Johnson & Johnson said it plans to pay $6.5 billion over 25 years to settle most of the lawsuits in the U.S. about its talc-based products causing ovarian cancer if the claimants agree. For years, these lawsuits have caused J&J problems, both financially and in terms of public image.
J&J believes its talc baby powder and other talc products are safe, but about 99% of the lawsuits are about ovarian cancer. To deal with this, J&J set aside $2.7 billion in the first quarter, raising its total reserve for talc claims to $11 billion.
The settlement plan involves using a third company, LTL Management, to handle the bankruptcy process. J&J tried this before, but the courts said no. LTL Management was made to take on the talc-related liabilities.
Now, J&J needs approval from the claimants. There will be a three-month voting period. If 75% of the claimants agree, the bankruptcy settlement will go through, ending the lawsuits and preventing future ones. In the past, claimants didn’t get to vote in LTL Management’s bankruptcy cases, but this time they will.
J&J says most claimants support the deal, based on discussions with their lawyers. “We firmly believe this plan is in the best interest of claimants and should receive a favorable and immediate confirmation from the bankruptcy court,” said Erik Haas, J&J’s worldwide vice president of litigation, during the call.
He argued that the settlement is a much better outcome for claimants than what they might expect from a trial.
“As our track record shows, most claimants have not received any compensation, nor are they likely to ever receive anything from a trial,” Haas said. “Considering the slow pace of trials, it would take decades to go through all the remaining cases, meaning most claimants will never have their day in court.”
However, some lawsuits have resulted in large payouts for claimants. For example, 22 women were awarded around $2 billion because they claimed their ovarian cancer was caused by asbestos in J&J’s talc products.
J&J’s stock closed more than 4% higher on Wednesday.
The remaining lawsuits are about a rare cancer called mesothelioma and will be handled separately from the new settlement plan. J&J says it has already resolved 95% of the mesothelioma lawsuits filed so far.
On Wednesday, J&J also announced it reached “final and comprehensive” settlements to resolve an investigation by over 40 states into claims that the company misled patients about the safety of its talc baby powder and other talc-based products.
The company has also reached a preliminary agreement to settle claims brought by suppliers of its talc, such as Imerys Talc America, Cyprus Mines Corporation, and their related parties.
