Analysis: Top-name drug recalls a bitter pill for consumers

NEW YORK Wed Nov 10, 2010 5:41pm EST

Food and Drug Administration (FDA) Commissioner Margaret Hamburg, M.D., speaks at the Reuters Health Summit in New York, November 9, 2010. REUTERS/Mike Segar

Food and Drug Administration (FDA) Commissioner Margaret Hamburg, M.D., speaks at the Reuters Health Summit in New York, November 9, 2010.

Credit: Reuters/Mike Segar

NEW YORK (Reuters) - With bugs in baby formula, glass flakes in intravenous drugs and foul odors emanating from Lipitor and children's Tylenol, a steady stream of high profile product recalls is undermining confidence in top drugmakers.

Industry officials and experts say the rise of well-known product names on major recalls is partly due to enhanced regulatory scrutiny.

Quality control within the industry may also be taking a back seat as drugmakers, biotechs and medical device companies prop up their profits through aggressive cost-cutting, both in primary operations and throughout their supply chains as they find it harder to increase sales.

"Some (recent recalls) have been very, very visible because of the nature of the product or the magnitude of the recall. In terms of absolute numbers, I think there has been an increase, but I think that reflects more vigilance," U.S. Food and Drug Administration Commissioner Margaret Hamburg told the Reuters Health Summit in New York.

"Economic pressures may lead to cutting corners and we need to be very mindful of that," Hamburg said. "When we do identify problems we are trying to move more swiftly and surely to make sure that the appropriate remediation occurs."

Problems can stem from simply putting off routine plant maintenance to seeking cheaper overseas suppliers for seemingly innocuous materials used for storing and shipping products, according to industry observers.

"You can look at companies that have gotten themselves into trouble on good manufacturing practices and discover that the manufacturing budget at the company involved had been shortchanged for a number of years," said Ira Loss of Washington Analysis, an independent research group.

And when companies cut thousands of jobs through layoffs and early retirements, as has been the case throughout the healthcare industry in recent years, good manufacturing practices may be the first thing to suffer.

"You may lose institutional memory and that can lead to slip-ups and mistakes," Loss said.

A BITTER PILL FOR CONSUMERS

The foul odor epidemic, among other manufacturing mistakes, has taken a toll on Johnson & Johnson (JNJ.N). U.S. sales of its consumer products dropped 25 percent in the third quarter due to its recall of nearly 200 million bottles of different over-the-counter drugs [ID:nN19113686].

Abbott Laboratories'(ABT.N) recall of Similac infant formula after insect parts were found in some batches helped bolster the earnings of Mead Johnson Nutrition Co (MJN.N), which sells rival formula Enfamil.

Other recent smaller recalls included intravenous drugs from Amgen Inc (AMGN.O) and Novartis (NOVN.VX) for anemia and rheumatoid arthritis due to the presence of glass flakes likely caused by a breakdown of materials in the vials in which they were stored.

Manufacturing issues can be as egregious as the criminal indifference revealed in a recent whistle-blower case. GlaxoSmithKline (GSK.L) paid $750 million in civil and criminal penalties for knowingly selling contaminated, adulterated and ineffective drugs produced at a now closed plant in Puerto Rico. In that case, the company fired the executive who identified myriad problems that FDA inspectors missed.

No serious harm to health has been linked to most of these recalls, but they diminish consumer trust in medicine.

"The harm is really in the public's confidence in the healthcare industry," U.S. Attorney for Massachusetts Carmen Ortiz said when the Glaxo penalties were announced last month.

"When you go to a pharmacy and you buy a drug, you expect that drug is what it purports to be," she said.

Quality standards can also be a victim of company budget decisions. When the head of marketing or research asks for additional funding, it comes with the potential for high returns. When a plant manager or quality control executive says a filtration system needs upgrading or an aging facility requires attention, it just adds to expenses.

The moldy odor that led to recalls of millions of bottles of J&J consumer products and more than 200,000 bottles of Pfizer's Lipitor was blamed on chemicals used to treat wooden pallets on which the medicines are stored and shipped. The chemicals leached into the bottles.

Use of cheap overseas suppliers can lead to problems of that nature, according to industry experts.

"Things that were off the table in the past are now on the table," said Jim Lawton, president of Dun & Bradstreet Supply Management Solutions, which tracks and monitors supply chain risks for clients.

"As a result you've got all these supply chains now that are fragmented across all sorts of companies and they're all geographically dispersed," Lawton said.

"My guess is they (J&J and Pfizer) don't even know who the pallet manufacturer is, and yet they're on the hook at the end of the day for whether or not consumers think they can buy Tylenol and if it's going to be a safe product to ingest."

The FDA's Hamburg agreed that supply chains are getting much more complex.

"There are many, many more players involved as a drug moves through the distribution process and at every point along the way is a point where there needs to be attention or problems may occur," she said.

And many countries don't come close to having the same quality control standards as a drugmakers' home turf.

"I work with a company that had outsourced something to China and the manufacturer in China had turned around and outsourced a key portion of that to sub-Saharan Africa, and yet my customer is saying, 'I didn't even know we had suppliers in Africa.' And they are just exposed," Lawton said.

The FDA has moved to increase oversight of foreign manufacturing plants, particularly in China where it has opened three offices. But the agency's budget is tight and inspections occur far less frequently overseas than for domestic plants.

"The FDA needs increased resources to be able to more effectively be doing inspections overseas. They just don't have the resources now to be there," said Allan Coukell, head of medical safety for the Pew Health Group.

Pfizer said it continues to investigate its lumber supply chain to find the source of the offending pallets and has switched to plastic pallets for shipping. It is also moving more of its bottle production to plants in the United States, actions that are likely to add costs but also comfort consumers.

J&J declined to comment on the origin of its problem pallets or steps it may have taken to determine its source.

"At the end of the day companies care very much about protecting their brand," Hamburg said. "A recall is enormously expensive both in terms of economic cost, but also reputational costs."

With many of its well known consumer products off the shelves for months, J&J has taken a hit on both counts.

But even as consumers get accustomed to buying cheaper drugstore brand medicines in the absence of Motrin or Tylenol, Loss believes they are likely to forgive and forget.

"I'm sure that there's a big ad campaign coming that's going to try to convince us, 'We made a mistake. We're back on board. Please trust us,'" Loss said.

(Reporting by Bill Berkrot and Lisa Richwine; Editing by Michele Gershberg)