Oregon sues Motrin maker over secret drug recall

NEW YORK (CNNMoney) -- Oregon has sued Johnson & Johnson for allegedly selling defective Motrin drugs to consumers in the state for more than a year, and for trying to secretly remove the faulty drugs from stores.

"Companies that break the rules and put consumers at risk will be held accountable," Oregon Attorney General John Kroger said in a statement.

The state filed the lawsuit Wednesday against J&J (JNJ, Fortune 500) and its two subsidiaries, McNeil PPC Inc. and McNeil Healthcare Inc. The company's McNeil division makes over-the-counter cold and pain drugs such as Tylenol, Motrin and Benadryl.

The suit claims that J&J discovered in late 2008 that some supplies of Motrin sold in gas stations and convenience stores nationwide were defective because they were not properly dissolving.

Instead of issuing a public recall of the defective Motrin products, the suit alleges that J&J hired contractors to go into stores in early 2009 and secretly buy the faulty products without telling wholesalers, retailers or consumers about the problem.

Food and Drug Administration officials learned of this "phantom" Motrin recall mid-2009, but the suit alleges that J&J's McNeil division did not publicly announce a recall until February 2010.

The public first learned of the phantom recall when details of it emerged in June during a Congressional hearing addressing a series of other Johnson & Johnson recalls. That's when company executives as well as the FDA were questioned about an attempt to surreptitiously take Motrin off the shelves.

After months of maintaining that the company did not engage in any deceptive practices in the Motrin recall, J&J CEO William Weldon finally admitted to lawmakers in December that J&J secretly bought up defective drugs without informing regulators and consumers of its actions.

The Oregon lawsuit said that despite the secret Motrin removal, more than 787 eight-count containers of the allegedly defective Motrin remained in stores for sale in the state.

Additionally, the lawsuit alleges J&J's activities reflected multiple violations of Oregon's Unlawful Trade Practices Act (UTPA), which prohibits companies from "employing unconscionable tactics, making certain false or misleading representations, or failing to disclose a fact."

The state is suing J&J for civil penalties of up to $25,000 for each violation of the UTPA, which could amount to millions of dollars.

Oregon Attorney General's spokesman Tony Green said the state had offered a proposed settlement to J&J prior to the lawsuit, which included a payment of $725,000 by J&J to the Justice Department to settle the dispute.

Green said J&J rejected the settlement offer which then resulted in the suit.

McNeil said in a statement that the company's actions with regard to the Motrin removal were "consistent with applicable law and there was no health or safety risk to consumers associated with this limited recall."

"As there is no legal basis for the claims advanced by Oregon, we intend to seek dismissal of the Complaint," the company said.