Trouble Brewing for Pharmaceutical Companies
Bribery and recalls. Federal agencies are turning up the heat on pharmaceutical companies. Were you surprised by the eight recalls of Johnson & Johnson products this year? Maybe you shouldn’t be. As HealthReformWatch.com reported in We May Need More Than a Spoonful of Sugar to Help Our Medicine Go Down, drug recalls reached a record high 1,742 in 2009 — more than four times the amount in 2008. Bowman Cox, managing editor of the Gold Sheet (which first broke the story) told CNN Money that in light of the 296 recalls issued in the first six months of 2010, there could be 600 or more recalls this year.
Why So Many Recalls?
Analysts and legislators are examining the recall statistics to find sources and solutions to the pharmaceutical safety issue.
1. Drug repackaging
Advantage Dose, a now-defunct Shreveport, LA based drug repackager, was responsible for more than 1,000 of the 2009 recalls. Companies like Advantage Dose repackage and relabel drugs into smaller units for resale or distribution to health care facilities. After excluding Advantage Dose from the count, there still remains a 50% jump in recalls from 2008 to 2009.
2. The generic rush
Gold Sheet’s Cox suggests that generic manufacturers cut drug design costs in their rush to be first to market after a branded-drug’s patent protection expires, decreasing quality. “The first applicant typically gets the lion’s share of the business for the new drug… So they get the application. They make and market the drug, but they could still have problems down the road if they haven’t really understood the optimum way to make that drug.” One example of a design failure is Caraco Pharmaceutical Laboratories’ “tablet thickness” recalls in March 2009.
3. Manufacturing lapses
Some experts say the biggest culprits include the quality of raw materials and contamination. Approximately one month ago, HealthReformWatch.com reported in Pharmaceutical Outsourcing: Trading Quality for Lower Costs? that India’s largest pharmaceutical manufacturer had been cited several times in recent years for manufacturing violations. Additional recalls include vaccines produced by Shantha Biotechnics for Sanofi-Aventis and injectible drugs made by Claris Lifesciences for Pfizer. The FDA stated its intent on May 5, 2010 to “propose stronger regulation for pharmaceutical companies that outsource manufacturing, putting more responsibility on the companies to ensure the purity and safety of the products…”
4. Increased FDA scrutiny of manufacturing facilities
Which came first, the chicken or the egg? Increased FDA oversight may or may not have led to the increased number of recalls; however, the recalls will probably lead to increased FDA regulatory power.
As Jennifer Jascoll reported, Senator Michael F. Bennet (D-CO) proposed the Drug Safety and Accountability Act of 2010 on August 3, 2010. According to Bennet’s press release, “[t]he bill would strengthen manufacturer quality standards, enhance the FDA’s ability to protect Americans through improved tracking of foreign manufacturing sites, and give the FDA much-needed authority to recall potentially dangerous drugs.” Currently, the FDA is empowered to issue warnings and recommend that a manufacturer issue a recall.
Two prior bills would also increase FDA powers to mandate a recall:
- The Protect Consumers Act of 2009 (sponsored by Rep. Betty Sutton, D-OH) would require the Secretary of HHS implement a recall if it is determined to be necessary.
- H.R. 6740 (sponsored by Rep. Edolphus Towns, D-NY) would provide the Secretary of HHS with the ability to mandate a recall “if the Secretary has reason to believe that the use or consumption of, or exposure to, a drug (or an ingredient or component used in any such drug) may cause serious adverse health consequences or death to humans or animals.”
According to CNN Money, the FDA has not identified any alarming pattern. FDA spokeswoman Elaine Gansz Bobo stated, “[s]ince every recall situation is unique, it would be difficult to assess whether there are any trends or increases in recalls this year… At this time, however, we have not identified any trends.” Despite the FDA’s lack of concern, other federal agencies are interested in the practices of pharmaceutical companies.
Further Federal Investigations
According to the N.Y.Times, federal prosecutors and securities regulators are investigating pharmaceutical companies for potential violations of the Foreign Corrupt Practices Act (FCPA). The FCPA is an anti-bribery law which bars companies from offering foreign government officials items of value for profit. For instance, Pfizer disclosed in April “that it paid $35m over six months to 4,500 doctors in private practice for education and the development and marketing of new drugs.” Although this practice is legal in the U.S., such payments are illegal in many foreign countries where physicians are employed by the government.
On November 17, 2009, Assistant Attorney General Lanny A. Breuer stated that the Department of Justice intended to focus its attention on the pharmaceutical industry:
In some foreign countries and under certain circumstances, nearly every aspect of the approval, manufacture, import, export, pricing, sale and marketing of a drug product may involve a “foreign official” within the meaning of the FCPA. The depth of government involvement in foreign health systems, combined with fierce industry competition and the closed nature of many public formularies, creates, in our view, a significant risk that corrupt payments will infect the process. Our remarkable FCPA unit and our terrific health care fraud unit will be working together to investigate FCPA violations in the pharmaceutical industry in an effort to maximize our ability to effectively enforce the law in this high-risk area.
“Corrupt practices” under the FCPA are not limited to cash in envelopes. Inappropriate payments for lavish hospitality, consulting, licensing agreements, and even charitable donations may raise red flags for government investigators.
Could bribery be contributing to decreased quality and the sudden rise in recalls? According to the Financial Times, the DoJ is focusing its efforts elsewhere:
[T]he DoJ is particularly interested in corrupt payments that may have influenced the reliability or integrity of data in clinical trials performed outside the US. A recent report by the Department of Health and Human Services found 80 percent of marketing applications for drugs approved by the Food and Drug Administration in the US had relied on at least one foreign trial.
It appears that the DoJ’s scrutiny of clinical trials is not without merit. The N.Y.Times reports that “[l]ast month, a federal drug official reported that he found repeated instances in a landmark clinical trial of Avandia, a controversial diabetes medicine, in which patients taking Avandia appeared to suffer serious heart problems that were not counted in the study’s crucial tally of adverse events.” The clinical trials for Avandia included many foreign trial sites, which were submitted in support of the drugs’ application to enter and remain on the U.S. market. GlaxoSmithKline, the trial’s sponsor, has not been accused of fraud.
According to recent regulatory filings, the following companies are under investigation for possible violations of the FCPA:
- Merck is cooperating with a federal investigation of company activities in multiple foreign nations.
- Medtronic is cooperating with investigations of company activities in Greece, Poland, Germany, Turkey, Italy, and Malaysia.
- Eli Lilly is cooperating with the investigations of subsidiaries in several countries, including Poland.
- Federal investigators are looking into improper payments related to the sale of Zimmer products abroad.
- Johnson & Johnson voluntary disclosed the possibility that company subsidiaries abroad had made improper payments to government officials in two countries relating to the sale of medical devices.
- Pfizer and Bristol-Myers Squibb have also disclosed that they are subject to federal investigations. AstraZeneca, GlaxoSmithKline, and Baxter SciClone have also received inquiries from federal enforcement agencies.
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I think that there is another reason for more recalls. Companies have been directed to look to new concepts such as quality risk management and quality by design. The FDA staffers have been pushing these at the top level as desirable if not obligatory. On the other hand, the industry QA staff are often with much more limited experience than in past days where QA was a role taken on by senior staff towards the end of their careers rather than a post for fresh graduates.
If you look at many of the compliance issues they are fundamental problems that would have been eradicated in most companies back in the ’90’s and have now come back.