McNEIL TYLENOL CAPLET AND TABLET PRODUCTION IS RUNNING TRIPLE TIME TO PROVIDE INVENTORY TO REPLACE CAPSULES WITHDRAWN FROM THE MARKET, J&J SAYS

McNeil's Tylenol manufacturing facilities are all running on a triple-shift schedule to produce tablet and caplet replacement inventory for the capsule forms of the firm's OTC products that were withdrawn from the market. The capsule withdrawal decision came Feb. 17 in response to the Tylenol capsule poisoning incident a week earlier in New York. McNeil said it stepped up production of caplet and tablet products by increasing manufacturing at two of its three plants from double-shift to triple-shift. The plants are located in Round Rock, Texas, and Las Piedras, Puerto Rico. A third plant, in Fort Washington, Pa., is continuing its normal schedule of triple-shift operation. McNeil said that the Round Rock facility is the primary producer of caplets, but that all three plants produce caplets and tablets. By quickly stepping up production of tablets and caplets, McNeil hopes to fill the hole left on retail shelves before competing products are substituted by retailers. Tylenol capsules represented one-third of McNeil's Tylenol franchise, which is estimated to be slightly over one-third of the estimated $1.6 bil. pain-relief market, or over $500 mil. As production switched entirely to tablets and caplets, McNeil reps began contacting trade customers mid-week to explain return items procedures for the capsule products. The procedure provides capsule customers with a credit toward tablet and caplet purchase. In a Feb. 18 mailing, the company told whslrs. that the capsule "merchandise will be reimbursed by credit memo at the regular direct account price plus a 10% handling charge for your warehouse returns, and a 20% handling charge for merchandise returned to your warehouse from your retail outlets." The letter advises customers not to "return any merchandise without a McNeil sales representative's authorization." J&J began contacting customers regarding its returns policy one day after its decision to withdraw all OTC capsule products from the market. The withdrawn capsule products are: Tylenol (regular and extra-strength), Sine-Aid, Co-Tylenol, and Maximum Strength Tylenol Sinus Medication, all marketed by McNeil Consumer Products; and Dimensyn, marketed by Ortho. The seven products were manufactured in a total of 17 different packagings. Of the withdrawn products, Tylenol extra-strength is currently the only one marketed in a caplet form. McNeil said that individual product managers for the products now available in tablet form would be evaluating whether those products should be developed in caplet form. The 500 mg extra-strength Tylenol caplets are sold in bottles of 24, 50, and 100. McNeil has scheduled a national sales force meeting Feb. 22 and 23 in Tucson, Arizona. The firm may use the meeting to unveil special deal promotions that its sales personnel can offer to trade accounts. For example, prior to the poisoning incident, McNeil had a coupon promotion scheduled to begin on March 1. The promotion could be expanded by McNeil to offer special deal prices or discounts which are more attractive to the trade than those planned by McNeil before the capsule withdrawal. While the firm acted swiftly at the trade level concerning the withdrawal, it also stayed in touch with the consumer through extensive and well timed lay media coverage. J&J announced its decision to withdraw capsules from the market on a slow news day -- Washington's birthday, ensuring heavy coverage. In 1982, after the Chicago poisoning crisis, J&J said it was bringing Tylenol capsules back to the market under similar conditions: the announcement came on Veterans Day. Bergen And Bindley Weighing Retailer Demand In Decision To Replace J&J Capsules With Caplets And Tablets Chairman and CEO James Burke has carried the brunt of J&J's public relations campaign to preserve the company's good name and convince the public to stay with Tylenol by switching to tabs or caplets. Since the poisoning was reported, Burke has appeared on several television shows, including "MacNeil/Lehrer," "Donahue," "Nightline," and "This Week With David Brinkley." He emphasized in those appearances that the efficacy and safety of caplets and tablets are equivalent to the capsule form of Tylenol. In its initial announcement Feb. 17 of the decision to halt marketing of OTC capsules, J&J included a plug for the caplet form. "We urge our consumers who use capsules to convert to the new extra-strength Tylenol Caplets, which were specifically designed by the company as a substitute for capsules." He added that "in caplets we have a product that we know will be preferred by capsule users over other alternatives." Burke said that J&J is "absolutely confident that the consumer preference for Tylenol in caplet and tablet form will keep this brand the most preferred pain reliever in the nation." Through his efforts, Burke has generated enormous goodwill for J&J from the press, the government, and the general public, and, in the process, made himself a public figure. A measure of the success of J&J's campaign is President Reagan's impromptu commendation of Burke at a meeting of U.S. corporate execs at the White House. Speaking to the Business Council at the White House on Feb. 19, President Reagan prefaced his remarks to the group by singling out Burke. "Before I say anything else, let me congratulate one of your members -- someone who in recent days has lived up to the very highest ideals of corporate responsibility and grace under pressure," the President said. "Jim Burke of Johnson & Johnson, you have our deepest admiration." As part of its caplet marketing campaign, J&J is offering consumers Tylenol caplet replacement, via store coupons, or reimbursement for unused or thrown away Tylenol capsule products. The firm began announcing the coupons in Feb. 19 full page newspaper advertisements. J&J said it has not yet set a date for reinstatement of traditional Tylenol consumer advertisements, which were discontinued after discovery of the first cyanide tainted Tylenol capsules in New York two weeks ago. J&J estimated total cost of the withdrawal at $150 mil. During the first week of trade reaction to the capsule withdrawal, whslrs. seem to have a wait-and-see attitude about how to manage their inventory. Bergen Brunswig and Bindley Western, for example, indicated that it was too soon to tell whether they would replace the capsule products completely with J&J tablets/caplets or with a combination of competing products. Bindley noted that it would probably wait for some indication of retailer demand before supplementing its stock of OTC analgesics. Florida-based whslr. Lawrence Pharmaceuticals, however, said it was "beefing up" its supply of McNeil caplet and tablet products as well as competitors' caplet and tablet products. The whslr. noted that it would probably obtain additional stock of Sterling analgesic products such as Bayer and Midol and tablet and caplet products from Whitehall's Anacin line. Lawrence indicated that it wouldn't be ordering extra capsule products that competed with the Tylenol brands, at least initially, because it anticipates a "spillover of fear" to all OTC capsule products. (NEW LINE) Eckerd Doubled McNeil Tablet And Caplet Inventory; Revco Is Adding Extra Stock Of Other Brands Several chain drug stores already have at least temporary plans for filling empty shelf space left by McNeil capsules. Eckerd said it "doubled" its inventory of McNeil tablet and caplet products in response to the withdrawal. "Most of the money" that went into replacing inventory went towards McNeil, the chain said. Revco, on the other hand, said it was replacing stock with additional brands from competing companies as well as extra McNeil tablets and caplets. Walgreen reports that it is still planning how to remerchandise the analgesic section, but said it expects that most of the space available from the withdrawn products will be "devoted to existing Tylenol products." While J&J reports that 87% of 400 surveyed pain relief users believe that incidents like the Tylenol poisonings could occur with any capsule pain reliever, the brand association provides competing brand and private label manufacturers an opportunity to push their products. Giant food chain, for example, has posted shelf stickers by its private label acetaminophen products stating that they are not manufactured by McNeil. The statements say: "For your information, Giant Ex-Prin extra-strength capsules and Giant Ex-Prin tablets are manufactured by Pennex Products, Co., Inc., and not by McNeil Labs., Inc./Johnson & Johnson." Richmond, Kentucky-based chain Begley Drug said it would devote most of the empty shelf space to its own private label analgesics. Some of the space, the chain said, would go to McNeil products while some would be used for other capsule products such as Warner Lambert's Sinutab and Sterling's Midol. Pay Less, based in Oregon, plans to replace its private label acetaminophen capsules with private label caplets. The chain said that most of space left by the McNeil capsules would be reserved for McNeil tablet and caplet products. Pay Less noted that it would stock all bottle sizes of the McNeil products, which it currently does not do, since all the firm's capsule products would be gone.