Johnson & Johnson Criticized Over Handling of Thousands of Lawsuits Related to Defective Artificial Hip Devices Recall

By on August 22, 2011

Healthcare giant Johnson & Johnson (JNJ), which is facing thousands of lawsuits  over its ASR™ Hip System, is reportedly taking an unusual step to avoid and limit its financial exposure associated with the recall of its defective orthopaedic device, according to Reuters. DePuy Orthopaedics, Inc., a Johnson & Johnson company and leading global provider of orthopaedic devices, recalled the ASR hip system in response to higher than expected failure rates.  The National Joint Registry (NJR) of England and Wales reported a five-year revision rate of approximately 12% for the ASR™ Hip Resurfacing System and approximately 13% for the ASR™ XL Acetabular System as stated in an August 26, 2010 J&J press release.

Instead of handling the recall directly, DePuy hired Broadspire Services Inc, a third party, to administer patient claims for out-of-pocket medical costs associated with the recall. This move has drawn criticism and debate among healthcare industry experts and lawyers. According to Reuters, while some view it as efficient outsourcing, others see it as a way for J&J to limit its liability and payout while gaining control of medical records and other material that could be used against patients in court.

While DePuy spokeswoman Lorie Gawreluk characterizes Broadspire’s role as benign, others disagree. “Doctors who are evaluating these cases are being paid indirectly by DePuy, and research suggests that even when we are very well-intentioned we can be influenced by conflicts of interest,” said Kristin Smith-Crowe, associate professor of management at the University of Utah, who specializes in business ethics. “This is a bit of a red flag in terms of the way this situation is set up.”

DePuy offered doctors $50 to give their patients a set of forms including a form letter from doctor to patient, written by DePuy, asking the patient to set up an appointment to discuss any concerns and to bring with them a signed medical release giving the physician permission to share information with DePuy. Alex MacDonald, a partner at MacDonald Rothweiler Eisenberg who negotiated billions of dollars in settlements over the diet-drug Fen-Phen, opined that J&J is using doctors to identify potential lawsuit claimants.  “I have been doing this work for 35 years and it is almost unprecedented for a large corporate defendant to run out and preemptively attempt to identify potential claimants,” said MacDonald.

A July 19 Financial Times article reported that J&J’s 20% profit decline for Q2 2011 compared to Q2 2010 due to lawsuits and product recalls.

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