Vaccination News Home Page

http://www.nytimes.com/2002/05/18/business/18DRUG.html

Drug Maker to Pay $500 Million Fine for Factory Lapses

By MELODY PETERSEN

he Schering-Plough Corporation announced yesterday that it had agreed to pay $500 million to the federal government because of its repeated failure over the years to fix problems in manufacturing dozens of drugs at four of its factories.

If approved by the United States District Court in Newark, the agreement would impose by far the highest financial penalty on a pharmaceutical company for failing to comply with federal manufacturing guidelines. In 1999, Abbott Laboratories paid $100 million to settle accusations about manufacturing problems.

The agreement with Schering-Plough covers violations, dating back as far as 1998, that government inspectors found in the company's factories in New Jersey and Puerto Rico. Some of the problems relate to the lack of controls that would identify faulty medicines, while others stem from outdated equipment. They involve some 200 medicines, including Claritin, the allergy medicine that is Schering's top-selling product. The manufacturing problems have caused shortages of several drugs, including Celestone, which is used to speed the development of the lungs of premature infants.

In March 2000, Schering-Plough recalled millions of asthma inhalers, saying there was a remote possibility that some did not contain a key ingredient. Many of those inhalers were manufactured and shipped long before the recall.

Under the proposed agreement, Schering-Plough must submit a plan to the Food and Drug Administration for bringing its factories into compliance with federal rules. The company must also station specially trained personnel at each factory to oversee operations, and hire outside consultants to conduct annual inspections. Federal regulators will also inspect the factories.

"This action is another clear sign that F.D.A. will continue to enforce the rules and regulations requiring companies to carefully control and monitor their processes," said Dr. Lester M. Crawford, the F.D.A.'s deputy commissioner, in a statement. "Manufacturers who choose to wait until F.D.A. investigators find violations rather than policing themselves will find that they have made a poor and costly decision."

In addition to Schering-Plough and Abbott, several other large drug makers have recently been criticized by federal regulators, who have found numerous problems with how they make prescription drugs and other medical products. The reasons for the growing number of problems are hotly debated. The industry has tended to attribute the rise to what executives describe as overly aggressive regulators, while the F.D.A. has said that drug companies have failed to keep their factories up to date.

If Schering-Plough fails to meet the terms of the agreement, which is known as a consent decree, the government could impose even greater financial penalties.

In a statement yesterday, Richard Jay Kogan, the chairman and chief executive, said the company believed that all of its pharmaceutical products were safe and effective.

"We are confident of our ability to move forward under the agreement and complete our improvement programs successfully," he said.

But Schering-Plough also said the proposed agreement did not resolve a continuing investigation by the F.D.A.'s Office of Criminal Investigation in Puerto Rico, where the company has two factories.

The company has said it does not know what products may be involved in that investigation, which is at a preliminary stage, and the F.D.A. has declined to comment on the inquiry.

There has been speculation on Wall Street that the inquiry might center on whether products were manufactured with insufficient amounts of active drug ingredients.

In the 2000 recall, the company was forced to take millions of inhalers off the shelf after determining that some of them might not have been properly filled with albuterol, a drug that helps asthma sufferers breathe. Those inhalers were made in New Jersey.

Government inspectors found similar problems last year at the company's factory in Manati, P.R., according to inspection reports. For example, hundreds of consumers have complained that the company's Nasonex nasal spray, which is made at that factory, did not work, the reports said.

Last year, Public Citizen, the Washington-based consumer group, called for a criminal investigation of Schering-Plough after finding that some asthma patients had died while using inhalers that were later recalled.

Dr. Sidney Wolfe, the director of Public Citizen's health research group, said that a lawyer from the United States attorney's office in New Jersey and an official from the F.D.A.'s Office of Criminal Investigation had interviewed him last fall about the information he had obtained about the inhalers and the patients who died.

Robert J. Consalvo, a spokesman for Schering-Plough, said yesterday that the company had no indication that the investigation might center on the asthma inhalers.

Under the consent decree announced yesterday, Schering-Plough agreed to recall two drugs used to treat asthma — Proventil Repetabs and theophylline — because tests showed they might deteriorate before their expiration date.

The company said it had also decided that it would no longer manufacture dozens of other older products. And Schering-Plough said it was temporarily suspending production of certain animal health products — including Nuflor, a medicine for foot rot in cattle — that are made at the plant in Manati.

Schering-Plough said late last year that it might have to pay as much as $500 million to the government. The company has already reserved for such a payment in its financial statements. Schering-Plough said yesterday that it was lowering its expected earnings growth rate for this year to a "mid-single-digit" percentage from the "low double-digit" figure it had projected previously.

Despite that change, the stock price rose yesterday by more than 5 percent, or $1.37, to $26.12, although it is down 27 percent for the year.

Timothy M. Anderson, an analyst with Prudential Securities, said the company's announcement of the agreement had helped clear up some of Wall Street's uncertainty about Schering-Plough.
 

Vaccination News Home Page

ALL INFORMATION, DATA, AND MATERIAL CONTAINED, PRESENTED, OR PROVIDED HERE IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TO BE CONSTRUED AS REFLECTING THE KNOWLEDGE OR OPINIONS OF THE PUBLISHER, AND IS NOT TO BE CONSTRUED OR INTENDED AS PROVIDING MEDICAL OR LEGAL ADVICE.  THE DECISION WHETHER OR NOT TO VACCINATE IS AN IMPORTANT AND COMPLEX ISSUE AND SHOULD BE MADE BY YOU, AND YOU ALONE, IN CONSULTATION WITH YOUR HEALTH CARE PROVIDER.