IHS Global Insight Perspective | |
Significance | The House Committee has held a hearing over McNeil's paediatric OTC product recalls, on which the FDA testimony unveiled a series of quality standard violations found in the company's manufacturing facilities. The agency may take heavier enforcement including criminal penalties. |
Implications | Despite the admission by the FDA and J&J that the violations are not acceptable, both parties claimed that the health hazard related to the quality problems in concern is low. |
Outlook | In addition to the negative impact on J&J's reputation, the recalls and the subsequent investigations and potential penalties will also bite into the company's financial performance due to the facility closure and potential penalties. |
The U.S. House of Representatives Committee on Oversight and Government Reform yesterday held a hearing regarding the recent recalls of paediatric medicines by U.S. healthcare giant Johnson & Johnson's (J&J) consumer healthcare division, McNeil.
FDA Testimony Reveals Heavier Enforcement Under Consideration
During the hearing, the U.S. FDA's principal deputy commissioner Joshua M. Sharfstein presented a testimony which revealed that the FDA has had growing concerns during recent years over the quality of McNeil's manufacturing process including several current good manufacturing practice (cGMP) violations identified around 2009.
The testimony revealed a list of oversights in McNeil's manufacturing facility and process, which include:
- Prior to 2009, the FDA inspectors identified several cGMP compliance problems in the company's facilities including laboratory control and equipment cleaning process. The company also failed to investigate the said problems;
- In May and June 2009, further cGMP violations were found, among which the company failed to meet its own quality standard in the purchase of microcrystalline cellulose, an ingredient used in its over-the-counter (OTC) liquid products;
- In the autumn of 2009, the agency learnt that McNeil failed to conduct timely investigation into reports that its products manufactured in a Puerto Rico plant had musty odour. Neither did it report the problem to the FDA;
- In April 2010, more cGMP violations were found, which included bacteria and particles found in a number of liquid products. In addition, one Tylenol product may have contained higher-than-expected concentrations of Tylenol per dropper.
While listing the unacceptable quality issues in the company's manufacturing of the recalled products, he also noted that the public health risk resulting from the quality problems is low. In addition, he also outlined the next actions including:
- The FDA is closely monitoring the company's implementation of a corrective plan for the improvement of its quality system and relevant organisational changes;
- The agency will continue its investigations on the quality issues related to McNeil's manufacturing facilities;
- The agency is also pondering heavier enforcement actions, which may include seizures, injunctions or criminal penalties.
The testimony also noted that the FDA will be developing new procedures in its inspections of a company's different facilities and also will make the McNeil case part of the agency's review on the recall process.
Outlook and Implications
Following several smaller-scale OTC product recalls, McNeil launched the recent recall of over 40 paediatric OTC liquid medicines, which accounted for over 136 million bottles of the said products at the end of April (see United States: 6 May 2010: J&J Again Hit by Recalls on Over 40 Paediatric OTC Liquid Formulations). Despite the claims by the company and the FDA that the health risk from the products in concern is remote, the large scope of product recalls and a series of quality issues found in McNeil facilities have generated broad concerns among the public and the regulation authorities. The case may lead to potential regulatory changes in the FDA's inspection frequency, procedure and requirements for product recall process in a bid to avoid future quality standard violations.
In terms of J&J, the recall and the subsequent investigations may result in higher-than-originally-expected prices. On one hand, it will suffer production and revenue losses from the closure of the concerned facility, which will be worsened by the potential penalties the FDA may impose. On the other hand, the issue will pose a negative impact on the company's profile and consumer confidence in its products, which will also affect the company's product sales before the reputation is fully mended. The financial impact is likely to be reflected in J&J's 2010 results.