The Supply Chain Matters blog has featured many previous commentaries related to Johnson & Johnson and the supply chain, manufacturing and quality management challenges related to certain of its consumer brands. A long series of past product recalls in over-the counter (OTC) medicines involving Tylenol, Benadryl, Motrin and Zyrtec date back to 2009 and resulted in the outright temporary closing of a manufacturing facility in Pennsylvania. In July of 2011 there were revelations of an internal investigation led by Johnson & Johnson’s independent directors which points to a direct connection from certain headcount reductions, along with “periodic headcount freezes’ as contributing factors related to product quality breakdowns at the company’s McNeill Consumer Healthcare unit. In May of 2012, there was yet another product recall involving the McNeill OTC unit. Our commentary at the time noted that we did not necessarily want to ‘pile-on’ not so flattering commentary regarding any one specific company, but alas, J&J  seemed to continue go out of the way in accumulating not so flattering headlines. Supply chain issues were not just confined to its OTC products. A pharmaceutical drug division that initiated a sole sourced contract manufacturing facility which later encountered a significant quality problem severely impacted the supply of the ovarian cancer treating drug Doxil, causing global wide concern among treatment physicians.

This week, J&J formally reported its fourth quarter-2012 financial results reporting a surge in quarterly earnings but lighter than expected quarterly sales.  Supply Chain Matters made a special effort to review the earnings transcript to note what progress has been made in addressing the various past supply chain and product quality issues, and we were pleased to note the senior management is openly addressing its initiatives and performance to date. Thus, we felt it important to note such progress in this posting.

In the financial analyst and investor briefing, J&J Chairmen and CEO, Alex Gorsky, noted the following:

One, and something that we’ve been extremely consistent about over the past several years, is returning and repairing some of the quality and supply issues that we’ve had in our OTC, particularly in the McNeil U.S. division. I’m very pleased with the progress that we’re making in that. We mentioned to you that the consent decree that we had designed in conjunction with the FDA was approved and reviewed in October, with very few comments. And given the breadth and scale of that agreement, we felt very good about that. We’ve had teams working hard since then. We’ve achieved all of our major milestones since we’ve submitted that agreement.”

Mr. Gorsky went on to note that the McNeill unit continues to operate in accordance with the consent decree issued by the U.S. Food and Drug Administration (FDA) and has achieved its commitments to date.  The company has now taken a much more prudent approach to re-starting full production with the initial reentry of products like Children’s Tylenol and Children’s Motrin. Over the course of the remainder 2013, J&J has plans to return about 75% of its OTC consumer brands to the marketplace.

Regarding the chronic supply issues related to the drugs Doxil and Caelyx, it was noted that significant progress to restore reliable supply. An alternate manufacturing approach consisting of collaboration between the current third-party manufacturer and another supplier to complete end-to-end production was approved in the E.U. and Japan late in 2012 and in Canada earlier this month.  In the U.S., the Janssen division announced in October 2012 that full access to Doxil has been restored. While Janssen continues to work with the FDA to seek approval of an alternate manufacturing source, the agency is exercising its regulatory discretion to release Doxil manufactured through this approach to the U.S. market to ensure continued full access for healthcare providers and their patients.

Other noteworthy comments from Mr. Gorsky were the following:

Excellence in execution is extremely important. Across our enterprise, we have built greater accountability for quality into the requirements of all of our leaders. It has strengthened quality and compliance at the enterprise level by taking specific steps to reduce variation and increase governance. We’ve also redefined standards and processes in the Johnson and Johnson supply chain to, most importantly, improve the level of execution and to deliver efficiencies that can free resources up for investment.”

For the chairmen and CEO of any large global company to openly address quality governance and supply chain execution consistency with such candor is certainly a sign of top-level commitment for change, accountability and more positive outcomes.

Supply Chain Matters applauds J&J for its continued renewed quality and supply chain efforts and we certainly trust that the company’s efforts will continue to foster positive outcomes in the months to come.

Bob Ferrari