The Johnson & Johnson Tylenol Controversies

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Case Details:

Case Code : BECG015
Case Length : 13 Pages
Period : 1975 - 2001
Pub. Date : 2002
Teaching Note : Available
Organization : Johnson & Johnson
Industry : Drugs and Pharmaceuticals
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Inspired by the discoveries5 of Sir Joseph Lister (Lister)6, Robert Wood Johnson (Robert) and his two brothers7 formed a partnership firm to nurture the idea of a practical application of Lister's discoveries.

Robert planned to enter the surgical dressings industry with a new type of readymade, sterile, wrapped and sealed surgical dressing in individual packages and suitable for instant use without the risk of contamination. In 1887, the trio converted the partnership into a company and the company was incorporated as Johnson & Johnson. Over the years, J&J established itself as a leading player in the healthcare industry. The company introduced revolutionary surgical dressings, acquired established companies8, and expanded internationally. In 1956, Tylenol became a part of J&J, when the company acquired McNeil Laboratories9. Tylenol was sold as an over-the-counter (OTC)10 drug.

During the 1960s, J&J aggressively promoted Tylenol among doctors and pharmacists as an alternative pain reliever. Soon, the product became very popular among consumers, as it was less irritating to the stomach as compared to other OTC analgesics11 like Aspirin or Ibuprofen (See Exhibit I).

In 1974, J&J acquired StimTech, a healthcare company selling a unique product - Transcutaneous Electronic Nerve Stimulator (TENS). The product reduced pain by electronic means and was claimed to be effective against headaches, backaches and arthritis. Industry observers expected TENS to become a substitute for analgesics including Tylenol. However, while J&J's marketing made Tylenol the leader of the US analgesics market, TENS failed. StimTech's founders filed a suit against J&J saying that the latter bought the company to suppress TENS' growth as it was seen as a potential competitor to Tylenol. StimTech's founders won the suit and J&J had to pay them US$170 million. In early 1975, Tylenol faced heavy competition from a similar low-priced product called Datril, manufactured by Bristol-Myers...

Excerpts >>

5] Identified airborne germs as a source of infection in the operating room.

6] A noted English surgeon.

7] James Wood and Edware Mead Johnson.

8] Some of the major acquisitions of J&J included McNeil Consumers Products Ltd., Frontier Contact Lenses, Janssen Pharmaceutica, RoC S.A and Neutrogena Corp. (manufacturers of skin and hair care products), Clinical Diagnostics, Biopsys Medical (produced products for minimally invasive breast biopsies), DePuy, Inc. and Cordis Corp.

9] A manufacturer of pharmaceutical products including Tylenol.

10] Drugs that can be purchased without a doctor's prescription.

11] Pain relieving medications.


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