Quality control problems for Johnson & Johnson's McNeil Consumer Healthcare business and the regulatory and congressional scrutiny that followed dominated the attention of drug and dietary supplement industry stakeholders in 2010.

Data from "The Tan Sheet" website show our coverage of the J&J-McNeil quality-control saga drew the most views during a year also marked by well-read topics such as FDA enforcement, claims substantiation and Sanofi-Aventis' acquisition of Chattem, which kicked off a series of major acquisitions that moved consumer businesses into the pharma space.

From Recalls To Reckitt: Top 10 In 2010

McNeil's Odorous OTCs And "Phantom Recall"
Big Pharma Tees Up Switches Via Acquisitions
FTC Raises Supplement Claims Profile
Savings Account Ineligibility For OTCs
FDA Flexes Enforcement Options
House Shift Shapes FDA Oversight
Perrigo Makes "ORx" Play
Firms Say FDA Transparency Shows Smudges
Ruling Opens Door For Supplement QHCs
FDA Admonishes Reckitt Over Petition

1. McNeil's Odorous OTCs And "Phantom Recall"

"The Tan Sheet" chronicled McNeil's story, from odor-linked recalls of Tylenol and other products manufactured at McNeil's Puerto Rico facility to lawmakers investigating the firm's "phantom recall" the previous year, to McNeil focusing on quality control in management moves, to federal investigations targeting J&J for liability for potentially unsafe recalled products.

FDA concerns about McNeil's quality-control problems surfaced early in 2010 when, as reported in the most-read story in "The Tan Sheet," the agency told the firm it should have acted sooner to recall products manufactured in Las Piedras, P.R., that consumers complained had an odor.

McNeil later linked the odor to chemical contamination from treated wooden pallets used for shipping and storing packaging materials (Also see "McNeil Expands Tylenol Recall As FDA Criticizes Firm's Response To AERs" - Pink Sheet, 18 January, 2010.).

The agency criticized McNeil for initially responding –after receiving about 70 complaints or adverse event reports of nausea, stomach pain, vomiting and diarrhea possibly linked to the products – by stating that such reactions are temporary and no known serious events from the chemical used in the pallets are documented.

"When something smells bad, literally or figuratively, companies must aggressively investigate and take all necessary action to solve the problem," Deborah Autor, director of the Office of Compliance at the Center for Drug Evaluation and Research, said in January.

The recall marked the start of a bumpy ride for J&J and its OTC subsidiary in 2010.

McNeil in April recalled 1,500 lots of pediatric liquid OTCs after an FDA inspection found violations of good manufacturing practices and possible bacterial contamination of raw materials at the firm's Fort Washington, Pa., plant, and in May members of Congress accused the firm of conducting a "phantom recall" of a Motrin product in 2009 ([A#05180190003] and Also see "FDA To Toughen OTC Oversight, Seek New Authority In Wake Of J&J Recalls" - Pink Sheet, 31 May, 2010.).

While enduring congressional, FDA and Department of Justice scrutiny of its OTC manufacturing, J&J shuffled its OTC business executive ranks, announcing the retirement of worldwide consumer head Colleen Goggins, and began remediation at Fort Washington (Also see "J&J/McNeil Done With Post-Recall Personnel Changes - CEO Weldon" - Pink Sheet, 4 October, 2010.).

But the firm could not prevent the impact on its revenues from removing from the market some products manufactured in Fort Washington until manufacturing could be restarted ([A#5180200001]).

While FDA criticized J&J and pledged to toughen its OTC oversight in wake of McNeil's recalls, Congress targeted the agency – not just the firm – for criticism. Members questioned whether FDA also was at fault in the distribution of possibly contaminated OTC drugs.

2. Big Pharma Tees Up Switches Via Acquistions

Sanofi's Chattem acquisition, announced in December 2009 and closed in February 2010, was among several deals that expanded the buyers' OTC-switch outlook – the No. 2 topic for 2010 in "The Tan Sheet" online database.

Like the Sanofi-Chattem deal, Pfizer's purchase of Wyeth and Merck's acquisition of Schering-Plough in 2009 showed pharmas developing and reshaping their switch strategies to remain competitive in an evolving industry that has placed renewed value in an OTC presence and switch platform (Also see "Rx-to-OTC Switch Interest Explodes Following Deal Activity - Experts" - Pink Sheet, 11 January, 2010.).

While Sanofi sought Chattanooga, Tenn.-based Chattem partly as a platform to switch its antihistamine Allegra (fexofenadine) OTC, drug development experts said the firm would need a revamped infrastructure to fulfill that vision (Also see "Sanofi Needs Switch Skills To Span Gap Between Rx And OTC Divisions" - Pink Sheet, 4 January, 2010.).

Experts told "The Tan Sheet" Sanofi's planned switch for Allegra should present few regulatory hurdles, but other products the firm identified as possible switch candidates would challenge even the most experienced switch hands.

3. FTC Raises Supplement Claims Profile

FTC took a more aggressive approach to enforcing against claims for vitamins and nutritionals in 2010.

The No. 3 topic for "The Tan Sheet" readers concerned FTC, through settlements, tightening enforcement of supplement ads by redefining substantiation requirements for some health claims and requiring FDA pre-approval for others (Also see "FTC Raises Claim Substantiation Bar For Dietary Supplements In Settlements" - Pink Sheet, 19 July, 2010.).

In a $5.5 million July settlement, FTC ordered Iovate Health Sciences U.S.A. to provide at least two randomized, double-blind, placebo-controlled, product-specific studies on humans before it can make weight-loss claims about the tested product.

A separate July settlement that marked FTC's initial case challenging advertising for probiotics resolved allegations that Nestle HealthCare Nutrition overstated the benefits of BOOST Kid Essentials.

Earlier in the year FTC closed a widespread review of omega-3 fatty acid supplement claims with warnings to 11 unnamed marketers of children's fatty acid supplements. The agency in February told the firms if they could not adequately substantiate claims that their products can enhance the intelligence, mood and visual acuity of children older than 2 years, the commission might take enforcement action (Also see "Omega-3 Probe Underscores FTC Standard For Claims Substantiation" - Pink Sheet, 22 February, 2010.).

4. Savings Account Ineligibility For OTCs

Called by stakeholders variously a stealth tax, aspirin tax, headache tax or cough and cold tax, the provision of the Patient Protection and Affordable Care Act requiring prescriptions for OTC drugs bought with pre-tax medical expense accounts stung the OTC industry and retail pharmacies, among others, and registered as the No. 4 topic for "The Tan Sheet" readers (Also see "Changes For Spending Account OTC Reimbursement Will Hit Consumers" - Pink Sheet, 13 September, 2010.).

Health policy experts noted the change could lead physicians and other practitioners to prescribe prescription drugs rather than OTC products to ensure adequate treatment or as a way to lower the out-of-pocket cost of the drug for patients since Rx co-pays often are less than the cost of an OTC.

The change in flexible spending and health savings accounts coverage of OTCs will cost the health care system about $10 billion to $15 billion over the next 10 years, rather than save $5 billion in that time period as the federal government estimated, an expert observed.

Late in 2010, the Internal Revenue Service imposed a Jan. 15, 2011, effective date for the change affecting FSAs and HSAs, rejecting a request by industry groups, including the Consumer Healthcare Products Association, for a longer delay. IRS allowed the two-week delay from the Jan. 1 effective date required in the act for drugstores and pharmacies to make dispensing systems and the Inventory Information Approval System, a network for retailers that accept FSAs and HSAs, agree on which drugs the act allows for purchases with the accounts.

5. FDA Flexes Enforcement Options

FDA in August published a guidance about the recall process, stating the agency "expects that a firm will voluntarily recall a drug that is defective or flawed if it could be hazardous to health," and if it does not, the agency can seize the product or pursue a court injunction.

Written in a question-and-answer format, the guidance warns that even though FDA cannot mandate a drug recall, "it can take more authoritative legal actions" against firms selling defective health products. Notably, FDA published the guidance as McNeil's recall of Children's Tylenol continued to draw attention to the agency's recall authority and procedures (Also see "FDA Warns In Recall Guidance Agency Has Arsenal Of Enforcement Options" - Pink Sheet, 16 August, 2010.).

The No. 5 topic in "The Tan Sheet" database for 2010 also included FDA's plans to warn firms only once – if at all – before taking stronger enforcement actions to stop systematic quality and safety problems. At an October conference, Howard Sklamberg, director of the Office of Enforcement in the Office of Regulatory Affairs, said the agency would stop sending follow-up warning letters to repeat violators as part of an initiative outlined in May 2010 to take "swift, aggressive enforcement action to protect the public health" (Also see "FDA Issues More Warning Letters, Drops Follow-Up Letters In Favor Of Action" - Pink Sheet, 25 October, 2010.).

In 2010, FDA also dusted off the Park Doctrine. Under the "responsible corporate officer doctrine," executives can be found guilty of a misdemeanor, separate from litigation targeting a corporation, by virtue of having authority to prevent, detect or correct company violations of the Food, Drug and Cosmetic Act (Also see "FDA Targets Executives With Powerful Misdemeanor Strategy" - Pink Sheet, 26 April, 2010.).

FDA's litigation chief, Eric Blumberg, advised drug firms to pay close attention to Park Doctrine standards the agency is reviewing for prosecuting corporate officers deemed responsible for violations they reasonably could have prevented (Also see "Do Not Be Surprised By Corporate Responsibility Standards - FDA Warns" - Pink Sheet, 7 June, 2010.).

6. House Shift Shapes FDA Oversight

The Republican takeover in the House shuffled the leadership in committees crucial to the supplement and OTC drug industries and likely set the stage for cuts to FDA funding (Also see "Elections Reshape FDA Oversight Scene On Capitol Hill" - Pink Sheet, 8 November, 2010.).

The GOP's appointment of Michigan's Fred Upton as House Energy and Commerce Committee chairman and California's Darrell Issa as Oversight and Government Reform Committee chairman, in particular, point to tighter scrutiny of FDA's work and more cooperative interaction with industry.

7. Perrigo Makes "ORx" Play

Private-label giant Perrigo's entry into a nascent growth channel – pursuing reimbursement for OTC drugs prescribed by doctors and dispensed by pharmacists – reached No. 7 among the most-read stories by "The Tan Sheet."

Under its "ORx" program, Perrigo registered OTC products for reimbursement through private and public health plans. The program allows the firm to better tap the sales potential of OTC switches, particularly in crossover categories where comparable therapies are available both Rx and OTC (Also see "Perrigo Pursues OTC Reimbursement Opportunity In Emerging "ORx" Space" - Pink Sheet, 22 February, 2010.).

"We felt there was an opportunity to come into this category based on the magnitude and the portfolio size we have of over-the-counter products," said Joseph Papa, president and CEO of the Allegan, Mich., firm.

8. Firms Say FDA Transparency Shows Smudges

Industry stakeholders argued some FDA proposals to increase transparency could threaten fair competition, innovation and firms' reputations unless the agency provides disclaimers and cautions consumers about drawing conclusions from the information.

FDA's Transparency Task Force, created in June 2009, proposed and sought comments on 21 suggestions to increase public disclosure and help "consumers, stakeholders and others understand how the agency operates and makes decisions," according to the agency.

The July 2010 transparency report included suggestions to expand adverse event reporting, share information about investigational applications and strengthen the agency's recall authority, among other measures (Also see "More FDA Transparency May Confuse Consumers, Stifle Competition - Industry" - Pink Sheet, 2 August, 2010.).

9. Ruling Opens Door For Supplement QHCs

A U.S. district court in May 2010 ruled FDA's June 2009 decision to deny proposed qualified health claims linking selenium to reduced risk of site-specific cancers failed the First Amendment standard established in the 1999 Pearson v. Shalala decision.

The No. 9 story for the year in "The Tan Sheet" explained that the decision obligated FDA to reconsider a slate of QHCs for selenium and could compel the agency to allow more QHCs for supplements. Plaintiffs' attorney Jonathan Emord sued the agency in 2009, alleging FDA "denied consumers accurate representations of nutrition science" by rejecting some anti-carcinogenic QHCs for selenium and allowing only narrowly defined claims for others

Emord, an ardent critic of FDA's policy on health claims for supplements and the lead plaintiffs' attorney in Pearson, said the ruling should lead to progress in allowing QHCs for supplement ingredients.

"FDA has repeatedly refused to comply with the law," he said. "I'm hopeful that this time the agency will get the message" (Also see "Selenium Claim Ruling Forces FDA's Hand, May Clear Path For More QHCs" - Pink Sheet, 7 June, 2010.).

10. FDA Admonishes Reckitt Over Petition

"The Tan Sheet" top 10 for 2010 ends with FDA's rejection of Reckitt Benckiser's request to redefine bioequivalence standards for guaifenesin generics, an attempt to delay private label competition for Mucinex OTC cough products.

The agency's January 2010 response was notable because FDA chastised Reckitt for not developing its arguments well, and in its outright denial of Reckitt's petition, given that FDA generally denies petitions only in part (Also see "FDA Denial Of Mucinex Petition Stops Reckitt's Bid To Delay Generics" - Pink Sheet, 18 January, 2010.).

But FDA stopped short of summarily denying the petition, as it warned it would if it deems a petition is submitted solely to delay abbreviated new drug application approvals.

The agency said Reckitt's July 2009 citizen petition failed to present "compelling evidence that FDA's current recommendations for approval of generic modified-release guaifenesin ... are inappropriate to establish bioequivalence."

By Malcolm Spicer

J&J Woes, Pharma Switch Outlook Lead "The Tan Sheet" 2010 Topics

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