--Congress held a hearing on the recalls. CEO William Weldon sent Colleen Goggins, Chief of J & J’s consumer products division to testify. Fortune stated: “Goggins's approach -- one part apology and promise to do better to three parts disclaimer and evasion -- embodies J&J's recipe for addressing the crisis. The company has been less than forthcoming about the Motrin recall, which it still defends, and was rebuked by a Congressman for failing to respond quickly to requests for information. "At every step in this process J&J has not been transparent," says Don Riker, a consultant to OTC drug companies. "Every bit of information is cagey, secretive, and micromanaged."
June 24—J&J said in a press release: “it does not anticipate having sources of supply before the end of 2010 for most of the products that were produced at its Fort Washington manufacturing facility.
Recall #6 July 8-—J&J recalled 21 lots of over-the-counter medicines as follow up to its January recall.
July 9--J&J was sued by US consumers for fraud and racketeering. The suit demands cash compensation for recalled children’s cold and allergy medicines. The four cases were brought in the Northern District Court of Illinois, Chicago. (Bloomberg) There’s irony in the case being brought in Chicago, the site of the 1982 Tylenol poisonings.
September 5--Financial Times interviewed J&J CEO William Weldon.
September 9--Weldon went on CNBC, speaking with Maria Bartiromo. (The video is embedded at the end of this post.)
Nearly a year after the first official recall, Weldon talked solutions. They closed the Fort Washington plant, laid off 300 workers, and replaced a number of senior executives. Weldon established an executive position responsible for J&J's supply chain. The position reports directly to him. J&J expects a loss of $600 million in revenue due to the recalls.
Reading between the lines, J&J has supplier quality problems. They face other significant concerns, according to Fortune magazine. Consider stories from a series of articles:
1. CEO William Weldon stayed behind closed doors, granting interviews only in the last few weeks. Weldon became CEO in 2002. His leadership has been marked by mergers and cost cutting.
2. McNeil quality began to slowly weaken in 2002. “The culprit was a familiar one -- cost cutting -- but in a subtler form. There were no wholesale layoffs in quality control. Instead experienced staffers were repeatedly laid off and replaced with newbies who mostly lacked technical pharmaceutical experience. By 2008 the analytical laboratory, formerly staffed almost entirely by full-time scientists, was half-full of contract workers.
"Once stricter than a schoolmarm, the department grew lax. The team that tested the production lines was dubbed the "EZ Pass system." In one instance an engineering flaw on a line made it difficult to clean liquid-medicine bottles. Rather than find a way to fix the problem, an engineer says, the team instead tried to simply eliminate that check from the test. "They were trying to take a lot of short cuts.”
3. One day in 2005 a batch of more than 1 million bottles of St. Joseph aspirin failed a quality test because a sample didn't dissolve properly. Following company procedures, two employees blocked the batch from being shipped. Their manager then called them into his office. "He said, 'You like working here? This should pass. There's no reason this should fail.'" Ultimately the two quality workers were ordered to retest the drugs, then average the new scores to arrive at a passing grade so that the pills could ship. Says one of them: "You get to the point where, like me, you end up doing what you're told."
4. The last few stories show McNeil already had a compromised internal quality function. Then came the integration with Pfizer’s consumer products division. The target was $500 to $600 million in cost savings from combined production lines. One former executive described the environment. "I was given savings goals that were mind-boggling, unheard-of. They were raised by 25% to 30%."
5. A Vice President remembers arguing with McNeil executives about how much it would cost to transfer Pfizer production lines to McNeil's Fort Washington plant, an arduous process that is heavily regulated. "The normal cost to do a transfer for a product might be $600,000" he says. "Those folks would say, 'That's way too expensive. It's only going to cost $250,000.'" McNeil employees knew it would be nearly impossible to meet those demands, he says, without screwing the process up. But they did it anyway for fear of being fired.
That same year, 2007, J&J announced it was laying off more than 4,000 people. The workforce at the Fort Washington plant was slashed by 32% between 2005 and 2009. The biggest cuts came on the factory floor.
A layoff casualty was the corporate compliance group, a SWAT team meant to keep the various quality-control groups in line. A former executive said after the group was cut, some divisions lost their focus on quality. "The heads of the operating companies let their hair down."
6. Weldon’s plan to hire a chief quality executive rankled staffers, given the 2007 elimination of J&J’s corporate compliance group, which rode herd on quality.
7. Weldon gave two drastically different messages to Fortune, “We hope we never experience this again.” “Quality remains our #1 focus.”
It's clear William Weldon's focus has not been quality. Weldon's mark is a never ending cycle of been doing more with less, interspersed with stretch goals. William Weldon isn't alone.
Four years before the Texas City refinery explosion, BP issued a stretch goal. "Reduce business unit cash cost for the year 2001 by at least 25 percent from the year 1998 levels."BP CEO Lord John Browne oversaw that decree with deadly consequences. Browne is doing the same for the British government, cutting the budget by 25%. Stretch goals can break production processes, as William Weldon knows. Browne and Weldon are in good company. It's a club, one producing a record "wealth gap" along with "buyer beware."
Members of San Angelo's Sunrise Rotary Club will recognize much of this information. They heard Dr. Deming's management theory, something badly needed in today's world. It seems quality has no meaning anymore.
Update 12-13-10: J & J recalled Mylanta, AlternaGEL, contact lenses and Rolaids. "Recall Bill" Weldon met with Tim Geithner. With 80% of drug or drug ingredients coming from China or India, did they discuss how medicine taking has turned into Asian Roulette?
Update 1-14-2011: Yet another Tylenol recall due to insufficient or undocumented equipment cleaning.
Update 4-9-11: J&J settled with the Justice Department for criminal wrongdoing for $70 million. The agreement resolves "improper payments by J&J subsidiaries to government officials in Greece, Poland and Romania in violation of the Foreign Corrupt Practices Act (FCPA) and kickbacks paid to the former government of Iraq under the United Nations Oil for Food Program."
Update 4-17-14: Heinz may be the next Tylenol or BP.