July 21, 2010 / 7:22 PM / 7 years ago

UPDATE 2-New J&J plant woes include Pepcid flavor mixups

* Different Pepcid flavors found in same packages

* FDA cites test procedures, complaint handling

* Analyst cites remote risk plant could be shut down

* J&J shares down 2.5 percent, Merck down 1.3 pct (Adds company comments, describes plant problems)

By Ransdell Pierson and Lisa Richwine

NEW YORK/WASHINGTON, July 21 (Reuters) - U.S. inspectors found problems with test procedures, record-keeping and handling of consumer complaints at a Johnson & Johnson (JNJ.N) and Merck & Co (MRK.N) manufacturing plant in Lancaster, Pennsylvania, a report released on Wednesday said.

The U.S. Food and Drug Administration report noted numerous instances where consumers complained that different products were packaged together, for instance berry-flavored Pepcid chewable antacid tablets were mixed in with mint-flavored Pepcid tablets.

Shares in J&J, which runs the plant as part of a joint venture with Merck, fell 2.5 percent. Merck slipped 1.3 percent. The facility makes widely used consumer brands, including heartburn drugs Pepcid and Mylanta.

"How do you get mint into berry if you're controlling your manufacturing process?" said Jan Wald, an analyst with Noble Financial Capital Markets who predicted it could be costly for J&J to fix the litany of quality control lapses cited in the new report.

J&J is grappling with quality control lapses at two of its other plants that have forced it to recall tens of millions of bottles of Tylenol and other popular consumer medicines.

On Tuesday, J&J said the massive recalls would trim its full-year earnings and said it was the subject of a criminal investigation by the U.S. prosecutor in Philadelphia. [ID:nN20247891]

Morningstar analyst Damien Conover said there is "a remote chance" the problems at the Lancaster plant, enumerated by the FDA on Wednesday, could also force J&J to shut it down.

"Today's report highlights the problems, which make J&J's situation a little more hairy," Conover said. "But it's hard to tell if they will warrant suspension or closure of the Lancaster facility."


The new FDA report listed 12 shortcomings uncovered by agency inspectors who visited the Lancaster site in late June and early July.

Records related to drug production "were not made readily available for authorized inspection," the report said. FDA inspectors said they had to request information on specific topics as many as 10 times before receiving full information.

"Clearly the FDA doesn't feel the responses to their questions were timely, or in some cases adequate and thinks the quality control processes were not effective," said Wald.

Overall, Wald said the FDA observations focus on the quality of documentation being performed at the plant, rather than dirt or contaminated products -- more serious types of problems cited by FDA at the now-closed J&J Fort Washington, Pennsylvania plant.

J&J on Tuesday cut its 2010 profit forecast because of the repeated recalls of painkillers Tylenol and Motrin and the allergy drugs Benadryl and Zyrtec and the expense of revamping the deficient Fort Washington plant. J&J said the facility will be out of commission until the second half of 2011.

Johnson & Johnson on Monday confirmed it had been cited by regulators for problems at the Lancaster plant. On Wednesday, the company repeated an earlier statement that it "takes the issues raised by the agency seriously" and will address the concerns as quickly as possible.

Merck, whose Chief Executive Richard Clark was formerly head of manufacturing at that drugmaker, made similar remarks in its own statement. Merck said the two partners "will be working to ensure that the issues raised by the FDA are addressed in a comprehensive and timely manner." (Reporting by Lisa Richwine and Ransdell Pierson, editing by Michele Gershberg and Bernard Orr)

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