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Illustration: Aïda Amer/Axios

Johnson & Johnson just managed to release itself from all legal liability for distributing opioids by paying $5 billion as part of a bigger $26 billion settlement with state attorneys general. Now, per Reuters, it's looking to Texas to help it cap its liabilities with respect to distributing asbestos in its baby powder.

Why it matters: If J&J successfully attempts what's known as the Texas two-step, that would effectively allow it to declare bankruptcy just for the purposes of its talc liabilities and nothing else. The rest of the company could sail on with no further risk of talc-related lawsuits down the road.

By the numbers: The potential size of such lawsuits is mind-boggling: Just one suit with 22 claimants resulted in an award of $2.12 billion, reduced from an initial jury award of $4.69 billion.

  • There are some 30,000 claims still outstanding, and an unknowable number of future claims. After all, it can take years after exposure to asbestos before ovarian cancer and mesothelioma show up.

How it works: J&J would effectively split in two. All of its talc-related liabilities would be in one company that would then file for bankruptcy, while the rest would carry on as normal, listed on the stock exchange.

  • That would normally be a "fraudulent transfer" — but under Texas law it would be a "divisive merger" and therefore wouldn't count as a transfer at all, fraudulent or otherwise.

The big picture: J&J would have to put billions of dollars into the subsidiary declaring bankruptcy. But the exact amount would be determined by a judge carefully jurisdiction-shopped by J&J. And then the company would never need to worry about any future talc-related lawsuits.

  • It's a legal gambit that might not work, but from J&J's point of view it's probably worth a try, given how bad the alternative currently looks.

Go deeper

Jul 21, 2021 - Health

Drug distributors, J&J reach $26 billion opioids settlement

Four key opioid companies have reached a near-global settlement. Photo: John Moore/Getty Images

The three dominant prescription drug distributors — AmerisourceBergen, Cardinal Health and McKesson — and Johnson & Johnson have agreed to pay a combined amount of $26 billion to settle allegations that they fueled the country's opioid crisis.

Why it matters: The companies, which have admitted no wrongdoing, are paying a sum of money that equates to 4% of their combined annual revenue. Meanwhile, a record 70,000 Americans died from opioid overdoses during the pandemic in 2020.

Updated 37 mins ago - World

Biden cleans up comments about Russia invading Ukraine

Photo: Doug Mills-Pool/Getty Images

President Biden sought to clarify his suggestion that a "minor incursion" by Russia into Ukraine may not draw the same response as a large invasion, telling reporters Thursday that "Russia will pay a heavy price" if any troops cross the border.

Why it matters: Some officials in Kyiv saw Biden's comments as inviting Russian aggression.

Tina Reed, author of Vitals
50 mins ago - Health

Study finds bias against Black patients written into medical charts

Illustration: Sarah Grillo/Axios

Black patients were more than two-and-a-half times as likely as white patients to have negative descriptors about them in their electronic health record, according to a study published Wednesday in Health Affairs.

Why it matters: The study is further evidence of bias in the U.S. health care system, which can ultimately result in worse care and disparately poor outcomes.