The Tylenol Mafia (27 page)

It was indeed fortunate for Johnson & Johnson that Burke put Collins in charge of McNeil just days before seven people died from cyanide-laced Tylenol capsules near Collins’s boyhood home. The appointment of David Collins to the positions of company group chairman, chairman of McNeil, and a member of the J&J Executive Committee came so suddenly that as of September 30, 1982, his office had not yet been moved up to the fifth floor of Johnson & Johnson headquarters where the offices of all J&J Executive Committee members were located.

The press never reported on the interesting fact that Collins, who had just been put in charge of the company that made Tylenol, had grown up in a city located dead-center in the middle of the Tylenol murders crime scene.
TIME
magazine did mention that Collins had called his former college roommate, attorney Paul Noland, to ask him to be his “eyes and ears” at the Tylenol murders crime scene. But the press did not report that Collins had also hired another boyhood friend, attorney Mike Heroux, to help J&J navigate through the Tylenol crisis. The press also did not report that Collins, Noland, and Heroux had all graduated together in 1952 from Fenwick, a private catholic high school in Oak Park.

The fortuitous appointment of David Collins and the major restructuring of Johnson & Johnson’s order fulfillment and sales and logistics operations all took place less than 30 days before the Tylenol murders. Interestingly, one of the topics discussed during the J&J Executive Committee’s annual three-day strategic planning review following the September 1982 Labor Day weekend, was the disastrous effects that a problem with the Tylenol brand could have on Johnson & Johnson.

“I took some kidding at that meeting for worrying about things I don’t have to,” recalled Burke. “We had been marveling at how lucky we were to be in our industry, to have some very profitable brands doing so well, and I had said, offhand, what if something happens to one of them, like Tylenol? Nothing is impregnable, but it was such an extraordinary business, there didn’t seem to be any downside. Nobody could come up with anything.”

Sometime during or shortly after the J&J Executive Committee meetings in September 1982, Johnson & Johnson executives made significant changes at the top of two operating companies - one that manufactured and sold Tylenol, and one that managed the contracting, order fulfillment, and distribution of Tylenol. When the Chicago poisonings were linked to Tylenol, J&J took charge of the situation, and the FDA simply fell in line.
 
FDA Deputy Director, Mark Novitch, later described the events following the Tylenol murders as if the FDA had been merely a bystander, acting at the direction of James Burke. Novitch said:

The actions that followed [the Tylenol murders] have become a case study in responsible crisis management. Major players were: Jim Burke, chairman of J&J; Dave Collins, chairman of McNeil, the J&J subsidiary responsible for Tylenol; Joe Chiesa, McNeil president; Tom Gates, its medical director; and many other colleagues. If they felt despair and uncertainty, none was apparent. Four decades earlier, J&J had adopted a credo stating the principles on which they would conduct their business. Burke and Collins said the credo told them what to do in the Tylenol crisis and it is impossible to say otherwise.

J&J involved the FDA immediately and continuously. It withdrew the initial lots from which the tampered drugs came and then, in the wake of copycat tamperings, withdrew all Tylenol capsules even though both J&J and the FDA had determined that the tamperings did not occur in its plants. J&J kept the press and public fully informed and even put its chairman in the unaccustomed role of chief company spokesperson. This was one of the first times that the CEO of a major company was used as a spokesperson for a crisis. This effort set a precedent that exists to this day.

On Friday, October 22, 1982, the FDA sent a letter to Johnson & Johnson, officially clearing the company of any responsibility for the Tylenol tamperings. Joseph P.
Hile
, the associate commissioner for regulatory affairs at the FDA, wrote:

We conclude that the contamination did not occur at either [McNeil manufacturing] plant, and was the result of tampering after the capsules had been shipped to distribution points, and most likely after they reached the retail shelves.

Notably, the FDA did not rule out the distribution channel as the true source of the cyanide-laced Tylenol capsules. The FDA also never presented any information to support the tampering-in-the-retail-stores hypothesis.

The manner in which the Tylenol murders investigation was conducted and the evidence inspected - or not inspected – indicates that officials at the time wanted to sweep the details of the Tylenol tamperings under the rug. The evidence that would have revealed the true extent of the tamperings – the Tylenol capsules from Chicago area stores – was destroyed. In addition, every bottle of cyanide-laced Tylenol recovered after the Tylenol murders, was engulfed by incredulous stories, unsubstantiated claims, and improbable circumstances.

Officials from the Tylenol task force said that Johnson & Johnson, while inspecting Tylenol capsules in October 1982, had discovered two bottles of cyanide-laced Tylenol – the seventh and eighth bottles. Johnson & Johnson, however, has never confirmed that it discovered any bottles of cyanide-laced Tylenol. J&J’s 1982 Annual Report states that two unused bottles of poisoned Tylenol were recovered as a result of the withdrawal of Tylenol capsules, but J&J did not actually take credit for finding those bottles. Furthermore, the eighth bottle of cyanide-laced Tylenol was planted into evidence two weeks after the Tylenol murders, and the seventh bottle wasn’t “discovered” until sixteen day after it had been turned over to Johnson & Johnson. Authorities initially misidentified the person who had supposedly turned in the eighth bottle, and they never identified the person who turned in the seventh bottle.

The sixth bottle of cyanide-laced Tylenol - the first one not from one of the Tylenol victims - was discovered among the Tylenol bottles removed from the Osco Drug store in Woodfield Mall. Officials initially said they had found two bottles of cyanide-laced Tylenol at the Osco store, but then changed that story, stating that they had found only one contaminated bottle. Years later, FDA Deputy Director, Mark Novitch, confirmed that two bottles had in fact been recovered from the Osco Drug store. “Two more poisoned containers were found on retail shelves during the sweep that followed [the Tylenol poisoning deaths], recalled Novitch.”

One financial analyst on Wall Street said, “Johnson & Johnson management was quick to cast themselves in the role of the self-sacrificing servants of the people. They generated enormous public sympathy and managed to convince most Tylenol consumers that they [the people] owed the company cooperation in saving the product.”

Larry Foster predicted that consumers would realize “we were victimized along with society” and that because of “goodwill” generated by the 95-year-old Johnson & Johnson, “we may come out of this with a stronger image.”
 
Foster was right. Johnson & Johnson emerged from the Tylenol crisis widely hailed as having provided a shining example of how to handle a major business calamity.

Amid the hysteria, said Foster, Johnson & Johnson tried not to forget about the families of the victims in Chicago, but ultimately he felt that he and his colleagues did not do as much for them as they could have. Foster said J&J originally considered the idea of setting up scholarships for the children affected by the deaths, but that idea fell through.
 
“We wrote them letters and we expressed our great sorrow and regret,” said Foster. “We couldn’t be as open with them as we wanted,” he said, “because the lawyers held us back. They were trying to protect the company.”

The employees at McNeil’s Fort Washington plant had offered to each provide $100 toward a reward for whoever found the person who tampered with their product. McNeil employees wanted to help the victims’ families with emotional support, counseling, and money from their own pockets. Johnson & Johnson executives rejected these generous offers, refusing to allow its employees to provide any emotional or financial help to the victims’ families. They were worried that any expression of compassion or offer of financial support might be construed as an admission of liability. Foster said the potential lawsuits against J&J hit a wall after it was determined that the company had been a victim as well.

As the trial-date for the Tylenol tamperings liability case approached, J&J’s lawyers filed a motion to secure a secret trial in the Circuit Court in Cook County, arguing before Judge Warren D. Wolfson that an open trial might spur copycat crimes. Judge Wolfson denied J&J’s motion for a secret trial. Then, on the eve of the trial, J&J’s lawyers, suddenly anxious to cut a deal, called the plaintiffs’ attorneys and offered to settle out of court. While secret settlement negotiations were being conducted behind closed doors, J&J spokesperson Robert Kniffin told reporters that negligence on the part of J&J could not be proven in any court. “As we’ve said all along, the poisoning and the tampering in Chicago was an unprecedented event,” remarked Kniffin. “We don’t believe there’s any way we could have anticipated them or prevented them.”

J&J’s attorneys pressured each of the plaintiffs to settle their individual Tylenol liability lawsuits, stating that if even one of them refused to sign a settlement agreement, the company would not settle any of their lawsuits. J&J used this all or none scare tactic to keep all of the Tylenol victims’ lawsuits out of an open courtroom. On the afternoon of May 13, 1991, less than 24 hours after the settlement negotiations began, settlement agreements with all of the plaintiffs were finalized.

The plaintiffs and their lawyers were all required to sign confidentiality agreements to keep the terms of the settlements secret. J&J also asked Judge Wolfson to grant a protective order keeping all of J&J’s documents confidential. Wolfson expressed distaste for this type of protective order, saying, “The public has a right to know about events that take place in courtrooms. Courts should not countenance (tolerate) the use of concealment as a bargaining chip.” Prior to making this judicious statement, however, Wolfson had already granted an order sealing all of the documents Johnson & Johnson had turned over to the court.

After the plaintiffs had signed the seven individual settlement agreements, Johnson & Johnson sent Robert Kniffin back out to regurgitate the company line. “Though there is no way we could have anticipated a criminal tampering with our product or prevented it,” said Kniffin, “we wanted to do something for the families and finally get this tragic event behind us.”

Jane Locke, a Loyola University law professor, said it is possible that the civil case against Johnson & Johnson was settled by the company because it was stronger than the company originally believed it was. According to the
Chicago Sun-Times
, “some estimates put the settlement at close to $50 million.” The actual settlement was nowhere near that much.

Based on settlement information provided by some of the Tylenol victims’ relatives, the settlement amounts ranged from about $500,000 to $990,000 per victim. The average settlement per victim was in the neighborhood of $650,000; about $4.5 million in total. The plaintiffs’ attorneys took 40 percent, leaving about $2.7 million ($4.4 million in 2012 dollars) to split up among the spouses, children, and parents of the seven victims.

J&J had dragged its feet for almost nine years before settling the Tylenol murders lawsuits. Conversely, just eight days after Burke had learned about the poisonings, he acknowledged that the original damage control group at corporate headquarters had evolved into three task forces that were working on an “image rescue project.” One task force that concentrated on employee morale had already produced an hour-long videotape made up of news reports and comments by company officials. Burke, in this taped message, informed his employees that “people don’t blame us. They feel we are being victimized just like everyone else.” J&J showed the tape on October 7, 1982, on the employee TV network.

Burke made up his mind on October 10
^th
that all of Johnson & Johnson’s 150 operating companies would pitch in and help re-launch the Tylenol brand. There would be no new name for the brand or a second “fighting” brand as some experts had recommended. “It will take time, it will take money, and it will be very difficult, but we consider it a moral imperative, as well as good business, to restore Tylenol to its preeminent position,” said Burke.

Wayne Nelson agreed. “It would almost be an admission of some kind of guilt in my opinion to walk away from that name [Tylenol]. We’d be very foolish. And even if a third of this business never came back, we’d still have the top-selling pain reliever in the world,” said Nelson, “It’s better than a sharp stick in the eye.”

The planning for the “comeback” phase was already in the works when J&J announced the nationwide recall of all Tylenol capsules. Burke had hired market research consultants to conduct around-the-clock strategy meetings with top aides. He had brought in public relations firms like Burson-Marsteller to manage the media spin, and had enlisted advertising agencies like
Sudler
& Hennessey to promote the re-launch of Tylenol in tamper resistant packaging. Arthur Rosen, an executive from
Sudler
& Hennessey, advised Burke on the timing of the advertising campaign. “You hold back until you’ve created a new package, and then you advertise your product and package together,” he said. “You wait until the issue has been resolved satisfactorily in everyone’s eyes. Even then,” said Rosen, “the ads should totally ignore the cyanide tragedy.” When the new packaging was ready to go, Johnson & Johnson launched a massive advertising and public relations campaign to promote Tylenol products as the first on the market with tamper-resistant packaging.