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Tylenol Scare of 1982

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    Executive Summary Law and Ethics often refers to the concepts of moral and legal rights, and focuses on one contemporary dilemma that raises major moral and legal questions. This research paper analyzes the ethical issue that took place in 1982, many people know it as the Tylenol scare of 1982. The ethical problem was faced by Tylenol, known as the most successful over-the-counter product in the United States at the time of the issue. The issue arised when seven people in Chicago were reported dead after taking extra-strength Tylenol capsules.

    After investigation it was reported that an unknown suspect replaced Tylenol Extra-Strength capsules with cyanide-laced capsules, resealed the packages, and deposited them on the shelves of at least a half-dozen or so pharmacies, and food stores in the Chicago area. Once the connection was made between the Tylenol capsules and the reported deaths, public announcements were made warning people about the consumption of the product. The media added to the issue by creating sensational ways of warning people about the product and breaking the story out by hurting the reputation of the company.

    At this stage Johnson & Johnson was faced with the dilemma of the best way to deal with the problem without destroying the reputation of the company and its most profitable product. The key stakeholders who were part of the ethical issue were firstly, the consumers. The consumers were the most concerned they were the target and they were not certain if proper precautions were taken regarding the ethical problem. Then came the general public who was panicked when news of the contamination-related deaths broke.

    The competition can also be considered a stakeholder as pharmacies across the USA reported a significant slowing in the sales of all acetaminophen-based products during the scare and the competitors were significantly affected in an indirect way. Another major stakeholder involved was the media as approximately 180,000 newspaper stories were run in the USA nationally regarding the Tylenol crisis, and hundreds of hours were dedicated to the reporting. It is also obvious that all the shareholders of the company were majorly affected by the problem as there was a 17. 24% drop in Johnson & Johnson stock prices.

    Lastly, many local communities were affected as cities and towns employed emergency services such as police and fire departments to drive through residential areas broadcasting warning through loud speakers. Lastly, recommendations as to how Johnson & Johnson can prevent a similar crisis in the future as well as strategies to effectively handle future crises if they do arise will be examined. Some of the following will be discussed: -Putting security measures in place to screen every individual/employee. -Hiring seasoned qualified staff to reduce human errors in production. Having staff sign off on production steps. -Reviewing PR policies. -Using mass media for public announcements. -Seeking legal action against false reporting. The report on the crisis and steps going forward will be concluded on the final page. The Industry In the 1980’s, the average pharmaceutical company would invest 12 years and nearly $200 million to get one drug product on the market. This tedious time period consisted of many obstacles such as research and development, clinical trials, government approval for patents, approval from various regulatory bodies and excessive sales & marketing budgets.

    These high entry barriers did double duty for professionals – they made it difficult for new companies to enter the field and also served as protection from competition for those already established in the field. Once in the field, all this hard work did not guarantee in-store shelf life for the end product but the risk of high reward was worth the labour for those in a position to try. The pharmaceutical sector had numerous profitable companies in the 80’s like Genentech, Amgen and Johnson & Johnson, but the businesses were quite divided and had few competitors.

    Different companies focused on developing various drugs which made internal growth opportunities huge. Companies grew at a rapid rate and their market shares of no more than 5% for each company remained untouched. Each new drug that hit the market between 1981 and 1983 made at least $36 million for its investors making this industry more profitable than other sectors at the time by 3%. This sector remained unthreatened by replica products until the mid-80’s due to patent laws.

    Up until this point substitutes for prescription drugs were not allowed and the laws forbid other companies to duplicate brand name drugs. The 1980’s saw a surge in vaccine litigation. In 1982, unethical conduct continuously put the pharmaceuticals industry in the hot seat. American citizens began filing lawsuits against four then-dominant drug companies (Merck, Wyeth, Lederle and Connaught) who in turn blackmailed the US Congress by threatening to stop selling vaccines in America unless a law was passed giving them complete immunity from prosecution for two reasons. ) The whooping cough vaccine was causing brain inflammation and death in many children. 2) After taking the polio vaccine orally, many children slowly became crippled while adults had similar outcomes after taking the vaccine. By 1986, Congress granted the pharmaceutical companies partial liability and implemented the National Childhood Vaccine Injury Act. This act protected a citizen’s right to sue when the companies had the technological abilities to make a vaccine less toxic but refused to do it.

    Today there are 6 pharmaceutical companies making vaccines for children (Merck, Wyeth, GlaxoSmithKlein, Sanofi Pasteur, Medimmune and Novartis). In addition, consumers had little to no power and the drug companies took advantage of this for maximum profits. The lack of competition allowed companies to raise their prices as they pleased with little opposition and biased doctors often prescribed brand name prescriptions to get the most medically effective solution no matter the cost. Consumers believed everything their doctors recommended because they did not have resources in place to better educate themselves.

    Prescription drugs were not publicly advertised nor did consumers have access to health related websites like most do today, so they could not take an active role in their medical decision making. The Organization McNeil Consumer Healthcare, a subsidiary of Johnson & Johnson and the producer of Tylenol, and Johnson & Johnson itself. The first to be founded was McNeil Laboratories, founded by Robert McNeil in 1879 when he acquired a drugstore. Johnson & Johnson was founded seven years later in 1886. Its founders, Robert Wood Johnson and his two brothers James Wood and Edward Mead Johnson, created the partnership to develop sterile dressings or hospitals. In 1955, the Tylenol brand was created with the development of Tylenol Elixir for children. The name Tylenol was created by the McNeil sales team using letters from the product’s main ingredient, acetaminophen. Tylenol was marketed as an effective painkiller but without the side effects of aspirin. It was marketed specifically to physicians and pharmacists as a safer alternative to Aspirin. In 1982 Tylenol was known as the most successful over-the-counter product in the United States with over one hundred million users.

    Tylenol was responsible for 19 percent of Johnson & Johnson’s corporate profits during the first 3 quarters of 1982. The medicine accounted for 13 percent of Johnson & Johnson’s year-to-year sales growth and 33 percent of the company’s year-to-year profit growth. Tylenol was the absolute leader in the painkiller field accounting for a 37 percent market share, outselling the next four leading painkillers combined, including Anacin, Bayer, Bufferin, and Excedrin. Today, Johnson & Johnson operates more than 250 companies in 60 countries in the healthcare industry.

    The company does business in three segments: medical devices and diagnostics, eye care and pharmaceuticals. The company tends to post growths in revenue every year (they reported revenue of $65,030,000 in 2011), and employs 114,000, a number which is also growing consistently with the organization. This vast array of products and wealth makes the company very stable and with many resources, which would make dealing with crises in the future much easier as the company has other successful products to fall back on in the short term as they rectify any issues. The Ethical Issue/Problem

    In October of 1982, Tylenol faced a tremendous crisis when seven people in Chicago were reported dead after taking extra-strength Tylenol capsules. It was reported that an unknown suspect replaced Tylenol Extra-Strength capsules with cyanide-laced capsules, resealed the packages, and deposited them on the shelves of at least a half-dozen or so pharmacies and food stores in the Chicago area. The company determined that the cyanide was not introduced into the bottles at the factory, which left only one other possibility: that they were tampered with once in-store.

    The FBI, Food and Drug Administration (FDA) and law enforcement agencies realized that someone had methodically taken the Tylenol bottles off the shelves at the stores where they were sold, filled the capsules with cyanide and returned them back to the shelves at a later period. Investigators had no evidence as to who might have committed the heinous crime and there was continuing fear that more deaths might occur unless they caught the Tylenol terrorist. It was known that the capsules were replaced with 65 milligrams of deadly cyanide capsules, 10,000 times more than what is necessary to kill a human..

    Once the connection was made between the Tylenol capsules and the reported deaths, public announcements were made warning people about the consumption of the product. Johnson & Johnson was faced with the dilemma of the best way to deal with the problem without destroying the reputation of the company and its most profitable product. Johnson & Johnson responded by not ducking or denying responsibility and recalled millions of bottles, rushed executives out to express concern for the public, made the new bottles tamper-proof, and gained enormous goodwill that has paid dividends to the company.

    Johnson & Johnson conducted an immediate product recall from the entire country which amounted to about 31 million bottles and a loss of more than $100 million dollars. Additionally, they halted all advertisement for the product. Although Johnson & Johnson knew they were not responsible for the tampering of the product, they assumed responsibility by ensuring public safety first and recalled all of their capsules from the market. In fact, in February of 1986, when a woman was reported dead from cyanide poisoning in Tylenol capsules, Johnson & Johnson permanently removed all of the capsules from the market.

    At stake were the reputations of McNeil Consumer Products, who manufactured the over-the-counter Tylenol capsules, and its parent company, Johnson & Johnson (J&J). The future of both companies greatly depended on how they were able to handle the alarming situation. The main problem they faced was that the drug, once trusted by millions worldwide, was now equated with death. Their first steps were to inform the public, find the source of the poisoning and determine if the cyanide had been impregnated into the capsules at the factory where they were manufactured or elsewhere. The cost was a high one.

    In addition to the impact on the company’s share price when the crisis first hit, the lost production and destroyed goods as a result of the recall were considerable. Tylenol acted quickly, with complete openness about what had happened and immediately sought to remove any source of danger based on the worst case scenario, not waiting for evidence to see whether the contamination might be more widespread. Within five months of the disaster, the company had recovered 70% of its market share for the drug and the fact this went on to improve over time showed that the company had succeeded in preserving the long term value of the brand.

    Shortly following the Tylenol murders, J&J received a handwritten extortion letter demanding $1 million dollars for an end to the poisonings. The extortionist asked J&J to respond to his demand via the Chicago Tribune. Instead, the company contacted the authorities who began to trace the letter’s source. It didn’t take them long to trace the letter to a man named James W. Lewis, a tax accountant and known con artist, who was also sought in connection with the brutal murder of an elderly man in Kansas City and a jewel robbery.

    The police quickly issued a warrant for Lewis’s arrest in connection with the Tylenol killings. On November 11, 1982, J&J held a news conference stating that they were going to reintroduce the Tylenol products that were temporarily pulled off the market. However, this time the bottles were wrapped in new safety packaging. In an effort to restore consumer confidence, the new Tylenol bottles contained a triple-seal tamper resistant package. Johnson and Johnson spent heavily to advertise the new packaging and offered consumers a $2. 50 coupon towards the purchase of any Tylenol product.

    It took less than two months before consumer confidence was restored. According to Steven Fink’s book, Crisis Management, J&J was able to “regain more than 98 percent of the market share it had before the crisis. ” Key Stakeholders General Public: American consumers panicked when news of the contamination-related deaths broke. Instead of risking the intake of contaminated product, many consumers chose to simply deal with minor aches and pain. Customers: This stakeholder was obviously affected due to the seven casualties incurred by the tampered with product.

    The families of those affected settled civil suits outside of court. Many customers who took the product in close proximity to initial reports panicked, phoning poison control centres asking for first aid and asking if they were in danger. Pharmacies lost profit due to the previous popularity of Tylenol and its contribution to their revenues. Competition: After Tylenol was recalled on October 5th, pharmacies across the USA reported a significant slowing in the sales of all acetaminophen-based products during the scare as consumers feared that perhaps there was an issue with the chemical in general.

    On the other hand, Aspirin (which used different ingredients) experienced a slight increase in sales as consumers turned to alternatives. To their part, there are no reports of the competition advertising in an unethical way regarding Tylenol’s downfall in order to increase their own sales. Media: Approximately 180,000 newspaper stories were run in the USA nationally regarding the Tylenol crisis, and hundreds of hours were dedicated to the reporting. In many cases the main focus of the stories centred on the deaths and the product recall.

    However, once the initial scare passed and the media re-focused on the cause of the contamination, research has shown that media coverage became more positive regarding Johnson & Johnson. The likely cause of this shift is credited to Larry Foster, who formed Johnson & Johnson’s first public relations department in 1957 and led the company through the crisis. The media, from a general standpoint, has a past riddled with sensationalizing major events and crises to sell their product. Therefore, any unethical conduct on their part is not necessarily surprising to most.

    Shareholders: Shareholders experienced a drop in Johnson & Johnson stock prices, as they fell 17. 24% between September 28th and October 5th ($2. 9453 – $2. 4375). This was primarily due to Tylenol’s market share of the non-prescription painkiller falling from 37% to 7% immediately after the crisis. Local Communities: Many cities and towns (particularly in Illinois) employed emergency services (police and fire departments) to drive through residential areas broadcasting warning through loud speakers. This was done as a preventative measure and to ensure as many from the population knew of the crisis as possible.

    Event Aftermath During 1982, 7 people died after taking pain-relief medicine capsules that had been poisoned with potassium cyanide. The FBI was called in to investigate the murders and was unable to solve the murders. No charges were laid, and no one was fired because police could not determine who was responsible for these events. The outcome of the event started with Robert Andrews, assistant director for public relations at Johnson & Johnson. He was told that the medical examiner had just given a press conference stating that people were dying from poisoned Tylenol.

    The company’s first actions were to immediately inform consumers across the nation, via the media, not to consume any type of Tylenol product. They told consumers not to resume using the product until the extent of the tampering could be determined. Johnson & Johnson, along with stopping the production and advertising of Tylenol, withdrew all Tylenol capsules from the store shelves in Chicago and the surrounding area. After finding 2 more contaminated bottles Tylenol realized the vulnerability of the product and ordered a national withdraw of every capsule.

    By withdrawing all Tylenol, even though there was little chance of discovering more cyanide laced tablets; Johnson & Johnson showed that they were not willing to take a risk with the public’s safety, even if it cost the company millions of dollars. The end result was the public viewing Tylenol as the unfortunate victim of a malicious crime. Johnson & Johnson also used the media, both PR and paid advertising to communicate their strategy during the crisis. Johnson & Johnson used the media to issue a national alert to tell the public not to use the Tylenol product.

    In the first week of the crisis Johnson & Johnson established a 1-800 hotline for consumers to call. The company used the 1-800 number to respond to inquiries from customers concerning safety of Tylenol. They also establish a toll-free line for news organizations to call and receive pre-taped daily messages with updated statements about the crisis. Johnson & Johnson communicated their new triple safety seal packaging: a glued box, a plastic seal over the neck of the bottle, and a foil seal over the mouth of the bottle during a press conference at the manufacturer’s headquarters.

    Tylenol became the first product in the industry to use the new tamper resistant packaging just 6 months after the crisis occurred. Within the year, the FDA introduced more strict regulations to avoid product tampering. This led to the eventual replacement of the capsule with the solid “caplet” (a tablet made in the shape of a capsule) as a drug delivery form and with the addition of tamper-evident safety-seals to bottles of many sorts. The initial media reports focused on the deaths of American citizens from a trusted consumer product.

    In the beginning the product tampering was not known, thus the media made a very negative association with the brand name. Throughout the crisis over 100,000 separate news stories ran in U. S. newspapers, and hundreds of hours of national and local television coverage. A post crisis study by Johnson & Johnson said that over 90 percent of the American population had heard of the Chicago deaths due to cyanide-laced Tylenol within the first week of the crisis. Johnson & Johnson used remediation and took a pro-active approach in the Tylenol crisis.

    Remediation offers some form of compensation to help victims of the crisis. Johnson & Johnson provided the victim’s families counseling and financial assistance even though they were not responsible for the product tampering. Negative feelings by the public against Johnson & Johnson were lessoned as the media showed them take positive actions to help the victim’s families. Today Johnson & Johnson has completely recovered its market share lost during the crisis. The organization was able to reestablish the Tylenol brand name as one of the most trusted over-the-counter consumer products in America.

    Johnson & Johnson’s handing of the Tylenol crisis is clearly the example other companies should follow if the find themselves on the brink of losing everything. Recommendations Based on the research performed on the Tylenol crisis of 1982, it is simple to see how Johnson & Johnson handled the situation with many of the most positive methods possible. The company maintained open lines of communication with both the media and the public to present the most accurate information possible throughout the crisis, and took proactive steps to assist affected families while showing remorse.

    Furthermore, the company set new industry standards for product packaging safety when they unveiled their three step system featuring glued boxing, sealed cap and sealed bottle (under the cap). However, there are additional preventative or response measures that the company may consider employing if future crises occur, outlined as follows: Put security measures in place to screen every individual/employee and their belongings as they enter the building. This may be a costly measure to undertake on a daily basis as additional security personnel and equipment would be needed, and it may cause industry rofessionals to view possible employment at Johnson & Johnson negatively. However, the public image of the organization would be enhanced significantly if these measures are communicated on tools such as the company website effectively. The public would see Johnson & Johnson as a company that is willing to take all available measures to ensure that their product is safe and avoid tampering again. It would also ensure that no illegitimate materials are being brought into the facility.

    Even though it is expected that the tampering in 1982 occurred after the product reached stores, if a similar crisis ever happened again the public and media would have more confidence in J&J’s safety due to these measures. Hire seasoned qualified staff to reduce human errors in production. Adding to the pervious tactic stated, Johnson & Johnson should ensure that all facility workers are adequately qualified, and management/supervising staff within the production facilities are experienced and qualified pharmaceutical workers. If hiring in the future the company should ensure such qualifications as well.

    These strict standards could also be communicated on the Johnson & Johnson website, and key management staff could even have their pictures and credentials featured on the page. This would also help J&J’s public image, especially in a future crisis when the public looks to question the staff working in the facilities. Once production steps are complete, the person or team members responsible for that step will sign the date and their names on the product to make it easier to identify where problems occurred. This will also leave those individuals responsible for any product issues that are determined to have occurred at a certain step.

    This is another security measure that could be communicated on the company website to enhance public image of Johnson & Johnson. The idea with this measure (as well as the last two) is credibility, and communicating how the company ensures a safe product with every batch that is shipped across the continent. This way in a future crisis the public and media will be less likely to quickly question whether any tampering was conducted by J&J staff due to the public knowledge that the company takes as many measures in their control that are possible to keep the public safe.

    Review company policies (Public Relations) regarding what is shared with the media during crises. Crisis training should be implemented to be better prepared in the future. Johnson & Johnson’s public relations department, in reality, did the best job they could at handling the media and public during the crisis. Much of this is credited to Larry Foster and the positive relationships he had built prior to the events. However, there is always room for improvement and therefore it may be helpful if Johnson & Johnson reviews its PR policies.

    More specifically the company may want to review what type of information the company and its employees release to the media upon initial news that there may be an issue with any products. Make a public announcement via radio and television, informing the public on how they can verify any information they may hear from the media. Although Johnson & Johnson also employed this strategy, they only provided a 1-800 number for the public and media to call if they sought information on the events and the product recall. Obviously in today’s society more mediums exist to address this issue.

    If a crisis arose again in the future, it is recommended that the company use mass media strategies to address public inquiries and advertise such a phone number. Television, radio, internet and social media such as Twitter and Facebook to address and communicate with the public. Social Media in particular could be very effective as it is widely used by the population and allows quick responses to communication between consumers and the organization. Sue the media corporations for falsifying information and misleading the public.

    This may seem like one of the more obvious recommendations, but a more defensive approach may be to take legal action against media outlets who report unverified information to the public. Although this may be a difficult case to prove, it would demonstrate that Johnson & Johnson will not stand for media outlets to report information that may not be true which damages the organization’s image. In a way it would set a precedent for such crises in the future. One important aspect to note is how the suit would be perceived by the public.

    Johnson & Johnson would want to be sure to issue press releases that effectively communicate the reasoning behind the complaint (false reporting) in order to ensure that they are not appearing to deny the issue/crisis itself. Conclusion Many public relations professionals point to the way Johnson & Johnson handled the Tylenol Crisis of 1982 as a benchmark for other organizations facing devastating crises of their own. However, there is always room for improvement in efforts to not only handle crises when they hit but also to prevent them from happening as organizations drive forward.

    Every good organization should strive to be as proactively ethical as possible in their business. Given today’s technological advancements in security and in the public’s ability to access information, the way organizations conduct themselves on a day-to-day basis as well as in crisis can be imperative to their success and longetivity. It is recommended that Johnson & Johnson use all means possible to help ensure they never have to deal with crisis as they did in 1982 and 1986 ever again going forward.

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