Watson does not expect to recall any products manufactured at its Corona, Calif. facility as a result of a proposed consent decree with FDA, CEO Allen Chao, PhD, told analysts in a March 28 conference call.

"FDA is not seeking a fine or a shutdown of our Corona facility, nor are they asking for any product recalls, or a reduction in production of our service levels," Chao maintained.

Rather, Watson says, FDA appears to be seeking a preventative consent agreement with the company. The agency "is seeking assurances that Watson's quality program continues and that the company maintains compliance in the future," Chao told analysts.

"It is our understanding that the safety and efficacy of product produced at Corona is not at issue," the exec stressed.

Watson is in discussions with FDA over the terms of the consent decree. "There are no assurances that an agreement will be reached with FDA, or how long the process might take," Senior VP-Corporate Quality Assurance Donald Britt said.

"We are working closely and cooperatively with the FDA to reach an agreement. However, if an agreement cannot be reached, then FDA-initiated litigation is a possibility," he added. The Washington, D.C. office of King & Spaulding is consulting Watson on the talks.

Watson has initiated two good manufacturing practices recalls for products manufactured in the Corona facility over the past 18 months.

The company initiated a Class III recall for Microgestin Fe (norethindrone acetate and ethinyl estradiol) for impurity specification failure on Feb. 6. Watson's methocarbamol generic was recalled on Dec. 20, 2000 after product lots were found to contain metal fragments.

Watson implemented a multi-year quality improvement program at its Corona headquarters facility after receiving a GMP warning letter in January 1999. FDA issued an earlier warning letter for the facility in January 1998.

FDA has inspected Watson's Corona facility three times since then - most recently in May 2001 - issuing an FDA-483 report after each inspection.

Most of the agency's observations from the May 2001 action letter "we had uncovered ourselves and had programs in place to address," Britt maintained. "All of the observations that were addressed in that 483 have been corrected, and systems are in place now to prevent reoccurences."

Watson has added more than 30 employees to the facility's quality assurance department and has spent $20 mil. over the last several years on quality enhancements across the company. Future spending will be "minimal," Chao noted.

Watson also hired the consulting firm KMI to conduct independent audits in April 2000 and October/November 2001.

The auditor found the manufacturing processes at Corona "provide a high degree of assurance" that the drugs produced at the plant meet FDA's GMP guidelines, Watson said.

"Watson believes the quality systems and programs implemented throughout the company since 1999 have resulted in significant and measurable improvements at its Corona facility, and that the Corona facility is in substantial compliance with cGMP regulations," the company declared.

If a consent decree is reached, Watson anticipates that it will require that the Corona facility "remain in compliance with cGMP regulations and continue the implementation of practices and procedures which are already substantially in place."

The Corona facility manufactures 26 of Watson's 170 branded and generic products, the pain product hydrocodone and the oral contraceptives Microgestin Zovia and Necon . Of the company's 17 pending ANDAs, two are from the Corona facility, Watson said. The company operates six other manufacturing facilities in the U.S.

Noting that facilities in Miami, Humacao, Puerto Rico, and Carmel, N.Y. manufacture products for Watson similar to those at Corona, Chao suggested that one reason the facility was singled out could be a lack of uniformity in FDA inspection practices.

"There's probably regional differences in the FDA's point of view" regarding inspections, the exec said. "It's a large organization, and there's not necessary uniformity throughout the country. So that's my speculation here."

Watson announced the proposed consent agreement concurrently with two "not approvable" letters for transdermal products manufactured at other facilities (see ¹ Also see "Watson Oxytrol Approval Expected In 2003; Patch Is “Not Approvable” At FDA" - Pink Sheet, 1 April, 2002.).

The company's overactive bladder patch Oxytrol (oxybutynin) is produced at Watson's Salt Lake City facility, while the depression patch EMSAM (selegiline), is manufactured by Somerset Pharmaceuticals. Somerset is a joint venture between Watson and Mylan Labs.

In addition to the Corona facility, Watson's Miami production plant has been the subject of a series of GMP warning letters. FDA issued action letters for the Florida facility in the first quarter of 2000 and April 1999 (² Also see "Watson Quality Improvement Plan At Fla. Facility Follows FDA Warning Letter" - Pink Sheet, 10 May, 1999., p. 26).

At least one Watson exec has headed quality assurance under an FDA consent decree; Britt was hired as Schein senior-VP quality in January 2000, roughly six months before the company was acquired by Watson. Schein signed the consent decree in 1998 (³ Also see "Schein Expects INFeD Supplies To Meet Patient Need Under Consent Decree" - Pink Sheet, 26 October, 1998., p. 13).

If Watson is not required to pay a fine as part of the consent agreement, it would represent a break with other recent GMP enforcement actions involving pharmaceutical and diagnostic companies.

FDA first obtained a disgorgement fee ($100 mil.) as part of an Abbott diagnostics consent agreement in 1999. In October 2000, Wyeth agreed to pay $30 mil. as part of a consent deal (⁴ Also see "Wyeth Will Lose 18.5% Of Marietta Sales If Firm Does Not Comply With GMPs" - Pink Sheet, 9 October, 2000., p. 3).

The largest potential monetary penalty could come for Schering-Plough; the company is negotiating a consent agreement with FDA that could include a fine of up to $500 mil. (⁵ Also see "Clarinex Approval Precedes Consent Decree, But Follows Schering GMP Work" - Pink Sheet, 7 January, 2002., p. 10).

In considering a Watson consent decree, however, FDA may be more closely following the Elan Pharmaceuticals agreement. The Elan decree, which was reached in May 2001, did not involve monetary penalties or a product recall (⁶ Also see "Elan Verelan Consent Decree With FDA Follows Two GMP Warning Letters" - Pink Sheet, 28 May, 2001., p. 18).

Watson/FDA Consent Decree Will Not Involve Product Recalls, Firm Says

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