In a scorching complaint that cites internal company memos, parents say their child died because Johnson & Johnson issued a "phantom or stealth recall" of tainted Children's Tylenol, buying up the drugs from stores on the sly without issuing a recall, "so the general public, ignorant of the dangers, would continue buying and administering these brand name drugs to their children."

Daniel and Katy Moore say their 2-year-old son River died of liver failure in July 2010, the day after he took Children's Tylenol.

They sued Johnson & Johnson, McNeil Consumer Healthcare, Costco and a long list of others in the chain of supply and distribution, and third-party contractors who allegedly bought up the over-the-counter drugs in the "phantom recall."

"Defendant Johnson & Johnson, a Fortune 50 Company with $60 billion in annual sales, knew of defects, impurities and contamination in the children's drugs and, yet, embarked on a 'phantom' or 'stealth' recall of these drugs to hide these problems so the general public, ignorant of the dangers, would continue buying and administering these brand name drugs to their children," the complaint states.

Katy Moore says she gave Tylenol to her son River on July 22, 2010. Within 30 minutes, River was splitting up blood and he died the next day due to liver failure. River's parents claim the Tylenol destroyed his liver.

They claim the defendants ignored deplorable manufacturing conditions and had numerous recalls of its products, including its infants and children's Tylenol.

River's parents claim Johnson & Johnson and its McNeil subsidiary hired contractors to secretly go into stores that stocked the tainted products, buy up all the products and not mention the recall to anyone.

"This clandestine phantom/stealth recall was done without notification to the customers or the retailers to avoid the public shame, the financial impact and regulatory ramifications of a formal recall," the complaint states.

It continues: "the purpose of the phantom/stealth recall is evidenced in an internal email in which a McNeil executive said, 'We are just trying to prevent a recall and a lot of expended dollars.'

"In another email, a McNeil executive described the success of the phantom/stealth recall by saying, 'This was a major win for us as it limits the press that will be seen.'

"On May 27, 2009, defendant Peter Luther sent an email approving the unethical phantom/stealth recall and instructed, 'Let's make this happen ASAP.'

"Defendant Luther, who defendant Weldon praised as being a loyal J&J employee, was not fired for his intimate roll [sic] in the phantom/stealth recall."

Weldon is chairman and CEO of Johnson & Johnson, Luther the president of its McNeil subsidiary, according to the complaint.

The complaint continues: "At the direction of J&J and McNeil's third-party contractors, including [defendants] Inmar Inc., WIS International, and CSCS [Carolina Supply Chain Services], visited various retail outlets and purchased all of the Motrin IB in the store, acting like regular customers.

"J&J and McNeil directed their third-party contractors, including Inmar Inc., WIS International, and CSCS, not to discuss their purchases as being a recall of the product.

"Indeed, J&J's specific instructions to the contractors hired to perform the phantom recall indicated that they were to 'quickly enter each store, find ALL of the Motrin product described, make the purchase transaction, secure the receipt, and leave ... THERE MUST BE NO MENTION OF THIS BEING A RECALL OF THE PRODUCT!' [Ellipsis in complaint.]

"J&J and McNeil subsequently misrepresented to the FDA that their third-party contractors were merely performing an audit of retailers to determine whether McNeil should initiate a formal recall.

"The FDA eventually became aware of the phantom/stealth recall when it received a copy of an internal memo containing the above instructions and confronted McNeil regarding those activities.

"On July 9, 2009, as a result of the above, McNeil publicly recalled the Motrin IB, at a delay of approximately 8 months.

"This phantom/stealth recall, in part, spurred the House Committee on Oversight and Government Reform to conduct a congressional investigation and hold two separate congressional hearings in 2010."

But River's parents say it was too little, too late for their son.

"Johnson & Johnson and its highly compensated executive knew of the problems with their products, and instead intentionally decided to gamble with River Moore's life because they were more concerned with company profits and meeting the Wall Street analysts' earnings projections, than the health and safety of American children," the complaint states.

"As a result, the contaminated Children's Tylenol, which never should have been on the market in the first place, caused River Moore's liver failure and death."

River's parents seek punitive damages for product liability, recklessness, breach of warranty, negligent infliction of emotional distress, violation of consumer protection law, civil conspiracy and wrongful death. They are represented by Thomas Sweeney with Messa & Associates.

Defendants include Johnson & Johnson, McNeil-PPC Inc., McNeil Consumer Healthcare, McNeil Consumer & Specialty Pharmaceuticals - a division of McNeil PPC Inc., Costco Wholesale Corporation, Inmar Inc., Carolina Supply Chain Services, Carolina Logistics Services, WIS International and eight Johnson & Johnson officials.

Secret Recall of Children's Tylenol Sparks Lawsuit

all this after this …..

Johnson & Johnson (JNJ) will pay more than $1 billion to the U.S. and most states to resolve a civil investigation into marketing of the antipsychotic Risperdal, according to people familiar with the matter.

J&J, the world’s largest health products company, reached an agreement last week with the U.S. attorney in Philadelphia, according to the people, who weren’t authorized to speak about the matter. Negotiations over a possible criminal plea are still under way, they said.

The U.S. government has been investigating Risperdal sales practices since 2004, including allegations the company marketed the drug for unapproved uses, J&J has said in Securities and Exchange Commission filings (JNJ). The company said it has been in negotiations with the U.S. to settle the investigation.

J&J, based in New Brunswick, New Jersey, disclosed in August that it reached an agreement to settle a misdemeanor criminal charge related to Risperdal marketing. The company is discussing paying about $400 million more to settle that portion of the investigation, one of the people said.

“We’re not going to comment on rumor or speculation,” Teresa Mueller, a J&J spokeswoman, said in a phone interview.

Risperdal, once J&J’s best-selling drug, generated worldwide sales of $24.2 billion from 2003 to 2010, reaching $4.5 billion in 2007. After that, J&J lost patent protection and sales declined. The settlement represents 31 percent of Risperdal’s peak sales in 2007, before generic versions of the medicine eroded revenue. It’s about 5.6 percent of the drug’s cumulative sales since 2003.

Approved for Schizophrenia

The Food and Drug Administration approved Risperdal in 1993 for psychotic disorders including schizophrenia. That market is limited, and J&J’s Janssen unit sought to sell Risperdal for bipolar disorder, dementia, mood and anxiety disorders and other unapproved uses, according to documents in a lawsuit against J&J by the state of Louisiana. It was later approved for other uses.

Company officials said in an SEC filing in May that they had reserved funds to resolve the government’s claims over Risperdal marketing. The company didn’t say how much had been set aside. The drugmaker said in an August filing it added an unspecified amount to the reserve to cover criminal penalties.

When the final settlement will be announced isn’t clear. The Justice Department typically announces civil and criminal resolutions at the same time in corporate cases.

A majority of U.S. states will join the settlement, the people said. Which ones will accept the final agreement hasn’t been determined, they said. Each state can decide whether to join the federal government’s settlement or pursue its own case.

Texas Trial

Typically, states with cases in court continue to pursue their own. Texas alone is asking for more than $1 billion in a case that goes to trial in state court in Austin next week. Jury selection begins on Jan. 9.

J&J and Janssen deny any wrongdoing in the Texas case.

“Janssen is prepared to vigorously defend itself against these claims,” Mueller said in an e-mail. “We are committed to ethical business practices and have policies in place to ensure that our products are only promoted for their FDA-approved indication.”

J&J and Janssen have been sued by 12 states, including Texas, South Carolina and Louisiana, over Risperdal marketing. The attorneys general of the other states “have indicated a potential interest in pursuing similar litigation against” Janssen, J&J said in its quarterly SEC filing in November.

A jury in Louisiana, weighing claims that the company downplayed the drug’s risks, awarded that state $257.7 million in 2010. A South Carolina judge last year ordered J&J to pay $327 million over Risperdal sold in the state.

Unapproved Uses

Hundreds of Janssen salespeople sold to doctors, nursing homes, Veteran’s Administration facilities and jails, according to documents in the Louisiana case. Marketers gave doctors materials about studies of unapproved uses for Risperdal. Janssen sponsored clinical trials of its effects on other illnesses.

In 1994, 1999 and 2004, the FDA ordered Janssen to stop making false and misleading marketing claims about Risperdal’s superiority.

The FDA told J&J in 1999 that its marketing materials for geriatric patients overstated Risperdal’s benefits and minimized risks. A J&J business plan for the next year called for increasing the drug’s market share for elderly dementia sales, an unapproved use, according to documents in the Louisiana suit.

The FDA didn’t approve Risperdal for bipolar disorder until 2003. In 2006, the regulator approved it for symptoms related to autism in children and teens. The FDA approved it to treat bipolar children and teens the next year. It was never approved for dementia.

Federal Drug Act

“Discussions have been ongoing in an effort to resolve criminal penalties under the Food Drug and Cosmetic Act related to the promotion of Risperdal,” J&J said in its August SEC filing. “Certain issues remain open before a settlement can be finalized.”

“The ultimate resolution of the above criminal and these civil matters is not expected to have a material adverse effect on the company’s financial position,” J&J officials said in the filing.

The agreement in principle on the criminal charge is “pursuant to a single misdemeanor violation of the Food, Drug and Cosmetic Act,” the company said.

Risperdal is a member of a class of drugs, known as atypical antipsychotics, that includes Indianapolis-based Eli Lilly & Co. (LLY)’s Zyprexa and London-based AstraZeneca Plc (AZN)’s Seroquel.

Lilly, AstraZeneca and two other J&J competitors making these drugs have paid $2.7 billion to resolve government marketing claims, particularly that the companies pushed the drugs for unapproved uses.

Lilly paid more than $1.7 billion to resolve state and federal investigations over Zyprexa and AstraZeneca has paid almost $590 million. Pfizer Inc. (PFE) paid $301 million for its drug Geodon.

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at [email protected]; Jef Feeley in Wilmington, Delaware, at [email protected]; David Voreacos in Newark, New Jersey, at [email protected].

To contact the editor responsible for this story: Michael Hytha at [email protected].

J&J to Agree to $1B Accord in Risperdal Probe