CDC, Distributors Could Sue Chiron For Failing To Supply Fluvirin
This article was originally published in The Pink Sheet Daily
Executive Summary
Centers for Disease Control & Prevention issues a notice asking why Chiron should not be held in default for failing to supply Fluvirin to the government, the company says in an SEC filing. Fluvirin distributors have also suggested that they should be compensated under their contracts for the 2004-2005 season.
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The Centers for Disease Control & Prevention and distributors of Fluvirin could file claims against Chiron for defaulting on its contractual obligations to supply the flu vaccine, Chiron said in a Dec. 20 Securities & Exchange Commission filing The U.K.'s Medicines & Healthcare products Regulatory Agency suspended Chiron's license to distribute Fluvirin Oct. 5 due to manufacturing problems at the company's Liverpool facility. The action prevented Chiron from supplying flu vaccine to the U.S. (1 (Also see "Chiron To Meet With U.K. Regulatory Authorities On Fluvirin Suspension" - Pink Sheet, 5 Oct, 2005.)). CDC "has issued a notice asking us to show why we should not be held in default of our contractual obligation to supply flu vaccine to the U.S. government for the 2004-2005 season," the company said. "We have submitted a response" to CDC "suggesting that the contract be terminated under provisions that will entail no penalties, but the matter has not been finally resolved," the filing states. CDC contracted Chiron to supply Fluvirin for the flu vaccine stockpile and regular government purchase for the 2004-2005 season (2 (Also see "Chiron To Distribute Fluvirin Directly To Providers This Year" - Pink Sheet, 24 Jun, 2004.)). Chiron has also "received communications from certain distributors of Fluvirin vaccine suggesting that they are entitled to compensation under their contracts for the 2004-2005 season," the filing states. Henry Schein is the largest distributor of Fluvirin; its agreement with Chiron runs through the 2005-2006 flu season. Schein reached a guaranteed purchase and distribution agreement with ID Biomedical for Fluviral that could begin as early as next season (3 (Also see "ID Biomedical To Decide On 2005 U.S. Flu Vaccine Production By Late January" - Pink Sheet, 6 Dec, 2004.)). "We believe that no compensation is required because our inability to supply the vaccine was due to government actions that constituted 'force majeure' within the terms of the contracts," Chiron said. In referring to the MHRA's license suspension as force majeure, Chiron is arguing that its inability to supply the vaccine resulted from an unforeseen event that was beyond its control. Even if Chiron can produce Fluvirin for next season, distributors may choose to purchase flu vaccine from different suppliers, the company said (see 4 (Also see "New Flu Vaccines May Take Some Of Fluvirin’s Market Share, Chiron Says" - Pink Sheet, 20 Dec, 2004.) ). Chiron said it has received subpoenas from the U.S. Attorney's Office in Manhattan and the House Energy & Commerce Committee in connection with Fluvirin (5 (Also see "Justice Department Opens Investigation Into Fluvirin" - Pink Sheet, 12 Oct, 2004.)). However, the Energy & Commerce Committee said it has not issued a subpoena; rather, the committee has sent Chiron letters requesting information. The SEC also is conducting an "informal inquiry into whether Chiron has violated any federal securities laws," the company said. "Additional investigations regarding these matters may arise," the company noted. - Andrew Kasper |