Johnson & Johnson's (NYSE: JNJ ) recall woes get worse by the day. The House Committee on Oversight and Government Reform launched an investigation yesterday into the recall JNJ announced last week.
Last Friday, the company recalled 43 over-the-counter children's medications -- liquid versions of Tylenol, Motrin, Zyrtec, and Benadryl. The press release for the recall doesn't make it clear exactly what the problem is: "Some of the products included in the recall may contain a higher concentration of active ingredient than is specified; others may contain inactive ingredients that may not meet internal testing requirements; and others may contain tiny particles."
That multiple-choice answer should have been a big clue that something was seriously wrong, and sure enough, on Tuesday, the Food and Drug Administration said there were serious quality control problems at the plant where the drugs were made.
The immediate financial effects of the recall won't be that big for Johnson & Johnson; it doesn't even break out sales of Tylenol. But there's potential for substantial long-term damage to the Johnson & Johnson brand name. Johnson & Johnson's consumer health division made up 24% of sales last quarter. If the Johnson & Johnson name doesn't mean quality, customers may head to competitors.
Just ask Medtronic (NYSE: MDT ) , which has struggled to regain market share after the leads on its defibrillators had to be recalled. Boston Scientific (NYSE: BSX ) is also battling back from a recall, and it wasn't even a quality issue. Recalls can seriously damage a brand, as Toyota (NYSE: TM ) found out this past spring. And toy companies such as Mattel and RC2 have had to deal with brand-degrading recalls of their own.
Since its Tylenol recall in the 1980s -- which wasn't its fault -- Johnson & Johnson has always been the poster child for how to correctly handle a crisis. It seems we're going to get a chance to see how it handles things when the problem apparently is its fault.