Well, this just stinks for Johnson & Johnson (NYSE:JNJ).
Last month, the company had to recall one version of its Tylenol Arthritis drug because of a "moldy, musty, or mildew-like odor" that it linked to a chemical in the wood pallets used to ship the drugs. Now it's expanding the recall to include a wide variety of over-the-counter drugs including Rolaids antacid, allergy drug Benadryl, and pain reliever Motrin.
The chemical, 2,4,6-tribromoanisole, isn't getting a rousing "2, 4, 6, 8 who do we appreciate?" from the people exposed. The reports of side effects include nausea, stomach pain, vomiting, or diarrhea. Earlier this week, the Food and Drug Administration issued a report chastising Johnson & Johnson for not investigating the problem earlier; reports of the smell apparently date back to 2008.
This doesn't seem quite as bad as Genzyme's (NASDAQ:GENZ) manufacturing issues last year -- the company said the recall won't have a material effect on earnings -- but it still doesn't help Johnson & Johnson keep its immaculate image.
Another tarnish to Johnson & Johnson's image came today in the form of Department of Justice allegations that the health-care giant gave kickbacks to Omnicare (NYSE:OCR) to encourage the pharmacy-services specialist to buy and recommend Johnson & Johnson's drugs. Omnicare has recently settled allegations against it involving "kickbacks" from J&J and Teva Pharmaceutical Industries (NASDAQ:TEVA). Johnson & Johnson says the "kickbacks" were completely legal rebates. Only time, and perhaps a jury, will decide whose version of the story is correct.
Large conglomerates like Johnson & Johnson, General Electric (NYSE:GE), and Honeywell (NYSE:HON) with lots of moving parts are bound to have issues. Heck, even smaller companies like Sequenom (NASDAQ:SQNM) can't control everything. The best investors can hope for is that the stench doesn't reach levels that have a major effect on the companies' earnings.
Johnson & Johnson is an Income Investor recommendation. To see how dividend-paying stocks can offer both secure income and the opportunity for growth, take a free look at this newsletter with a 30-day trial.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Omnicare is an Inside Value recommendation. The Fool's disclosure policy didn't leave that sandwich in the break-room refrigerator.
