Within these devices, there is a controller chip that sits between the USB port and the actual flash chips. This controller chip is what mimics the FAT file system. The code within the controller chip is not readable, even on a good flash.
Some drives have a software password feature. If the user set the password and then forgot it, then there is no real solution. Formatting will fail under that situation since they are protecting against rogue user from wiping people's files. The manufacturer most likely has a back-door to reset the password or get into the drive. However, they will not share this info as it defeats the purpose of the password.
These devices are really the new "floppy disk". When they work, great! When the stop working, discard them. If very important data is on the drive, then get ready to spend lots of money for the manufacturer to try and retrieve it.