The Tylenol Mafia (35 page)

Under room temperature storage conditions, TYLENOL acetaminophen solid formulations are generally stable for 3 years from the date of manufacture for commercially available products.

By mentioning Tylenol’s three-year shelf life, Ogun had inadvertently exposed a problem with the shelf life of the Tylenol in Elsroth’s bottle, and subsequently, the shelf life of the Tylenol in the second bottle of cyanide-laced Tylenol. The Tylenol in Elsroth’s bottle was manufactured in May 1985, and had an expiration date of May 1987, meaning it had a shelf life of two years. The Tylenol in the second bottle was manufactured in July 1985, and had an expiration date of April 1987, meaning it had a shelf life of 21 months. This expiration dating was not in line with the three year shelf life of the Tylenol that was bottled at the McNeil manufacturing plants.

A drug’s shelf life is based on stability testing. The stability of a drug varies based on the container-closure system in which the drug product is being sold. A drug packaged and sold to repackagers in bulk containers typically has a shorter shelf life than the same drug bottled at the manufacturing plant.
The obvious reason that the Tylenol from the two batches involved in the 1986 Tylenol tamperings had shelf lives of 21 months to 24 months, instead of three years, was because the Tylenol from these batches had not been bottled at the McNeil plants. It had instead been shipped in bulk containers of Tylenol powder to a repackaging facility where it was encapsulated, bottled, and packaged.

On Saturday, February 15
^th
, Carl Vergari further discounted the possibility that the cyanide had been introduced into the capsules at the local retail stores. Explaining his belief, Vergari said that his office had been told by the Federal Bureau of Investigation that the seals on both bottles had not been broken after they left the factory. He said investigators should thus not eliminate the theory that the capsules were tainted at the point of manufacture. Vergari also said that despite lot numbers indicating two manufacturing sites, it was possible for a bottle of Tylenol to be made at the Fort Washington plant and still carry the Puerto Rican plant’s lot number. The evidence that put Vergari on track to find the true source of the cyanide-laced Tylenol capsules had come from Puerto Rico.

32

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The discovery of the second bottle of cyanide-laced Tylenol made it abundantly clear that someone had gotten cyanide-laced Tylenol capsules into the Tylenol bottles before they were packaged and shipped to Westchester County retail stores. Vergari had also learned that the manufacture of the Tylenol at two different plants did not mean that the Tylenol had been bottled and packaged at two different plants.

Vergari said federal investigators had told him that it was possible for a bottle of Tylenol to be made at the Pennsylvania plant, but carry the Puerto Rican plant’s lot number. “The report we’re getting,” said Vergari, “is that there was no tampering afterwards [after the bottles were packaged at the plant], so this [finding] would lend support to the theory that somewhere during the manufacturing process is when the cyanide was put into the capsules... in the plant.”

Vergari was getting dangerously close to the truth. The Tylenol in the second bottle of cyanide-laced capsules had in fact been manufactured in Puerto Rico, but not bottled there. An incident that occurred in 2001, and mentioned earlier, illuminates this routine practice.

On June 28, 2001, the FDA’s district office in San Juan, Puerto Rico, witnessed the destruction of 16 drums of Tylenol 80mg Fruit Chewable Tablets that had been manufactured at McNeil’s plant in Las Piedras, Puerto Rico. The product arrived at the San Juan port on April 22, 2000, and stood unclaimed by McNeil for over a year. The Tylenol tablets had been shipped to a plant in Canada to undergo the packaging process, but then returned intact because the repackager was unable to complete the process before the product expiration date. This incident provides an illustration of the exact same scenario that Vergari and the FBI had uncovered in February of 1986, which was that the Tylenol from Lot AHA090 had been shipped in bulk containers from the McNeil plant in Puerto Rico to be packaged elsewhere.

Johnson & Johnson had a major incentive to manufacture drugs in Puerto Rico, because it paid no federal taxes on the profits from eligible drugs manufactured there. In 1921, the federal government enacted a tax exemption for qualifying income of “possession corporations” - U.S. corporations operating in U.S. territorial possessions. This provision, in its amended form, is known as Section 936 of the Internal Revenue Code, enacted by Congress in 1976 to help Puerto Rico obtain employment-producing investments. Section 936 allowed corporations to shelter from federal tax a substantial amount of U.S. income obtained from products with intangible assets, such as drug patents, manufactured in Puerto Rico.

In 1982, Congress made changes to Section 936 to “lessen the abuse caused by companies’ claiming tax-free income generated by intangibles developed outside of Puerto Rico.” The Tax Equity and Fiscal Responsibility Act of 1982 established that, in general, income from intangible assets, such as patents, trademarks, and trade names, transferred by a parent company to its Section 936 subsidiary would be taxable to U.S. shareholders. But the Act still gave corporations the right to claim income attributable to certain intangible assets as nontaxable. Thus, even after 1982, Section 936 corporations were able to shelter from federal tax a substantial portion of the income earned on certain products manufactured in Puerto Rico.

Carl Vergari’s only interest in J&J’s Puerto Rican operation was in discovering where the Tylenol manufactured there was actually packaged. What Vergari had already come to understand, or was very close to understanding, was that the Tylenol from Lot AHA090, in the second bottle of cyanide-laced Tylenol, had been shipped from Puerto Rico in bulk containers and had then undergone the packaging process at a repackaging facility in the continental United States.

Robert Kniffin said the Tylenol from Lot AHA090 “was manufactured in Dorado, Puerto Rico, on July 17, 1985, shipped by sea August 22
^nd
to either Newark or Baltimore and trucked to Montgomeryville, where it arrived on September 5
^th
.” He said, “It was shipped out the next day with a batch of 84,000 bottles.” This batch of Tylenol was shipped from Dorado on the same day that the Tylenol in the first bottle of cyanide-laced Tylenol was shipped from Montgomeryville; an indication that both lots were part of one large order for one repackager.

Several Johnson & Johnson spokespersons, including Larry Foster, Robert Kniffin, and James Murray said the Tylenol in the second bottle of cyanide-laced capsules had been manufactured in Dorado, Puerto Rico. The FBI and FDA also confirmed that the second batch of contaminated Tylenol had been manufactured in Dorado. Oddly, no one ever mentioned the curious fact that the McNeil Consumer Products Company did not have a manufacturing plant in Dorado. Since 1983, the McNeil Consumer Products Company had been manufacturing Tylenol in Las Piedras, Puerto Rico, 43 miles to the southeast of Dorado.

Johnson & Johnson did, however, own a manufacturing plant in Dorado. The McNeil Pharmaceutical Company - sister of the McNeil Consumer Products Company - had been manufacturing drugs in Dorado since 1976. The McNeil Pharmaceutical Company manufactured only prescription drugs, whereas the McNeil Consumer Products Company manufactured non-prescription drugs containing Tylenol. Both operating companies were subsidiaries of McNeilab Inc.

The McNeil Pharmaceutical Company had FDA approval to manufacture Tylenol with Codeine, a prescription drug, at the Dorado plant. The Dorado plant has never had FDA approval to manufacture non-prescription Tylenol.

The McNeil Pharmaceutical Company had its headquarters at Johnson & Johnson’s 270,000 square-foot facility in Montgomeryville, Pennsylvania. It also operated a manufacturing plant there.

Robert Kniffin said that the Montgomeryville facility was one of three “distribution points” for Tylenol products. In fact, the Montgomeryville facility was not really a distribution center in the traditional sense. It only had a couple truck bays and made relatively few shipments of J&J products to large third-party wholesalers, repackagers, and distributors.

In the 1980s, the McNeil Pharmaceutical plant in Montgomeryville manufactured the prescription analgesics Zomax,
Tolectin
, and Suprol, and the antipsychotic drug, Haldol. The plant also manufactured
Tylox
capsules, a painkiller that contains Tylenol and the narcotic,
oxycodone
. Johnson & Johnson’s Montgomeryville plant thus received bulk containers of Tylenol powder, which McNeil Pharmaceutical then used to manufacture
Tylox
.

The McNeil Pharmaceutical plant in Dorado manufactured Tylenol with Codeine. Non-prescription Tylenol has never been manufactured or bottled at either the Montgomeryville or Dorado plants. The 120,000 square-foot Dorado plant did, however, manufacture bulk Tylenol, which was then combined with codeine to make Tylenol with Codeine. Tylenol with Codeine was not actually bottled at the Dorado plant. Instead, pharmacists bottled Tylenol with Codeine at local drugstores when they filled consumers’ prescriptions, as is the norm with prescription drugs.

It didn’t seem to make sense that the Tylenol in the second bottle of cyanide-laced Tylenol was manufactured in the Dorado plant, but it was, and officials repeatedly confirmed this fact.

On Saturday, February 16
^th
, Robert Kniffin said Johnson & Johnson had begun reviewing personnel files of about 1,400 workers employed at the McNeil Consumer Product Company’s three production facilities in Round Rock, Fort Washington, and Las Piedras. In this way, Kniffin had acknowledged that the McNeil Consumer Products Company manufactured Tylenol in Las Piedras – not Dorado. But Kniffin had previously stated that the Tylenol in the second bottle of cyanide-laced capsules had been manufactured in Dorado, Puerto Rico on July 17, 1985.

On Thursday, February 13
^th
, J&J officials said they believed that a small amount of cyanide was kept at the factory in Dorado for “quality control testing,” - thus confirming again that the second contaminated batch of Tylenol had been manufactured in Dorado. The FBI also confirmed that the Tylenol in the second bottle had been manufactured in Dorado. The Tylenol manufacturing plant, however, was located in Las Piedras. Making this paradox even more perplexing is that the FDA had not given J&J approval to manufacture Tylenol capsules, tablets, elixir, or any other non-prescription Tylenol formulation at the Dorado plant.

Several contracts between McNeil and the Department of Defense further confirm that non-prescription Tylenol tablets, elixir, and capsules have never been manufactured in Dorado. Throughout the 1980s, the U.S. Department of Defense (DOD) contracted with the McNeil Pharmaceutical Company in Dorado to buy Tylenol with Codeine. The DOD contracted separately with the McNeil Consumer Products Company to buy non-prescription Tylenol at the company’s Las Piedras plant.

The Tylenol in the second bottle of cyanide-laced Extra Strength Tylenol capsules had indeed been manufactured at the McNeil Pharmaceutical plant in Dorado. Johnson & Johnson had shipped that Tylenol in large fiber drums of Tylenol powder to a repackager under contract with Johnson & Johnson to encapsulate, bottle, and package Tylenol. On multiple occasions, someone evidently dropped cyanide-laced Tylenol capsules into the Tylenol bottling production lines at that repackaging facility.

For a number of reasons, Johnson & Johnson covered up what was going on with the shipments of bulk Tylenol powder from the Dorado plant. J&J obviously wanted to avoid being held liable for the Tylenol tamperings and subsequent death of Diane Elsroth. It appears that Johnson & Johnson was also covering up its diversion of Tylenol that was supposed to be used to make Tylenol with Codeine. But what motive could Johnson & Johnson possibly have had for diverting that Tylenol to repackagers who then used it to make non-prescription Extra Strength Tylenol capsules?

Johnson & Johnson’s probable motive was, of course, money; specifically the exemption from federal income tax it received under Section 936 of the U.S. Tax code.

Johnson & Johnson did not pay federal income tax on the income earned from the sale of certain drugs manufactured in Puerto Rico. But J&J only received that Section 936 tax credit on patented drugs. Johnson & Johnson had no patent for acetaminophen, the active ingredient in Tylenol. However, it did have a patent for the combination drug of Tylenol with Codeine. Johnson & Johnson, it appears, received hundreds of millions of dollars in tax credits by reporting to the Internal Revenue Service some of its sales of non-prescription Tylenol capsules as if they were sales of the prescription drug, Tylenol with Codeine, manufactured in Dorado, Puerto Rico.

For the period 1980 to 1990, Johnson & Johnson received federal tax credits under Section 936 of $1.17 billion on sales of $2.78 billion (in 1990 dollars) on two drugs manufactured in Puerto Rico: Tylenol with Codeine and Ortho
Novum
7/7/7 28. J&J subsidiary, Ortho McNeil, was licensed to manufacture Ortho
Novum
7/7/7 28, and McNeil Pharmaceutical was licensed to manufacture Tylenol with Codeine at the Dorado plant. But what portion of those Tylenol with Codeine “sales” were really sales of bulk Tylenol then used to make OTC Tylenol capsules for which J&J should have paid federal taxes? And how much of that $1.17 billion, plus fines, would Johnson & Johnson have had to give back to U.S. taxpayers if the truth had come out about its diversion of Tylenol?