Johnson & Johnson pulled two hip-repair implants off the market Thursday, the latest in a string of products recalled because of quality problems.
J&J's DePuy Orthopaedics Inc. unit said Thursday it is recalling the hip implants because too many patients needed surgeries to replace the devices. The unit had sold about 93,000 of the devices before phasing out production last year. The company said it's withdrawing the “very few” left on the market because new data indicated surgeons needed to replace them at a rate more than twice the industry average.
The latest recall deepens concern about quality controls at the company. This week, J&J's Vision Care Inc. unit withdrew about 100,000 boxes of contact lenses sold in Asia and Europe because a manufacturing problem prompted some customers to complain of pain, stinging or redness. Since September, the McNeil Consumer Healthcare unit has issued a series of recalls pulling more than 136 million bottles of Tylenol and other over-the-counter medicines off the shelves.
“Is this it, or is there more coming?” asked Les Funtleyder, portfolio manager of the Miller Tabak Health Care Transformation mutual fund, who is planning on buying J&J shares when his fund starts Sept. 13 but is keeping an eye out for more problems.
The over-the-counter recalls will cost J&J an estimated $600 million in lost sales this year, not including an undisclosed sum to refit a key Tylenol manufacturing plant that will be shut down about a year, and to upgrade others. DePuy's recall could cost J&J an additional $1.2 billion over five years for the cost of patient medical care and legal liability, Wells Fargo analyst Larry Biegelsen estimated in a note to investors.
The latest recall deepens concern about quality controls at Johnson & Johnson. Above, the company's headquarters in New Brunswick, N.J.
The company's 2009 reported revenue was $62 billion. J&J stock fell 18 cents to $57.80 in 4 p.m. composite trading on the New York Stock Exchange.
J&J Chief Executive William Weldon recently established a team overseeing quality across the company's supply chain to address the manufacturing issues.
Mr. Weldon said in an interview last week that McNeil's troubles, in particular, have taught the company lessons and it would work hard to fix the issues inside the unit and anywhere else at J&J.
Mr. Weldon said the manufacturing problems were isolated to McNeil, which he called an outlier. Yet since then, two more J&J units have issued recalls.
Mr. Weldon wasn't saying the rest of the company was perfect or that it couldn't improve, a spokesman said Thursday, but that J&J had an outstanding record of supplying products overall.
Manufacturing experts say it's difficult for even the most committed companies to avoid periodic issues arising during production, especially for a firm like J&J that makes a mix of consumer goods, drugs and medical devices and leaves a lot of autonomy to its subsidiaries. Yet, the experts say the stream of problems suggests that J&J managers aren't striking the right balance between ensuring quality and controlling costs.
“It must have to do with the people they've got, and their awareness of quality, and their concern about cost and all the issues, trying to balance quality and cost,” said Stephen Byrn, who teaches courses on drug and medical-device manufacturing at Purdue University and helped found its master's program on quality for health-care products.
J&J's decision to issue the recalls reflects the company's “commitment to do what's in the best interest of those who use our products,” the J&J spokesman said. He added that Mr. Weldon had said he didn't believe cost-cutting played a role in any of McNeil's problems.
DePuy, based in Warsaw, Ind., sells several kinds of hip implants. The recalled devices were especially popular for use in younger patients because the devices were thought to be more stable and less susceptible to dislocations than competing products, the company said.
The two recalled products are the ASR XL Acetabular System and ASR Hip Resurfacing System. The ASR Hip Resurfacing System wasn't approved in the U.S. and was only sold outside the country. DePuy sold ASR hip parts in the U.S. for an average price of $6,465 each last year, according to Orthopedic Network News, a newsletter that surveys hospitals to track device prices.
Under generally accepted standards, no more than 5% of patients should have a revision within five years, DePuy said. But new, unpublished data from the National Joint Registry of England and Wales found that the two implants had rates of 12% and 13%, the company said.
The two systems relied on all-metal implants or caps to replace the ball-and-socket in hip joints, rather than using plastic or ceramic surfaces. Such metal-on-metal implants have drawn scrutiny because wear can kick up metal debris that damages surrounding muscle and tissue in some patients, thereby requiring that the implants be replaced earlier than usual.
Surgeons have been warning about the problems with metal-on-metal implants. They try to avoid redoing the hip operations because “revision” surgeries carry risks and successive implants don't tend to fit as well as the first ones.
Revision surgeries “are technically more difficult, they take longer, the patient is more at risk of complications and the recovery is more prolonged,” said Mary O'Connor, who chairs the orthopedic department at Mayo Clinic Florida and is president of the American Association of Hip and Knee Surgeons.
Revision surgeries are also expensive. They cost $20,800, about a fifth, or $4,000, more than the typical cost of procedures putting in the implants, according to the Agency for Healthcare Research and Quality.
DePuy advised doctors to monitor patients with the recalled implants. Dr. Henrik Malchau, an orthopedic surgeon at Massachusetts General Hospital who has done the revision operations in DePuy patients, said he wouldn't replace the recalled devices unless tests showed high ion levels in a patient's blood and damaged soft tissue. “Any surgical intervention is associated with complication and risk of death,” he said.
DePuy said it would cover reasonable costs of monitoring and treatment, including revisions, associated with the recall, and that it will pick up all costs, including those that Medicare would pay.
J&J declined to cite 2009 revenue figures for the recalled hip parts. The company's DePuy franchise posted $5.37 billion in world-wide sales last year, accounting for nearly 9% of total J&J sales. DePuy is one of the largest makers of replacement orthopedic joints, where it competes closely with Zimmer Holdings Inc. and Stryker Corp.

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