Deep Pockets | Does the FDA Get Tougher if the Owner Gets Richer?

Acquisition of one pharmaceutical firm by another is preceded by due diligence efforts in many functional areas. Let’s talk about activities in the GMP area. Firms may not be able to fully rely on past inspections by the FDA to predict the extent of remediation that might be necessary in the manufacturing and testing of the firm’s products. We provide five recent examples where the FDA appears to increase their enforcement intensity when an acquiring firm with perceived ‘deep-pockets’ enters the game.

Recently, the FDA posted a 17-page, 18-observation 483 issued to Claris Injectables Ltd, in Ahmedabad, India at the end of inspection on August 4, 2017.  Thomas Arista (National Expert Investigator) was one of the two investigators.  The previous inspection of this site for which a 483 is available was conducted in May 2015, and while many of the observations point out similar issues with shortcomings in environmental monitoring, the 2015 document was only 4-pages long.  Moreover, the 483 did not prompt additional enforcements such as a warning letter or import alert.  The FDA website does not currently identify any Claris sites under Import Alert 66-40 for failure to follow drug GMPs.  Claris sold its global generic injectables business to Baxter International on July 27, 2017; it’s not clear whether the sale includes this site.  If it does, this is likely the FDA’s message to Baxter that this site (and perhaps other Claris Injectables sites) need serious remediation and they expect it to be completed in a timely manner.  Baxter will be viewed as having the ‘deep-pockets’ necessary to fully address the problems.

This is not all that far-fetched.  The FDA continues to hold Pfizer accountable for shortcomings at Hospira sites…again the deeper pockets issue.  Pfizer completed the acquisition of Hospira in September 2015.  Hospira has been front and center in shortages of injectable drug products, as well as CGMP enforcement actions, at a variety of their manufacturing sites well before the purchase by Pfizer.  The warning letter issued to Hospira on February 2017 regarding their site in McPherson, Kansas was issued to the CEO of Pfizer and cites ‘similar CGMP violations at other [Hospira] facilities in your company’s network.’   The FDA proceeds to mention four warning letters issued to Hospira between 2010 and 2015 that identify CGMP deficiencies at five Hospira facilities.  The 20-page 483 mentioned in the warning letter identified 14 observations in several quality systems including a mention of combination products.  Pfizer seems to have underestimated the challenges posed by the purchase of Hospira.  Results for the Essential Health Unit (which includes Hospira) in 3Q2017 was down 11%.  FiercePharma reports that “Read explained that when Pfizer acquired Hospira for $15 billion in 2015, his team was confident it would take only one to two years to integrate the manufacturing plants and resolve the majority of the supply chain issues. But despite its “robust action plan,” two years out, problems still confound.”  The FDA comments in the 2017 warning letter issued to the CEO of Pfizer shows their impatience and only slightly concealed frustration with remediation of long standing problems at Hospira.  In addition, this problematic inspection resulted in Complete Response Letters (CRLs) that cite manufacturing deficiencies including one for their own EPO biosimilar.  Obviously, Pfizer has far deeper pockets and more financial resources than Hospira even though they were a reasonably large firm when they separated from Abbott in 2004.

And, for another example, Amgen announced its acquisition of Mustafa Nevzat in April 2012 and completed the acquisition in June 2012.  Mustafa Nevzat was a privately held pharmaceutical firm in Turkey.  The FDA arrived in May 2012 for a routine inspection, issued a 26-page 483 to one of the two sites in Turkey, and then imposed an import alert for failure to comply with drug CGMPs which remains in effect today.  One of the investigators was Jose Cruz Gonzalez, a seasoned inspector with significant experience evaluating sites outside the US.

Stryker acquired Sage Products in February of 2016.  In July of 2017, Sage Products received a warning letter for apparently egregious lack of oversite of their contract manufacturer who was manufacturing drugs and car wax using the same equipment.  Needless to say, the contract manufacturer didn’t have cleaning validation.  Also, Sage was cited for failures in their approach to ensuring their oral drug products are not contaminated with objectional microorganisms including B. cepacia.  Stryker, with a market cap of approximately $58 billion paid just under $2.8 billion for Sage Products.

And, to add one final example, Mylan Inc. completed the acquisition of Agila Injectables from Strides Arcolab Limited on December 4, 2013 after announcing a definitive agreement to acquire them on February 27, 2013.  One of the Agila sites was inspected in June 2013 and this resulted in a warning letter in September 2013.  The 483 associated with the warning letter was 10 pages long and one of the investigators was Peter Baker who has been associated with many of the data integrity enforcement actions in India and China.  Note that both activities occurred after the announcement of the intended purchase.  In less than two years after the acquisition, three additional sites were associated with a warning letter dated August 6, 2015.  In this warning letter, the FDA states: “Furthermore, several violations are recurrent and long-standing. Although we acknowledge that the Agila facilities were acquired by Mylan recently, you were on notice of the violations in Warning Letter 320-13-26, dated September 9, 2013. Even without this Warning Letter, your corporate quality system should have detected and corrected the forgoing violations without FDA intervention.”  Ultimately Strides Shasun (yes, there was a name change) settled with Mylan to assist in covering the cost of remediation at the plants they sold to Mylan.

Bottom line, when a large company with seemingly significant financial resources acquires a smaller firm, the FDA appears to hold the acquiring company responsible to fix existing problems at the acquired firm and to do so in a timely manner.  Problems that may not have previously resulted in enforcement actions suddenly become important, expensive to remediate, and public.  The length of the enforcement related 483s in three of the cases mentioned above is a not so subtle clue that the FDA is attempting to obtain the undivided attention of the acquiring firm.  483s that are 17, 20, and 26 pages long are a clear sign of FDA displeasure at what they found upon inspection and rarely end painlessly for the firms that receive them.