After an Oklahoma judge imposed a $572 million judgment on Johnson & Johnson for its role in the opioid crisis, you might’ve expected the company’s stock to fall.
Instead, it rose as investors appeared to be encouraged that the verdict wasn’t the $17 billion that the state had sought.
But the company still faces serious risk of further financial liability as plaintiffs continue to pursue opioid cases throughout the country. And the bill could add up quickly for J&J if the pharmaceutical company continues to roll the dice in court instead of striking settlements, experts said.
Investors seem to have gotten that message, as well. While the stock peaked at $132.40 on Tuesday – which was up 3.6% for the day – shares closed up 1.4% on Tuesday.
“This verdict does not necessarily mean that liability will be easily or clearly established in the other opioid trials, involving other players, litigating other claims, before other judges,” said Nora Freeman Engstrom, a Stanford University law professor and legal ethics expert. But “for plaintiffs it yielded a clear victory. That victory will reverberate far beyond Oklahoma’s borders.”
Oklahoma’s $572 million opioid judgment: Here’s what comes next for Johnson & Johnson
Monday’s verdict in Oklahoma struck a blow in favor of plaintiffs who blame pharmaceutical companies for exploiting Americans and wreaking havoc with aggressive and deceptive marketing of opioids.
The company vowed in a statement to appeal Monday’s civil judgment, saying the outcome “disregards the Company’s compliance with federal and state laws, the unique role its medicines play in the lives of the people who need them, its responsible marketing practices” and the company’s small role in the crisis. J&J says its drugs have represented only 1% of opioid prescriptions in Oklahoma and the U.S.
The company’s decision to continue fighting the opioids case stands in contrast to settlements struck by others, including Purdue Pharma and Teva Pharmaceuticals, which settled Oklahoma cases for $270 million and $85 million, respectively.
That J&J chose to fight falls in line with the company’s strategy as a combatant in other recent lawsuits involving its products, including thousands of cases in which plaintiffs have alleged that they got cancer from the company’s talcum powder.
“Right now the brand is in the midst of a crisis, and their strategy in the past has been to deny” liability, said Peter Jaworski, an associate teaching professor who teaches ethics at Georgetown University’s McDonough School of Business. “They might need to take a second look at that.”
To be sure, the $572 million verdict won’t cripple the company, which posted a profit of $15.3 billion and revenue of $81.6 billion in 2018.
Plus, it could have insurance to help cover the costs, though it’s possible the company is self-insuring, said Carl Tobias, a product liability expert and law professor at the University of Richmond.
“Insurance would typically cover pharma defendants in a typical product liability case, but it may depend on the language in the contract,” Tobias said in an email.
Credit Suisse analyst Sami Badri said in a research note that investors may be able to breath more easily after Monday’s verdict.
“While it could be years for the appeal to be fully concluded, and considerable uncertainty still remains associated with other ongoing litigation including opioids and talc, we believe today’s decision helped reduce the range of uncertainty related to the potential opioid-related liability (J&J) could face, specifically in Oklahoma, if not across the US more broadly,” Badri wrote.
But investors are taking the wrong approach if they believe the company is off the hook altogether, said Colin Scarola, a stock analyst at CFRA Research who tracks J&J.
“If a plaintiff can persuade a judge or jury that your marketing was misleading, then you’re going to be on the hook for some pretty significant damages,” he said.
The fact that Purdue and Teva struck smaller settlements yet had greater opioid sales in Oklahoma suggests that drug companies may need to seek out settlements instead of rolling the dice in court, he added.
“That’s probably going to send a strong signal to the drug firms that settling on terms you can agree to is a lot better than taking the risk of letting a judge or jury decide what you have to pay,” Scarola said.
J&J gave no indication that it plans to strike settlements.
“The company must responsibly address its litigations, including being willing to go to trial when the facts and law are so strongly on our side,” the company said in a statement to USA TODAY.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.