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J&J blames revenue drop on 'pricing pressures'

Johnson & Johnson's first-quarter profit fell by more than 10 percent as increased sales were offset by higher costs for production, marketing and administration, plus charges for litigation and other items.

The maker of No More Tears baby shampoo, prescription drugs and surgical tools said Tuesday repeatedly during a conference call with analysts that revenue for a wide range of products is being hurt by "pricing pressures" from insurers and government health programs.

But the world's biggest and most diversified maker of health care products said it continues to make progress fixing manufacturing problems that have caused about three dozen product recalls since 2009 and kept Tylenol, Motrin and other popular consumer health brands out of stores. More of those brands are returning or soon will be.

J&J, based in New Brunswick, N.J., said it earned $3.5 billion, or $1.22 per share, down 10.6 percent from $3.9 billion, or $1.41 per share, a year earlier. Excluding litigation and acquisition-related charges totaling $610 million, income would have been $4.1 billion, or $1.44 per share. That beat analysts' forecasts by 4 cents per share.

Revenue totaled $17.51 billion, up 8.5 percent from $16.1 billion a year earlier.

J&J shares rose $1.73, or 2.12 percent, to close at $83.44. The stock has rallied 19 percent in the year to date, better than the benchmark S&P 500.

"We're off to a good start in 2013 with solid results," chief financial officer Dominic Caruso told analysts.

But analyst Steve Brozak of WBB Securities said he expects more insurers and government health programs around the world to demand lower prices.

"Now the government's going to start to sharpen their pencils and say, 'We want a discount of this and this and this,' " Brozak predicted. "That is not a good thing for them."

And that's already beginning.

"As of now, we have $1 billion of costs of U.S. health care reform embedded in our business," Caruso told analysts.

That includes effects from multiple provisions of the Affordable Care Act: new rebates on prescription drugs bought by state-managed Medicaid programs, higher rebates for drugs bought under Medicare, a fee on prescription drug sales and a new fee on sales of medical devices.

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