The consumer health market size is increasing as consumers are taking greater responsibility and interest in their own health. Johnson & Johnson owns highly successful brands such as Tylenol, Band-Aid, and Neutrogena. The acquisition of Pfizer's Consumer Healthcare division in 2006 and addition of brands such as Listerine, Lubriderm, Visine, and Neosporin further solidified Johnson & Johnson dominance in consumer health care. Recently however the company has been plagued by a series of product-quality problems, mainly at its McNeil Consumer Healthcare unit, which makes over-the-counter medicines. The company has recalled Tylenol, Motrin, Benadryl and other products for problems ranging from musty odors that caused nausea in consumers, to excessive concentrations of active ingredients.  The problems with manufacturing have hurt the company's bottom line. In 2010, the company suffered significant losses in this segment with a decrease of 7.7% in revenue over the previous year. 
The company's pharmaceutical segment faces many of the challenges that face all pharmaceutical companies, including issues surrounding patent expiration and FDA approval. Johnson & Johnson's pharmaceutical segment maintained its revenue numbers as seen in 2009 with only a 0.6% decline in 2010.
Johnson & Johnson Corporation was founded in 1886 by Robert Wood Johnson, an American entrepreneur and Industrialist. Inspired by the developing scientific understanding of proper of sanitation, Johnson aimed to make antiseptic surgical procedures easier. Through numerous targeted acquisitions and research over the next century, the company steadily diversified its business to encompass pharmaceutical, medical devices, and consumer packaged goods.
In Q4 of 2010, Johnson & Johnson reported sales of $ 15.6 billion, a 5.5% decrease from the same quarter of 2009.  The company saw a sharp decrease in its consumer segment with a overall 15% loss in sales (the US sales drop for this segment was 28.8% to 1.2 billion). The pharmaceutical division also reported a loss of 4.7% in sales of $5.7 billion compared to 5.9 billion in 2009 for the same quarter. Consumer sales were significantly impacted by the ongoing recalls and product quality issues that the company has suffered. Generic competition was cited as the major force behind loss in revenue in the pharmaceutical sector.
In Q3 of 2010, Johnson & Johnson reported net earnings of $3.4 billion, a 2.2% growth from the same quarter of 2009.  The company saw an increase in sales for both pharmaceuticals and med devices & diagnostic departments; with pharmaceutical growing by 4.7% to $5.4 billion and med devices by 1.3% to $5.9 billion from the same quarter in 2009 respectively. However, the U.S.Consumer sector saw a 24.5% decrease in sales to $ 1.27 billion.  Consumer sales were significantly impacted by the previously announced recalls of certain over-the-counter medicines and the suspension of manufacturing at the McNeil Consumer Healthcare Fort Washington, Pa., facility.  Even with such a loss in sales, the company still beat analyst expected earnings of $1.15/share by 8 cents to earn $1.23/share.
In Q2 of 2010, Johnson & Johnson reported net earnings of $3.449 billion, a 7.5% growth from the same quarter of 2009. While the company continued to see a decline in revenue from its pharmaceutical and consumer segments (-14.3 and -2.0%, respectively), growth in its medical devices segment reached 3.2%. Recall of Tylenol, Motrin, and other products (27.5% decrease in revenue from OTC/Nutritionals in the US for Q2 2010 compared to previous year) was cited as the reason behind the company lowering its 2010 forecast from $4.80 to $4.90 in earnings per share to a new range of $4.65 to $4.75. 
In Q1 of 2010, Johnson & Johnson reported earnings of $4.53 billion, a 29% growth from the same quarter of 2009. While the company continued to see a decline in revenue from its pharmaceutical and consumer segments (-5.7 and -3.7%, respectively), growth in its medical devices segment reached 8.1%. While earnings beat analyst estimates, Johnson & Johnson lowered its 2010 forecast by $0.05 per share due to initial costs from the new healthcare legislation. This forecast cut, however, was less than the cuts made by rivals Eli Lilly and Company (LLY) and Novartis AG (NVS).
On April 30, 2010, the McNeil Consumer Healthcare division of Johnson & Johnson announced that it was recalling 40 of its products, including children's Tylenol and Motrin. The recall was announced following an FDA inspection of a manufacturing plant that found several deficiencies that did not meet quality standards for manufacturing pharmaceuticals. While the FDA noted that chance of adverse reactions was remote, it advised consumers to use private label medicines in place of the recalled drugs manufactured by Johnson & Johnson. While the recalls represent a very small proportion of Johnson & Johnson's total revenue, the recalls could affect public perception of the company's image of quality and have led to federal investigations of the McNeil manufacturing division.
The company has continued having manufacturing problems, in November 2010, the company recalled 9.3 million bottles of Tylenol cold treatments because the bottles did not disclose the medicine’s alcohol content on the front label. Its McNeil Consumer Healthcare unit, responsible for OTC product manufacturing has been at the forefront of these problems. also withdrew about 4 million packages of Children’s Benadryl allergy tablets, on Nov. 22, 2010, citing manufacturing lapses. J&J has been excoriated by the Food and Drug Administration for failing to catch McNeil's quality problems.
In April 2010 the agency slapped McNeil's plant in Fort Washington, Pa., with an inspection report that caused the company to shut the factory until 2011. In an inspection of another McNeil manufacturing plant in Puerto Rico between September and early November of 2010, FDA officials found that the company failed to follow written quality-control procedures, didn't properly investigate manufacturing snafus, released into the market drug products that should have been rejected for quality violations, and several other problems. These quality concerns are troubling and have led critics and the US Congress to question the company's credibility. The company famous for its gold standard of crisis management with the Tylenol Recall of 1982 has now found itself in hot waters.
Johnson and Johnson's problems with quality have continued into 2011, on Jan 18,2011, the company announced another product recall. Around 43 million units of OTC products (Benadryl, Tylenol and Sudafed) and 4 million units of Rolaids were recalled for inadequate equipment-cleaning procedures (manufactured at its troubled Fort Washington Plant before closure) and labeling omissions respectively. The company maintained that the recalled products did not have problems with quality and would not likely hurt consumers.
The bad publicity has cost the company dearly; in addition to loss in brand value, according to analysts at Pharmalot, the company has actually seen loss in market share. J&J has lost 12 percentage points' worth of market share in the $4.2 billion cough-and-cold market (share went from 17% in early 2009 to 5% in recent times) and in pain and arthritis, J&J's remedies lost half their share, which fell to 10 percent from 20 percent during the same time frame.
Johnson & Johnson has interests in a broad spectrum of the health care market, and takes a decentralized approach to managing its 250 operating companies and franchises. In the company's continuing effort to diversify its business and increase profits, Johnson & Johnson is constantly acquiring new companies, including 8 in the last year alone. In 2009, worldwide sales totaled $61.9 billion, making Johnson & Johnson the second largest manufacturer of health care products, behind Pfizer.
The company consists of three major divisions: consumer healthcare, medical devices, and pharmaceuticals.
The Pharmaceutical division is the second largest of the three business segments, bringing in $22.4 billion in revenue for 2010. Pharmaceutical products are usually prescription medications distributed to retailers, wholesalers, and health care professionals. It uses the same business model and faces similar challenges as other major pharmaceutical companies.
Johnson & Johnson's pharmaceutical portfolio contains seven drugs with 2010 world wide revenues of over $1 billion. Some major pharmaceuticals are listed below:
Remicade is approved for several indications, including Crohn's disease, psoriatic arthritis, and rheumatoid arthritis (see Arthritis Drug Market). In 2010, Remicade brought in $4.6 billion in sales, a growth of 7.1% from 2009. Remicade is a biologic and is not currently threatened by generics.  However, legislation concerning follow-on biologics will affect Remicade in the future.
Remicade (infliximab) is a recombinant anti-TNF protein in the same class as competitors, Humira (Abbott) and Enbrel (Amgen). Remicade was approved 3 years earlier than Humira, in 1999,and must be administered intravenously by a physician every 8 weeks, a process that takes around 2 hours.
Topamax brought in sales of $538 million in 2010, a decline of over 50% from 2009. Topamax is used to treat epilepsy and migranes (see Antiepileptic Drug Market). The primary product patent for Topamax expired in September 2008, and the FDA granted Johnson & Johnson pediatric exclusivity for the drug into March 2009. Since Johnson & Johnson's loss of market exclusivity for Topamax, generic competition has entered the market, leading to a decrease in sales for Topamax in 2010.
The exact mechanism of action for Topamax is not clearly understood. However, studies indicate that Topamax blocks sodium channels in neurons and may augment the effects of the neurotransmitter, GABA, in the brain. Both of these mechanisms are known to have a calming effect on neurons.
Procrit (a.k.a. Eprex)
Procrit is a drug used to treat one of the side effects of cancer treatment - a loss of red blood cells. Sales for the drug were $1.9 billion in 2010, a decline of 13.9% from 2009.  Shrinking revenues are largely due to declining sales amid safety concerns regarding erythropoiesis stimulating agents (ESA's) such as Procrit. Like Remicade, Procrit is a biologic, and faces less generic competition concerns in the near-term future.
Procrit is an epoetin alpha protein designed to mimic a red blood cell-producing protein naturally made in the kidney, a class of drugs called ESA's. ESA's, including Procrit's main competitor, Epogen (Amgen), are used to treat patient who experience kidney failure, which can occur naturally or from harsh medical treatments like chemotherapy. In 2007, the FDA issued a warning letter against ESA's based on studies which showed a high association of serious or life threatening side effects in cancer patients taking ESA's.
J&J's antipsychotics franchise, including the Risperdal formulations and Invega, earned revenues of $2.0 billion in 2010, a decrease of 12.7% from 2009 (see Antipsychotic Drug Market). Risperdal lost its patent exclusivity in March 2007, and has since seen sales decline substantially.
Invega was approved in 2007 by the FDA to treat schizophrenia. Invega contains the same active ingredient as Risperdal and has been criticized as not being any different from its predecessor.
Johnson & Johnson is the world's largest developer and manufacturer of medical treatment and diagnostic devices, with annual sales of $24.6 billion in 2010. It is the largest contributor of all three business segments for Johnson and Johnson for FY2010. This segment includes a wide variety of equipment and supplies used mostly in the professional fields, by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. Major franchises in this division include:
DePuy: Products for reconstructing joints and traumatic skeletal injuries, including spinal deformities and bone fractures. DePuy is the largest franchise within Johnson & Johnson's medical devices segment, with sales of $5.6 billion in 2010, a 4.0% growth from 2009. DePuy Mitek, a brand of sports medicine products, has been particularly profitable.
Ethicon and Ethicon Endo-Surgery: Surgical instruments and accessories. The two groups' sales in 2010 were $4.5 billion and $4.7 billion, respectively.
Cordis: Stents, catheters, guidewires, and other surgical products. Cordis sales totaled $2.5 billion in 2010.
Consumer products are non-prescription health care products marketed directly to the general public. Johnson & Johnson has diverse franchises in over-the-counter pharmaceuticals and nutritionals, skin care, baby & kids care, and women's health products, totaling $14.6 billion in sales in 2010. Although the Consumer Health Care division is the smallest of the company's three segments, it includes some of the company's most recognizable brands such as Tylenol, Neutrogena, and Band-Aid.