A U.S. bankruptcy court judge has rejected Johnson & Johnson's proposed settlement regarding talc-containing baby powder, marking another obstacle in the company's efforts to address the issue. This is the third bankruptcy case related to the baby powder problem for a J&J entity.

Red River Talc LLC, a subsidiary of J&J, had put forth a Chapter 11 bankruptcy plan for approval by the court, aiming to settle ovarian cancer and other gynecological cancer claims linked to talc products with a payment of $9 billion. However, Judge Christopher Lopez of the U.S. Bankruptcy Court for the Southern District of Texas, Houston division ruled against the plan due to issues with the solicitation process for personal injury claimants.

Johnson & Johnson stated that it will not appeal the decision but will return to the legal system to challenge the talc claims it considers baseless. The company will also reverse $7 billion of a previous reserve.

Despite settling a majority of mesothelioma lawsuits and resolving other legal disputes, J&J continues to face allegations that its talcum powder caused ovarian cancer and other health issues. The legal actions led to a decline in sales of baby powder, prompting the company to discontinue talc-based products in 2020 and announce a global halt to sales in 2022.

J&J previously proposed a $6.48 billion settlement over 25 years to address ovarian cancer claims related to its talc products. The company clarified that the recently rejected reorganization plan aimed to resolve nearly all ongoing talc lawsuits in the U.S., excluding mesothelioma cases. The news of the setback caused J&J's stock to drop by over 3% before the market opening on Tuesday.