Important note: Information in this article was accurate in 1996. The state of the art may have changed since the publication date.
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The Wall Street Journal - 17 July 1996
Phil Kuntz and Laurie McGinley
The decision casts significant new light on the effort to secure Food and Drug Administration (FDA) approval for the test - a campaign that the arbitrator said involved illegal political donations to various unidentified members of Congress and large contributions to a think tank affiliated with House Speaker Newt Gingrich.
The decision by arbitrator John Gibbons came in a proceeding involving Johnson & Johnson's (J&J) move in early 1995 to fire Elliott Millenson, who developed the test and later sold his business to Johnson & Johnson, where he headed the Direct Access Diagnostics division.
Direct Access is part of J&J's Ortho Pharmaceutical Corp. subsidiary. Gibbons ruled that Johnson & Johnson improperly fired Millenson in early 1995 in a dispute over adverse publicity arising from the contributions.
Johnson & Johnson claimed that Millenson had disobeyed an order to clear contributions with his superior.
They accused him of causing "substantial harm through adverse publicity" after news reports disclosed that Gingrich had intervened in behalf of Direct Access at a time when Johnson & Johnson entities were making large financial donations to the Progress and Freedom Foundation, a thank tank founded by a member of Gingrich's inner circle of political advisers.
"The support of members of Congress and of other groups was enouraged by contributions," Gibbons wrote. Nonetheless, the arbitrator ruled that Johnson & Johnson's claims of injury to its reputation "are simply too speculative to be taken seriously" and said the company was partly to blame for the bad press.
For his part, Millenson denies the think-tank donations were tied to Gingrich's intervention.
The arbitrator now turns to the issue of the remedy; he requested briefs from both sides. Millenson's lawyer, J. Alan Galbraith, asserted in an interview that Millenson's employment contract requires Johnson & Johnson to give him back the company and pay him back salary.
In addition, the attorney said, Millenson's contract calls for him to receive a $1.5 million bonus because the FDA, in May, approved the test kit.
The arbitrator's decision comes as Johnson & Johnson begins to market the test in Texas and California. Because the initial marketing is limited, losing the division wouldn't necessarily be a big financial blow at first.
But the long-term prospects for the test are bright, and some analysts think it could produce as much as $1 billion in annual sales.
In addition, losing a subsidiary would be another black eye for Johnson & Johnson, whose Ortho subsidiary in 1995 pleaded guilty to a charge of destroying documents relating to an investigation of its product, Retin-A, an acne cream.
Millenson developed the HIV test in 1985 while heading his own company, but he ran into intense resistance from the FDA and many AIDS activists, who argued that testing should be restricted to a professional health-care setting.
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