Johnson & Johnson stock falls after investigation for safety of baby powder

Johnson & Johnson stock is down after being under scrutiny for its baby powder contents.

Johnson & Johnson baby oil bottle after Johnson & Johnson asbestos investigation Source: Bloomberg

Johnson and Johnson stock is down after the company revealed that it was subpoenaed by the US Department of Justice and US Securities and Exchange Commission (SEC). The agencies wanted documents related to the safety of its baby powder products.

Why is Johnson and Johnson being investigated?

Johnson & Johnson is under investigation by the US government agencies for its supposed knowledge about asbestos in its baby powder products . The health care product company has had to settle numerous lawsuits brought by female customers alleging that the asbestos in the talc powder caused them to contract ovarian cancer. Extensive reporting by Reuters and the New York Times in December 2018 showed that the corporation apparently knew about the carcinogenic material in its powder, but kept it hidden from the public.

In a filing with the SEC, Johnson & Johnson noted that it was co-operating with the agencies in their investigations.

‘Decades of independent tests by regulators and the world’s leading labs prove Johnson & Johnson’s baby powder is safe and asbestos-free, and does not cause cancer. We intend to cooperate fully with these inquiries and will continue to defend the Company in the talc-related litigation,’ noted the company.

Why is the US Congress also investigating Johnson & Johnson?

US government agencies are not the only ones investigating Johnson & Johnson. US Senator, Patty Murray, a member of the Senate Health Committee, also wanted the corporation to release documents about the contents of its talc powder.

‘I am troubled by recent reports of an alleged decades-long effort by Johnson & Johnson to potentially mislead regulators and consumers about the safety of one of its products, which may have resulted in long-term harm for men, women and children who used Johnson & Johnson baby powder,’ wrote Murray in a letter to Johnson & Johnson.

Though the company had a positive Q4 earnings report, the reporting about the asbestos has caused a massive selloff of Johnson & Johnson stock that wiped out $40 billion in one day from its market value. It remains to be seen if investors will move past this latest crisis for the corporation.


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