Why Johnson & Johnson’s CEO Welcomes Scrutiny

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It’s nearly a year and a half since Johnson & Johnson split off its consumer-health arm to focus on pharmaceuticals and medical technology. Johnson & Johnson has wasted no time expanding its portfolio. In the past two years it has invested more than $60 billion into research and development (R&D), as well as mergers and acquisitions, according to CEO Joaquin Duato. In January, the company announced it would be buying biopharmaceutical company Intra-Cellular Therapies. Duato, who has been CEO since 2022 and chairman since 2023, says the company’s current level of investment is aimed at shifting its portfolio “to address unmet needs in high-growth, high-innovation markets.”

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The spun-off consumer arm, Kenvue, owns brands such as Johnson’s Baby, Band-Aid, and Tylenol. Since before the split, the company has faced tens of thousands of lawsuits over claims that its baby powder and other talc products are linked to cancers including ovarian. It has reportedly been attempting to resolve many lawsuits through bankruptcy proceedings for a subsidiary, Red River Talc LLC.

A spokesperson for Johnson & Johnson said in an emailed statement that a confirmation hearing for Red River Talc LLC is scheduled for February “to fully and finally resolve all current and future claims related to ovarian cancer arising from cosmetic talc litigation against the Company and its affiliates in the United States,” which the spokesperson said had been agreed “after receiving the overwhelming majority of support from claimants.”

“The Plan is in the best interest of the ovarian claimants as it constitutes one of the largest settlements ever reached in a mass tort bankruptcy case and affords claimants a far better recovery than they stand to recover at trial,” the statement said.

On Jan. 31, Reuters reported that the U.S. Department of Health and Human Services (HHS) could seek more than $1 billion from Johnson & Johnson to repay federal health agencies for the medical costs of patients who allege that the company’s talc products were the cause of their cancer.

As part of the Red River Talc LLC process, the company spokesperson said: “HHS submitted a filing providing notice of its medical liens on amounts paid to claimants that were covered by Medicare or other government insurance programs. Unsurprisingly, HHS’s counsel asked for just 15 minutes out of the two-week confirmation hearing to state its position regarding its medical liens. To be clear, any liens that HHS may have related would be assessed against payments to be made from the bankruptcy trust—and do not impact the proposed amounts to be paid to the trust.”

In an interview with TIME last year, and through follow-up questions in early January, Duato discussed the split of the business, dealing with the scrutiny brought about by the lawsuits, drug prices, and what’s ahead for Johnson & Johnson.

This interview has been condensed and edited for clarity.

You’ve had some structural changes and spun out the consumer business. Has that changed your approach to growth?

Taking a step back, why did we separate our consumer business? We wanted to create two leading companies: one in the area of consumer and self-care, the other in the area of patients, healthcare professionals, in important diseases like cardiovascular, oncology, mental health, vision, trauma. So very much, one focused on the consumer, [and] another one focused on the patient. The transformation is that now we are a regional development, healthcare produce company only. Our goal is to be able to bring therapies that are going to improve the standard of care, extend lives, [and] alleviate suffering in this very clear area of healthcare professional, patient-driven diseases. That means that we are a research and development [intensive] company. Our investment in R&D in 2023 was $15 billion. We are the largest investor in R&D in life sciences. It means that now we are also a company that has a higher growth profile. A company that is simpler by focusing only on healthcare products. And when you are simpler, normally, you are more agile and more competitive. So that ultimately is the goal to have a company which is focused in important diseases, that is more agile, more competitive, more able to fulfill our promise of bringing new medical technologies and medicines to patients faster.

The consumer business has faced some controversies, such as lawsuits relating to baby powder. Was the separation also a helpful way to distance Johnson & Johnson from those, both from a reputation perspective and financially?

The driver of the rationale to separate the consumer business was exactly what I told you. We wanted to create one company focused on the consumer that had its own fit for purpose organization, fit for purpose strategy, fit for purpose capital location, which is different than a company focused on diseases, on patients that have different drivers, different capabilities, different expertise. So as the expertise required for consumers was different from the one required to treat diseases and to work with healthcare professionals, we thought it was better to create two global companies that are going to be better suited to fulfill their mission of serving consumers and serving patients. That was the rationale of doing that.

Read More: Is Any Kind of Baby Powder Safe to Use?

What would you say you learned from that experience?

I learned that Johnson & Johnson was very attached to our consumer identity, because our employees and external stakeholders were very attached to the consumer products that they all have used. So, emotionally for our company, it was difficult to be able to part ways, and to create these two companies, because the equity of Johnson & Johnson was very much attached with our consumer business. That’s why, in order to amplify the impact of that separation in the new Johnson & Johnson, we created new branding, and we have amplified internally, the fact that now we are a healthcare products company—the fact that we are research and development intense, the fact that we are a company that has capabilities that no other company has. No other company spans from doing cell therapy to treat cancer, to doing robotic surgery or multiple surgeries, of working on heart pumps or atrial shunts, or doing bispecific antibodies. So we are trying to root ourselves and our purpose of bringing transformational medicines and medical technologies to patients, focus on these important diseases, and we are bringing to bear a set of capabilities that make us unique. We have 138 years of history, and my goal as a CEO is not only the next couple of years, but also a company that has multiple decades of success. And I think this construct of being more focused, more specialized, is going to put us in a better position to fulfill our mission of bringing new medical technologies to patients.

What have you learned from the challenges that have put the company under scrutiny, like the baby powder and pelvic mesh implant lawsuits?

We welcome the scrutiny. When you are the largest healthcare company, you are always going to be under scrutiny, and we are a company that takes our principles of putting the patient first very seriously, and we have a strong risk management framework within the company in order to be able to [make] evidence-based decisions when it comes to the risk-benefit of our products. In our company, the functions of quality, safety and compliance are independent functions. They report directly to me, and they are independent, and they are trusted to make evidence-based decisions. So we are very focused on making sure that we have a strong system within the company to make evidence-based decisions, based on science, by experts, and we trust that we are doing that. As a company that has the vocation to be multi-decade, it’s [important to] always do the right thing and put the safety of the patients first.

So are there things that would be done differently today?

As time evolves, we always look and there are always areas for improvement in any company, not only in that one, but in many other companies. But we stand firm in which, at every stop, we have done what we thought was right at the moment with the information available for the patients. We always try to put, we always put, the safety of the patient first. And we have mechanisms within the company to have independent, evidence-based qualified voices to guide in that judgment of benefit-risk that is always important when we are dealing with healthcare products.

You mentioned the company’s long history. Do you believe that Johnson & Johnson has managed to stay true to the credo that the founding family established back in 1943?

We ask our employees every year, if they think we are being true to our credo. We have 135,000 employees globally, and the rates of engagement of our employees are north of 90%. Our employees vote with their feet. The average tenure of a Johnson & Johnson employee is almost a decade. That’s much higher than anybody in our industry. Why is that? Because they feel identified with our purpose, they feel that we are a principled company that is true to our credo, and they also feel that they have the professional opportunities to continue to develop and grow within Johnson & Johnson. And I am an example of the opportunities that Johnson & Johnson provided. Last week I received in the mail at home a diploma for my 35-year anniversary—it was with a letter signed by me, so it was funny to receive it. Why did I stay 35 years at the company? Precisely [because of] what I told you.I aligned with the purpose, I had the opportunity to continue to grow and learn, and the company was inclusive enough to have a person like me eventually becoming the CEO. I am the first non-U.S. born CEO in the history of it.

There’s more discussion around corporate social responsibility these days. How are you thinking about it?

We don’t go with cycles. If you are a healthcare company, and if you are the largest healthcare company, then we believe by conviction, independent of the cycles, that we have a responsibility to drive health equity. That’s part of who we are, and that’s another reason, by which I will always be proud that we’re working for Johnson & Johnson, and we have the opportunity to use our size and scale to do some good. Obviously, we have to prioritize what we focus on. One area is frontline healthcare workers. In the area of health equity [in 2023] we trained a million healthcare workers. Through our efforts in community health in the U.S., since 2020 we have touched 4.5 million people. We have a prominent role in some diseases that are affecting particularly low-resource settings, for example, drug-resistant tuberculosis. We supply, for free, medications for intestinal worms globally. So there’s a number of areas in which we use our strengths in order to be able to collaborate to drive health equity—frontline healthcare workers, community health and also medications in which there’s not a commercial or economic counterpart, in which we are trying to drive access to as many people as we can.

In February 2024, you told senators on Capitol Hill that pharmacy benefit managers undermine efforts to ease drug price pressure on patients. What do you think the solution to that problem is?

When I look at the countries that have price-setting mechanisms, generally they have more restricted access to patients, and also they are able to produce cheaper medicines. So that’s not a good predictor of what the impact of price-setting is going to be. Certainly, there is a question of patient affordability in the U.S., and there’s a question about the out-of-pocket expenses that patients have to pay when they are at the pharmacy counter, especially when they have difficult to treat conditions. For background, about 60% of the list price of a medicine goes to the intermediaries in the chain. I think the idea we should focus on is how we take the 60% and pass all of it, or part of it, to the patients to alleviate the out-of-pocket expenses that they have at the pharmacy counter. If we focus on that, you’re going to find Johnson & Johnson as a very willing partner to discuss that topic. In our case, our net prices decrease every year and our level of discounting is increasing every year. Today, our average discount—in other words, what the intermediaries are keeping—is $58 of every $100. So let’s work on that $58 to address the out-of-pocket expenses that patients have. I do not believe, going by the examples that I can see in other countries that have price-setting mechanisms, that is going to increase access and bring more medicines.

What are the biggest lessons you’ve learned about leadership over the course of your career?

Leadership, it’s about people. It’s about others. So leadership is not about the leader, but this is about a leader in how that individual can serve others. It’s about servant leadership. When people ask me about my leadership style, the other component that I underline is that I want to be a builder. I want to make sure that we are going to build a stronger Johnson & Johnson into the future, and that we are going to be true to our mission, and that we’re going to build a company which is going to be successful for generations. And in order to do that, the practical aspect that I emphasize is learning. So if we want to be the type that is building a stronger future, we always have to be evolving. We have to be a learning company. We have to give opportunities for learning to all employees, no matter where you work in the company, no matter your role, up and down the company, we all have to learn.

What are your priorities for 2025?

My ongoing priority is to maintain what makes Johnson & Johnson special, and to advance the standard of care for patients with industry leading healthcare innovation. That means sustaining the high pace of growth and medical breakthroughs that are the hallmark of Johnson & Johnson, which is what you can see across our pipeline and portfolio.

In 2024 we received 27 approvals across major markets for our innovative medicines and we launched more than 15 major products in medtech. We recognize that in many cases patients need multiple interventions, including pharmaceutical and medtech, to achieve the best outcomes and our focus on both is what makes Johnson & Johnson unique. It’s why we invest in multiple modalities to tackle individual diseases.

In 2025 we expect to see exciting progress across our portfolio, including in multiple myeloma, lung and bladder cancer, cardiovascular disease and in tackling immune-mediated diseases, like ulcerative colitis and Crohn’s disease.

What are you hoping to see from the new presidential administration? 

Since 1886, Johnson & Johnson has worked with 24 U.S. presidential administrations and we look forward to working with the next to advance pro-innovation healthcare initiatives that support patients, healthcare professionals, and the communities in which we live and work.

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