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Johnson & Johnson (JNJ) has a lot on its plate with the lawsuit regarding its antipsychotic drug, Risperdal, and the side effects thereof.

This is a very serious case. As of very recently, Johnson & Johnson has been found guilty in Arkansas of hiding or minimizing the risks its new antipsychotic drug may have on patients. The fine, which currently stands at $1.2 billion, was leveled against Janssen Pharmaceuticals (a Johnson & Johnson subsidiary) and is the largest on record for a pharmaceutical company. What's more, this is far from being the only financial loss experienced by Johnson & Johnson in relation to this drug in recent months. In Massachusetts, the state government has requested that Johnson & Johnson's chief executive, Alex Gorsky, be made to testify in a case that has been ongoing since 2010. Also, in Texas, the company has already paid an amount of $158 million to settle a Medicaid scandal related to the drug. The scandal involved accusations against Johnson & Johnson for making poorer Medicaid subscribers pay high process fees for an overrated drug.

The main outrage against these two companies, after the actual side effects caused by their unsafe drug, is that they put profits before people. If Johnson & Johnson and Janssen Pharmaceuticals are willing to compromise on the safety of their patients and clients, then there is no reason for us to assume that they have the best interests of their stockholders at heart either.

Unfortunately, the size of the fine may cause even further financial damage to Johnson & Johnson. Several states have pending lawsuits against the company, and now that they have seen a $1.2 billion fine successfully leveled against it they are less likely to settle. They know now that they have a very good chance of winning high numbers in court. Knowing this, it is safe to assume that the company will experience a decline fairly soon. This is despite claims by Johnson & Johnson that the lawsuit will "not affect the company in any material way."

Johnson & Johnson is not the only pharmaceutical company currently under scrutiny by the law. Pfizer (PFE) is also in trouble. The recent questions raised regarding whether or not Pfizer could be held at least partially accountable in the asbestos lawsuits leveled against its now bankrupt subsidiary Quigley have been answered, but the news is not good as far as Pfizer is concerned. It has been decided that Pfizer is accountable for the situation, and the final verdict will soon tell what the company will have to do as a result of its accountability. While other companies, such as Abbott Laboratories (ABT), have managed of late to keep on the right side of lawsuits, Johnson & Johnson and Pfizer seem to not have the same luck.

Johnson & Johnson plans to appeal. According to the main spokesman for the company, the state was unable to prove that any patients on the drug actually experienced any side effects. The side effects that the drug is supposed to induce are weight gain, an increased risk of diabetes, and an increased risk of stroke in elderly patients. The company has also been accused of misleading doctors in relation to the effectiveness of the drug and of marketing the drug as safe to be used by children and the elderly, although this was allegedly not approved. Johnson & Johnson maintains that it complied with state laws and did not mislead anyone. The case is certainly one that warrants close watching as Johnson & Johnson stands a chance of coming out on top still.

However, even if Johnson & Johnson is cleared of misleading the general public regarding the drug, it still seems that Risperdal is overpriced considering what can do. Not to mention, there are still a number of cheaper generics that offer the same results.

While companies such as Johnson & Johnson and Pfizer struggle with legal difficulties, Abbot Laboratories still holds strong. Abbot currently has the top-selling drug on the market, Humira. Pfizer once again loses out on this front. Its drug, Lipitor, was once the leader, but has since been knocked out of the running by various generics that have reached the market. Teva (TEVA) also appears to be ahead of the game with the approval of its new generic sleep disorder drug, Provigil, although it may be facing some stiff competition in the process. GlaxoSmithKline (GSK), another rising competitor to Johnson & Johnson, recently raised its stake in Theravance due to the company's confidence in its new drug for chronic obstructive pulmonary disease, Relovair.

Varying opinions can be found regarding the possible future outcomes for Johnson & Johnson. Many claim that the recent lawsuits have left Johnson & Johnson "riddled with problems," which effectively means that it is very difficult to know whether or not this company is a safe bet going forward. There is not a lot of positive news to go on, and it seems that the better tactic at this point may be to wait and see what happens in the near future. If the lawsuits truly have no influence on the overall stability of the company, then there is no harm done. However, it is difficult to predict things of such legal complexity.

Yet, there are still those that remain positive. Despite the stiff competition and severe lawsuits, Johnson & Johnson still has a number of advantages in its favor. The stability of this company can be seen in the fact that it is one of the very few remaining companies with an AAA credit rating, and it is probably the most diversified pharmaceutical company currently in operation. It is still referred to as a "dividend growth champion" and may still be one you can safely put your trust in despite the run of recent bad press.

Source: Johnson & Johnson Will Tumble On Risperdal Lawsuit, Bad PR