Johnson & Johnson (NYSE:JNJ) is facing a new round of lawsuits over its DePuy unit's Pinnacle line of metal-on-metal hip implants blamed for poisoning patients, reports Bloomberg. J&J set aside $2.5 billion last year to resolve claims that 8,000 of its artificial hips were defective. DePuy Synthes' Pinnacle hip was allegedly defectively designed and caused metal debris to leech into patients' bloodstreams. The cobalt-and-chromium material caused an infection that forced a patient to have her artificial hips surgically removed, she said in court filings.
J&J stopped selling its Pinnacle devices in August 2013. If J&J found guilty, a panel could order the company to fork over up to $5.78 billion as punishment, says Bloomberg. J&J's earlier settlement of patient lawsuits linked to the ASR hips caused the company pay huge damages. Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia, said, "The first trials in any of these consolidated litigations set the tone for the following cases." He continued, "If J&J loses the first couple of these Pinnacle trials, they better start seriously thinking about coming up with a settlement similar to what they signed off on for the ASR hips."
"This is a very dangerous case for J&J," said Erik Gordon, a professor at the University of Michigan's business and law schools who teaches classes about how drugs are developed and regulated in the U.S. "They could be facing huge damages here and it will be easy for the plaintiffs' lawyers to scare the jury with talk of metal poisoning and increased cancer risks," he added. In my original article I mentioned that DePuy recalled its metal-on-metal hip implants and initiated a reorganization procedure. Faced with an array of challenges, J&J's stock could be under tremendous pressure going ahead. However, I believe that long-term investors should accumulate J&J on significant dips.
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