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CASE 3. Procter and Gamble and Toxic Shock Syndrome
In September 1980, Proder and Gamble reached a consent agreement with the Food and Drug Administration (FDA) to "demarket" its new super absorbent Rely tampon which had been twenty years in development. This agreement was reached one week after Procter and Gamble representatives were confronted by the FDA with results of a Center for Disease Control (CDC) study which found a Strong correlation between the use of Rely tampons and Toxic Shock Syndrome (TSS). By then, TSS, a disease characterized by vomiting, high fever, diarrhea, and a rapid drop in blood pressure resulting in shock, had been blamed as the cause of death for 25 women in 1975. Subsequent deaths brought this number to about l00 by l984. Procter and Gamble was initially made aware of evidence linking tampon usage with TSS in June l980 when it, along with other tampon manufacturers, received the results of a preliminary CDC study. Shortly thereafter, Procter and Gamble conducted its own studies of Rely, and found no significant link between TSS and this particular brand of tampons. Given a week to respond to the September CDC study, Procter and Gamble quickly assembled a previously selected independent panel of health and scientific experts to review the CDC findings. This panel reported that they did not find convincing evidence linking Rely in particular to TSS(as opposed to tampons in general). On the other hand, they reported that they could not refute the claims of the CDC study either. As a result of this panel's findings, Procter and Gamble immediately discontinued sales of Rely when its representatives next met with the representatives of the FDA, Procter and Gamble signed the consent agreement calling for the "withdrawal', of Rely from the market. Under this agreement Procter and Gamble attempted to buy back all of the product which was still in the hands of consumers or retailers through a concentrated campaign consisting of 340,000 letters and telegrams sent to retailers, and radio, television, and print advertisements directed at consumers. According to the consent agreement, Procter and Gamble did not have to declare the product unsafe or defective and in fact they stated they had no evidence that it was. The motivation for reaching this agreement was at least partly the fear of being forced by the FDA into a"product recall" in which they would have to admit the product was unsafe--an admission that would certainly be used in product liability litigation. Procter and Gamble is also particularly sensitive to adverse publicity and this product withdrawal was viewed as a way to cut its losses on this dimension. Toxic shock syndrome remains a mystery. New occurrences of the disease continue even after the withdrawal of Rely. Scientists believe it is caused by a virulent strain of bacteria, and evidence persists that contraction of the disease is linked to certain forms of tampon usage, but the precise connection is unclear. Both men and nonmenstruating women have contracted the discase. For Procter and Gamble the withdrawal of Rely from the market was estimated to have cost $75 million after taxes (compared with total corporate profits of $640 million in the preceding year). Procter and Gamble was also left with no product in the $1 billion per year menstrual-products market, although they were considering new entries. The company's reputation, which suffered during the controversy, seems to have largely been redeemed. A public opinion survey conducted after the withdrawal found that the public gave Procter and Gamble high marks for its quick action. A number of legal claims against Procter and Gamble are slowly making their way through the courts. Although accurate figures are hard to come by, several sources estimate that approximately 400 lawsuits were filed against Procter and Gamble for an estimated $4 billion. Other tampon manufacturers have also been sued. The results of the lawsuits settled to date are even more difficult to assess since many were settled out of court. Most settlements, however, appear to have been for far less than the plaintiffs requested. Still, in the aggregate the financial burden to Procter and Gamble has been substantial. In 1984 Procter and Gamble reentered the menstrual market with "Always," a line of absorbent sanitary napkins. Questions
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