J&J Issues Voluntary Recall For Medical Device on Heels of Stock Buyback Announcement

NEW BRUNSWICK, NJ —On Wednesday Johnson & Johnson issued a voluntary worldwide recall of its power morcellators, a device commonly used in hysterectomies to shred tissue into smaller pieces, because of the risk of spreading undetected cancer when morcellation is performed.

New research released last week showed that the surgical devices can spread more types of cancer in a woman’s body than previously thought.

J&J, specifically its Ethicon subsidiary, is the world’s largest manufacturer of the device, formally known as a laporoscopic power morcellator.

In a statement on Thursday, Ethicon said that withdrawing its morcellators is not the same as recalling them, which implies a performance problem.

“The product performs as intended,” stated J&J officials.

As we reported, J&J suspended sales of the controversial device after the US Food and Drug Administration (FDA) warning three months ago that the device may disperse occult cancer in the course of fibroid removal. At that time, the FDA strongly advised doctors to stop using morcellators for removing fibroids in the uterus.

However, J&J did not take its morcellators off the market completely. Instead, the company stated that the device has always been safe and said that it was waiting for further consultation from the medical community.

A J&J spokesman, Matthew Johnson, acknowledged “the uncertain risk-benefit assessment of the procedure.”

“Due to this continued uncertainty, Ethicon believes that a market withdrawal of Ethicon morcellation devices is the appropriate course of action at this time until further medical guidelines are established and/or new technologies are developed to mitigate the risk,” in an email. 

The FDA held a formal two-day hearing on the issue last month and is expected to decide this year whether to restrict or ban doctors from using power morcellators.

A San Francisco gynecologist named Andrew Brill removed himself from the 16-member FDA panel that was formed to advise the government on the safety of morcellators, because he had received nearly $100,000 in consulting fees from Ethicon last year. 

At least two other gynecologists on the panel have had financial ties to manufacturers, according to J&J’s website and other public documents.

The new research-study by Columbia University doctors, found that 1 in 368 women who get hysterectomies have a hidden uterine cancer that is at risk of being spread by a morcellator.

Published in a Journal of the American Medical Association report, the study confirms prior government assessment that use of the tool is risky. This research took into account the records of a significantly larger group of women than the FDA did in its main analysis.

Previously, the risk of having an undetected cancer was thought to be 1-in-10,000.

The market withdrawal of the morcellators comes just weeks after the pharmaceutical giant announced plans to buy back $5 billion in stock, and just one month after it sold one of its most profitable units, Ortho-Clinical Diagnostics, to the Carlyle Group.

At the time of the announcement, the company had $2.87 billion outstanding shares valued at $101.27 per share.

J&J, one of the largest producers of health care products as prescription drugs, Band-Aids and Listerine mouthwash, plans to repurchase the shares via open market and privately negotiated transactions.

In both open market and privately negotiated transactions, repurchases can be done at the discretion of the owners. J&J has stated that it does currently have a timeline by which it hopes to reach the $5 billion mark. 

In Fiscal Year 2013, the company spent $2.82 billion in stock buy-backs.  

The company has been based in New Brunswick since it was founded by three brothers more than 100 years ago.  Recently, the company has come under fire for problems with medical devices such as the power morcellators, pelvic mesh implants,  as well as over-the-counter medicines.

Many activists whose families have been injured by the spread of a highly aggresive cancer following laproscopic surgery have been fighting back.  

“Leading the charge was a Boston heart surgeon whose wife had surgery last December in which the morcellator was used. When a post-operative pathology report showed the presence of cancerous cells, she embarked on a lengthy course of aggressive chemotherapy,” wrote Kathleen O’Brien in the Star Ledger.

“Given his professional connections, Hooman Norchashm, was able to amass evidence that the cancer, leiomyosarcoma, was cropping up far more frequently than surgeons believed.”

Noorchashm started a petition on change.org. J&J’s withdrawal of the tool indicates a win. 

He told the Star Ledger that “he’d still like to see the FDA ban morcellators. Without that ban, gynecologists will be tempted to re-introduce the surgical technique that was popular with patients. (It came with smaller scars and far less recuperation time.)”

An industry analyst, Damien Conover, with Morningstar Equity Research told the Star Ledger: “Withdrawing the surgical tool from the market may offer a bit of protection against those lawsuits – but not enough to spare the company some cost. They’re still going to have to do some kind of settlement,” he said.

Electric power morcellators have been commercially available for 2 decades, since 1993. J&J doesn’t disclose morcellator sales, but they are a very small part of the health-care conglomerate’s overall business, which posted sales of $71.3 billion in 2013.

In 2011, J&J held an estimated 72% of the market for the devices, according to the most recent data provided by iData Research Inc., a market-research firm, according to published reports. 

In a televised Bloomberg interview following July’s second-quarter conference call J&J CEO, Alex Gorsky said: “If we stay focused on the long term – focused on our key strategies we are going to have success. We are proud of our performance. We are really doing a lot of great things.”

In the second quarter of Fiscal Year 2014 (FY2014), the company saw a 9% increase due to the sales of its new hepatitis-C drug, Olysio.

However, executives have stated that they do not believe the sales would keep pace and maintain their current levels.  But officials hope that new products coming on the market soon will boost their finances.

CEO Alex Gorksy said that J&J plan to approve between 10 new drugs through 2017, plus additional uses to 15 drugs already on the market.

Prescription drug sales had risen 21%, or $8.51 billion, and include such medication as Xarelto for preventing heart attacks and strokes ($361 million) and Zytiga for prostate cancer ($562 million). 

When asked about the dip in J&J stock, Gorsky said: “Well you know, first of all we are really proud of our performance in the pharmaceutical, consumer, and medical device business. We are really doing a lot of great things. Helping patient’s live longer healthier happier lives and actually growing our business.”

He said that the company knows it can grow faster than the market, but that it could not predict the market, and wanted, at the end of the day, only the “best science.” He added that the company views results “in a very fact based way.”

At the end of the interview Gorsky reminded us that J&J has paid shareholders a dividend payout for “over 30 consecutive years.”