Treating the Symptoms of a Drug Recall

Recalling drugs is a very common practice in the Life Sciences industry. It’s a good strategy to avoid future litigation, especially if the tainted products are out in the market for a long period. Failed specifications account for 40.7% of pharmaceutical recalls. In 2018 to date the US Food and Drug Administration (FDA) has ordered a total of 38 drug recalls. 2017 saw the FDA recall 58 drugs.

Despite such staggering numbers, there continues to be little awareness in Asia about the risks a recall incident can pose to a company’s balance sheet. Further, while there are agencies to evaluate medicinal products in Asia, they are country, rather than regionally based, and criteria and standards vary across countries.

A recent case study involving a Chinese pharmaceutical company highlights the costs, both direct and indirect, of a drug recall, and what options companies have to protect themselves from such losses.

On July 13, 2018 the FDA issued a voluntary recall of several drug products containing the active pharmaceutical ingredient “valsartan”, used to treat high blood pressure and heart failure. This recall was due to an impurity, N-nitrosodimethylamine (NDMA), which was found in the recalled products. NDMA, an organic chemical, is classified as a probable human carcinogen (a substance that could cause cancer). Amongst other products, the chemical has been used to make liquid rocket fuel, softeners, and lubricants.

Company XYZ, a Chinese pharmaceutical company, had supplied the active pharmaceutical ingredient for this drug to most major pharmaceutical companies across the globe. It sold CNY328 million (US$50 million) worth of the ingredient in 2017. A small error, which could be human, impacted 2,300 batches and led to recalls in 23 countries, and a stock price drop of 20% on the Shanghai Stock Exchange (SSE).

To learn more about the losses likely to be incurred by Company XYZ, read this case study prepared by Marsh’s Healthcare and Life Sciences Industry Leader for Asia, Prashansa Daga.