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Monday, April 25, 2011

What’s The Deal with McNeil’s Consent Decree?

Written by Clinton Ballard - Validation Specialist, QPharma

After nearly 2 years of recalls totaling more than 47 million units of very popular over the counter (OTC) drugs (Sudafed, Tylenol, Rolaids, Sinutab Sinus, Benadryl, Motrin, and Zyrtec) on March 10, 2011 McNeil-PPC, Inc. subsidiary of Johnson & Johnson Services, Inc. (J&J) signed a consent decree with the FDA covering manufacturing facilities in Las Piedras, PR, Fort Washington, PA, and Lancaster, PA.

The details of the Consent Decree requires McNeil to destroy all drugs under their control that have been manufactured or recalled from the Fort Washington, Las Piedras, and Lancaster facilities since December 2009 to the date of entry of the Consent Decree. McNeil is allowed to continue manufacturing operations in the Las Piedras, PR and Lancaster, PA facilities but manufacturing and distributing drugs from its Fort Washington, Pa., facility is prohibited until the FDA determines that its operations are compliant with federal regulations. McNeil must comply with a stringent corrective action plan across all three sites set forth by the FDA. The full details of the corrective action timetable are outlined in the Consent Decree. The key arrangements of the Consent Decree requires that McNeil establish and implement a quality assurance / quality control (QA/QC) program that is applicable to cGMP regulations and in coordination with J&J’s corporate level QA/QC program. McNeil is also required to hire an independent cGMP expert to: inspect all three facilities to determine whether the violations the FDA found during their audits have been corrected, ensure that proper manufacturing processes are in place, and verify that the agreements made in the Consent Decree are met. After certification from an independent expert, the FDA will determine if the facilities are in compliance. If McNeil maintains all three facilities in a state of continuous compliance with applicable regulations and the Consent Decree for at least sixty (60) months they may petition the courts for relief from the Consent Decree. 

McNeil is required to pay the cost of all of the FDA investigative expenses while under consent decree. As of the date of entry of the Consent Decree the cost of FDA inspection is $87.57 / hour, the cost for any laboratory work is $104.96 / hour, and $0.51 / mile for travel. If McNeil violates the agreements of the Consent Decree, the FDA can order McNeil to cease all manufacturing, recall products, and take other corrective action, including levying fines of $15,000 for each day and an additional $15,000 for each violation of the law, up to $10 million annually.  

 J&J will end up paying a nice chunk of change for their McNeil sites’ failure to comply with federal regulations. But, considering the repeated recalls and how long the FDA has been telling McNeil, to clean their act up McNeil got off rather easy based on the agreements of the Consent Decree. McNeil is not required to cease production of any of their recalled products which is usually agreed upon in most FDA consent decrees. McNeil was also able to circumvent paying a hefty disgorgement fee like Schering-Plough who signed a consent decree with the FDA and was required to pay $500 million dollars to the United States Treasury back in 2002. J&J CEO, Bill Weldon was also not listed as a defendant on the Consent Decree but in past consent decrees involving Schering-Plough, Abbott Laboratories and Genzyme the CEO was listed as a defendant. In McNeil’s case the Vice President (VP) of quality and the VP of operations for OTC products are listed as the defendants. Essentially this Consent Decree is a slap on the wrist for McNeil and merely shines light on the implicated McNeil sites’ lack of commitment to “high quality” as stated in the J&J’s corporate company credo.

J&J is a leader in the healthcare product industry, reporting $61.6 billion in sales for 2010. OTC pharmaceutical sales made J&J $4.6 billion in 2010 accounting for 7.7% of their total sales. Recalls were estimated to have cost J&J $900 million in sales in 2010. Considering the amount of money on the line and the brand J&J has created with their McNeil Consumer Healthcare product division it would not be in the company’s or stockholders best interest to not come out of this Consent Decree as a transformed company with a newfound commitment to the J&J Credo. 

The transformation has already begun. Recently J&J has announced that they will be splitting the McNeil Consumer Healthcare unit up into divisions by geography and product type, allowing for more focus on consumer drug operations. Under this new infrastructure, the product lines will be organized into four categories: OTC drugs, skin care, oral care and women's health. The regional divisions: Asia-Pacific, North America, Europe/Middle East/Africa and Latin America will market all of the product lines.

Fortunately J&J can afford the cost of coming out of a FDA consent decree, but do they have the necessary internal McNeil leadership and support required to guide them out of this Consent Decree is a question that only time can answer. Stay tuned as we continue to monitor J&J’s attempt to come out of this Consent Decree.

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