Report of Independent Registered Public

Accounting Firm
To the Board of Directors and Shareholders of Johnson & Johnson
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Johnson & Johnson and its subsidiaries (the
“Company”) as of January 3, 2021 and December 29, 2019, and the related consolidated statements of earnings, of
comprehensive income, of equity and of cash flows for each of the three fiscal years in the period ended January 3, 2021,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company’s internal control over financial reporting as of January 3, 2021, based on criteria established in Internal Control
— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of January 3, 2021 and December 29, 2019, and the results of its operations and its cash
flows for each of the three fiscal years in the period ended January 3, 2021 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of January 3, 2021, based on criteria established in Internal Control —
Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are

Johnson & Johnson 2020 Annual Report • 103

 recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to
accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.

U.S. Pharmaceutical Rebate Reserves - Managed Care, Medicare and Medicaid

As described in Note 1 to the consolidated financial statements, the Company recognizes revenue from product sales
when obligations under the terms of a contract with the customer are satisfied. Rebates and discounts provided to
customers are accounted for as variable consideration and recorded as a reduction in sales. The liability for such rebates
and discounts is recognized within Accrued Rebates, Returns, and Promotions on the consolidated balance sheet. A
significant portion of the liability related to rebates is from the sale of pharmaceutical goods within the U.S., primarily the
Managed Care, Medicare and Medicaid programs, which amounted to $7.2 billion as of January 3, 2021. For significant
rebate programs, which include the U.S. Managed Care, Medicare and Medicaid rebate programs, rebates and discounts
estimated by management are based on contractual terms, historical experience, patient outcomes, trend analysis, and
projected market conditions in the U.S. pharmaceutical market.
The principal considerations for our determination that performing procedures relating to U.S. pharmaceutical rebate
reserves — Managed Care, Medicare and Medicaid is a critical audit matter are the significant judgment by management
due to the significant measurement uncertainty involved in developing these reserves and the high degree of auditor
judgment, subjectivity and audit effort in performing procedures and evaluating the assumptions related to contractual
terms, historical experience, patient outcomes, trend analysis, and projected market conditions in the U.S. pharmaceutical
market.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to U.S. pharmaceutical rebate reserves — Managed Care, Medicare and Medicaid, including controls over the
assumptions used to estimate these rebates. These procedures also included, among others, (i) developing an
independent estimate of the rebates by utilizing third party information on price and market conditions in the U.S.
pharmaceutical market, the terms of the specific rebate programs, and the historical experience and trend analysis of
actual rebate claims paid; (ii) testing rebate claims processed by the Company, including evaluating those claims for
consistency with the contractual and mandated terms of the Company’s rebate arrangements; and (iii) comparing the
independent estimates to management’s estimates.

Litigation Contingencies - Talc

As described in Notes 1 and 19 to the consolidated financial statements, the Company records accruals for loss
contingencies associated with legal matters, including talc, when it is probable that a liability will be incurred and the
amount of the loss can be reasonably estimated. To the extent adverse verdicts have been rendered against the Company,
management does not record an accrual until a loss is determined to be probable and can be reasonably estimated. For
these matters, management is unable to estimate the possible loss or range of loss beyond the amounts already accrued.
Amounts accrued for legal contingencies often result from a complex series of judgments about future events and
uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such
estimates and judgments can be affected by various factors, including, among other things, whether damages sought in

104 • Johnson & Johnson 2020 Annual Report

the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not
complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute;
procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve
comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous
parties involved. There have been verdicts against the Company for this matter, including a verdict in July 2018 of
$4.7 billion, which was reversed in part and affirmed in part by the Missouri Court of Appeals in June 2020, reducing the
overall award to $2.1 billion and, with additional interest as of January 3, 2021, as the Company pursues further appeal, is
currently $2.5 billion. An application for transfer of the case to the Missouri Supreme Court was subsequently denied, and
the Company is currently seeking review by the United States Supreme Court. As described by management, the
Company continues to believe that it has strong legal grounds for the appeal of this verdict, as well as other verdicts it has
appealed. Notwithstanding the Company’s confidence in the safety of its talc products, in certain circumstances the
Company has and may settle cases. The Company has established an accrual for defense costs and reserves for
settlement of certain cases and claims, as well as one case currently on appeal, in connection with product liability
litigation associated with body powders containing talc.
The principal considerations for our determination that performing procedures relating to the talc litigation is a critical audit
matter are the significant judgment by management when assessing the likelihood of a loss being incurred and when
determining whether a reasonable estimate of the loss or range of loss for each claim can be made, which in turn led to a
high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s
assessment of the loss contingencies associated with this litigation.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to management’s evaluation of the talc litigation, including controls over determining whether a loss is probable
and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures. These
procedures also included, among others, (i) gaining an understanding of the Company’s process around the accounting
and reporting for the talc litigation; (ii) discussing the status of significant known actual and potential litigation with the
Company’s in-house legal counsel, as well as external counsel when deemed necessary; (iii) obtaining and evaluating the
letters of audit inquiry with internal and external legal counsel for significant litigation; (iv) evaluating the reasonableness of
management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably
estimable; and (v) evaluating the sufficiency of the Company’s litigation contingencies disclosures.

Litigation - Opioids
As described in Notes 1 and 19 to the consolidated financial statements, the Company records accruals for loss
contingencies associated with legal matters, including opioids, when it is probable that a liability will be incurred and the
amount of the loss can be reasonably estimated. To the extent adverse verdicts have been rendered against the Company,
management does not record an accrual until a loss is determined to be probable and can be reasonably estimated. For
these matters, management is unable to estimate the possible loss or range of loss beyond the amounts already accrued.
Amounts accrued for legal contingencies often result from a complex series of judgments about future events and
uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such
estimates and judgments can be affected by various factors, including, among other things, whether damages sought in
the proceedings are unsubstantiated or indeterminate; matters present legal uncertainties; there are significant facts in
dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to
achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are
numerous parties involved. The Company has been named in numerous lawsuits brought by certain state and local
governments related to opioids matters. The trial in the matter filed by the Oklahoma Attorney General resulted in a
judgment against the Company in the amount of $572 million which was subsequently reduced to $465 million. The
Company has appealed the judgment and, as described by management, believes that it has strong grounds to overturn
this judgment. Separately in October 2019, the Company announced a proposed agreement in principle that would
include the Company paying $4 billion as settlement of the lawsuits. In October 2020, the Company agreed to contribute
up to an additional $1 billion to an all-in settlement amount that would resolve opioid lawsuits filed and future claims by
states, cities, counties and tribal governments, for a total of $5 billion which has been accrued, subject to various
conditions and an agreement being finalized. As described by management, this agreement in principle is not an admission
of liability or wrong-doing and would resolve opioid lawsuits filed and future claims by states, cities and counties.
The principal considerations for our determination that performing procedures relating to the opioids litigation is a critical
audit matter are the significant judgment by management when assessing the likelihood of a loss being incurred for the
judgment against the Company in Oklahoma and when determining whether a reasonable estimate of the range of loss for

Johnson & Johnson 2020 Annual Report • 105

 the proposed agreement in principle to settle opioids litigation can be made, which in turn led to a high degree of auditor
judgment, subjectivity and effort in performing procedures and evaluating management’s assessment of the loss
contingencies associated with this litigation.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to management’s evaluation of the opioid litigation, including controls over determining whether a loss is probable
and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures. These
procedures also included, among others, (i) gaining an understanding of the Company’s process around the accounting
and reporting for the opioids litigation; (ii) discussing the status of significant known actual and potential litigation and
ongoing settlement negotiations with the Company’s in-house legal counsel, as well as external counsel when deemed
necessary; (iii) obtaining and evaluating the letters of audit inquiry with internal and external legal counsel for significant
litigation; (iv) evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is
reasonably possible or probable and reasonably estimable; and (v) evaluating the sufficiency of the Company’s litigation
contingencies disclosures.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 22, 2021
We have served as the Company’s auditor since at least 1920. We have not been able to determine the specific year we
began serving as auditor of the Company.

106 • Johnson & Johnson 2020 Annual Report