Last month's recall of Johnson & Johnson's liquid children's medicines provides just the latest evidence of what U.S. health regulators say are systemic quality problems at the healthcare company and its McNeil consumer unit.

The U.S. Food and Drug Administration has had growing concerns about the quality of the company's manufacturing process that have led to a number of unsatisfactory inspections and consumer recalls, Deputy Commissioner Joshua Sharfstein told a congressional hearing on Thursday.

The agency is weighing whether to penalize the company through either civil or criminal charges, but no decision has been made yet, he added.

FDA inspectors have been checking McNeil Consumer Healthcare's facilities increasingly often and in February took the extraordinary step of meeting with management at its J&J parent company, Sharfstein told the U.S. House Oversight and Government Reform Committee.

Although the public risk from these quality problems is low, these problems should never have occurred, Sharfstein said, calling the manufacturing failures unacceptable.

The hearing comes amid what is believed to be the largest known recall of over-the-counter children's medicines. Congressional staff has said the recall affects roughly 70 percent of the market for such liquid products for infants and children.

It is the fourth J&J recall in the last year and prompted lawmakers on Thursday to blast the company for potentially putting children at risk.

J&J said in separate testimony prepared for the hearing that they have taken drastic steps to clean up the affected manufacturing facility and shake up management.

In late April, J&J announced a nationwide recall of its popular Children's Tylenol pain reliever. Altogether, more than 40 varieties of liquid medicines, including pain drug Motrin, and allergy medicines Benadryl and Zyrtec, were recalled.

Agency inspectors in late April cited McNeil's Fort Washington, Pennsylvania, plant for a variety of lapses that included bacterial contamination of ingredients, filthy equipment and the potential for medicines to be too potent.

Sharfstein said the FDA cited similar problems at McNeil before 2009, but added the unit generally resolved the issues.

But in May and June 2009, agency inspectors again found multiple problems, including the failure to meet its own standard for quality, Sharfstein said.

The House committee is investigating the recall and trying to shed light on J&J's lapses as well as the FDA's oversight. The head of the U.S. Senate health committee has also questioned the FDA, but is not yet seeking a public meeting.

One particularly troubling incident occurred as far back as November 2008, when McNeil uncovered problems with an adult version of Motrin, Committee Chairman Edolphus Towns said.

The company told the FDA it would seek to sample the affected Motrin already at retailers. But outside contractors it hired instead bought up the products in question and were told to act like customers and not to mention a recall, according to lawmakers and the FDA. After the agency found out, McNeil recalled the product. It was unclear if the Motrin in question was for children or adults.

Deborah Autor, the head of FDA's Office of Compliance, said it has referred the overall recall to its criminal investigation division to review. FDA officials said they did not know how long such a review would take.


Lawmakers -- both Democrats and Republicans -- blasted J&J for allowing the lapses at its McNeil unit even as it touts itself as serving patients first.

The committee's ranking Republican, Representative Darrell Issa, called it a moral outrage to market products aimed at children but allow manufacturing neglect.

When a parent gives her child a Tylenol Product or other children's medicine produced by Johnson & Johnson, they are relying on the 120-year-old reputation of a company who claims that it puts 'the needs and well-being of the people we serve first,' he said.

Towns said there could be further hearings on the issue.

Colleen Goggins, worldwide chairman of J&J's consumer group, defended the company's actions. She told lawmakers in written testimony that J&J worked quickly to ensure recalled products were removed from stores and the public informed.

McNeil has also made significant organizational changes, hiring new officials to oversee quality and plant operations, she said.

Even before the most recent recall, McNeil and J&J have been working to improve product quality and will expend whatever resources are necessary to ensure that this facility provides, once again, high-quality medicines, Goggins wrote.

But lawmakers were skeptical, and questioned whether the FDA needed more authority to keep companies in line.

McNeil appears to have a culture of mediocrity, said Representative Elijah Cummings, a Democrat.

Sharfstein says the recall has led to major change at McNeil, but the FDA would continue to monitor the company's plan to correct the lapses. He said the Obama administration supported stronger authority for the FDA to recall drugs.

Despite the hit to some of the company's flagship products, investors have been largely unmoved by the unit's problems at J&J, a diversified healthcare company that makes hundreds of other medicines and devices.

Analysts at JP Morgan have said the recall is likely to shave J&J's sales by $300 million this year to sales of nearly $62.3 billion. The recall is likely to dent earnings by 3 cents per share but that could rise depending on how much the company must spend to fix the situation, they have said.

Shares of J&J were off 17 cents at $58.95 on the New York Stock Exchange compared to the S&P 500 Index's rise of 2.3 percent.

(Reporting by Susan Heavey; Editing by Lisa Von Ahn, Phil Berlowitz)