Schein Expects INFeD Supplies To Meet Patient Need Under Consent Decree

Schein expects to be able to meet demand for its injectable iron product INFeD under a consent agreement reached with FDA Oct. 16.

"Based on past usage patterns, with the INFeD inventory on hand and the resumption of INFeD manufacturing in the coming weeks, we expect to have sufficient product to meet patients' needs," Schein said.

Schein has been in negotiations with FDA following a Sept. 9 seizure action against Steris, a subsidiary of Schein ("The Pink Sheet" Sept. 14, p. 22).

INFeD (iron dextran injection) is one of 12 products on an FDA list of Steris-produced drugs deemed "medically necessary" under the consent agreement because they are available exclusively or primarily from Schein.

Also included are chorionic gonadotropin, hydroxycobalamin, nandrolone decanoate, dexamethasone sodium phosphate, and four injectable selenium brands.

Heparin 20,000 IU/vial is also listed, with the stipulation that it be available only for compassionate use in eight patients with Arrow International model 400 infusion pumps.

The consent agreement allows for Schein to recondition "medically necessary" seized products on an expedited schedule. Schein is to submit proposals for medically necessary drugs within 10 days, which FDA will "promptly" review.

For non-medically necessary products, Schein is to submit reconditioning proposals within 30 days, which FDA will then have 30 days to review.

The consent agreement also allows accelerated procedures for Steris to resume manufacturing of "medically necessary" drugs.

Before resuming manufacturing of the products, Steris must submit a report from independent consultants on whether the methods, facilities and controls involved in the product's manufacture comply with good manufacturing practices. The company must also submit a remedial action plan for each product.

The report is to include "whether the methods used in the manufacture of the drug are validated, whether the in-process, finished product, and stability test methods are validated and sufficient in number to ensure that the product has the identity and strength, and meets the quality and purity characteristics which it purports or is represented to possess."

FDA may decide to terminate distribution of any products "if, in FDA's judgment, circumstances change so the uninterrupted distribution of these drugs by [Steris] is no longer in the public interest."

Once production is resumed, Steris is to report any shortage of medically necessary drugs to CDER, the agreement states.

Schein said that it "expects to resume production of INFeD in the coming weeks and other products starting in the first quarter of 1999."

FDA seized product at a Steris plant in Phoenix, Ariz. and distribution centers in Phoenix and Brewster, N.Y. following inspections that found continued Good Manufacturing Practices problems.

The agreement requires Steris to work with an independent team of experts to institute a corrective action plan, prepare a report on management controls, report any discoveries of potentially fraudulent information and certify that Steris has achieved full GMP compliance.

Steris must also work with the independent experts to institute a quality assurance program and establish a formal training program for employees. Manufacturing may not resume until FDA issues written notice that all or some of the products appear to be in GMP compliance.

The agreement requires Steris to hire outside experts to conduct twice-yearly inspections of the company for five years following FDA notification that the facility is in GMP compliance. The outside audits are to be submitted to FDA's Los Angeles district office.

Schein characterized the consent agreement as building on the firm's existing efforts to re-establish GMP compliance.

"During the next 30 days, Steris will continue and expand the records review and product-testing program it initiated earlier this year, which includes oversight by independent expert consultants," Schein said.

The consent agreement allows Steris to use accelerated certification procedures to resume manufacturing of commercially significant products.

The "medically necessary" products INFeD and chorionic gonadotropin are also included on the commercially significant product list.

Other products subject to accelerated validation procedures because of commercial importance are vecuronium, edetate disodium, progesterone and metoprolol tartrate.

To receive expedited certification, Steris must submit an application for supplemental approval for each product, specifying all intended changes to the manufacturing process.

The applications will be reviewed on an accelerated basis. Steris is also to submit a protocol for each drug, to which FDA has 15 days to respond.

Schein will discontinue manufacturing of 110 Steris products, with the option to "propose resumption of manufacturing pursuant to the validation and certification procedures" documented in the agreement. These products brought Schein approximately $65 mil. in revenue during the 12 months ending in June.

Discontinued Steris products include estradiol, prednisolone, diazepam, levothyroxine, lidocaine and morphine.

"As we resume broader manufacturing, we will consider the reintroduction of certain of these products and anticipate the approval of new products to reduce the impact of this revenue loss," Schein said.

"Cost savings achieved through significant streamlining of our operations, which is already under way, is expected to partially offset the impact to operating income" from lost revenue from discontinued products, Schein said.

Schein reduced Steris' workforce in Phoenix from 700 to 350 employees following the seizure action ("The Pink Sheet" Oct. 5, In Brief).

Steris intends to re-validate a total of 33 products under the consent agreement. In addition to the medically necessary and commercially significant products, Steris intends to resume manufacturing methylprednisolone, neomycin/polymyxin B sulfate/hydrocortisone otic, triamcinolone and promethazine.

The agreement will trigger a number of product recalls. Steris "shall recall immediately upon signing this consent decree all lots of suspension products that have failing or lack resuspendability and homogeneity stability data for the required storage temperature and conditions," the agreement states.

Steris will also recall products that do not meet the new quality protocols to be developed under the agreement.

"We believe there are no safety issues associated with the products being recalled," Schein said.

Schein expects to record a one-time charge in 1998 of $135 mil., predominantly in the third quarter, with an expected tax benefit of $26 mil.

The charge covers the write-off of goodwill, inventory and impaired fixed assets, which is approximately $132 mil. pre-tax. Accrual of severance due to workforce reductions, other Steris costs and approximately $29 mil. associated with product recalls are also included in the charge.

Under the consent agreement, Schein is responsible for court costs as well as the costs of destroying any seized products that it does not wish to recondition. Within 20 days of entry of the consent agreement, Schein is required to post a $6 mil. bond with the Phoenix federal court.

Schein explained its decision to destroy some of the seized products as a result of prioritization.

"While the company believes that all its products are safe, the time required to demonstrate the cGMP compliance status of certain of the seized products would have delayed the production of INFeD and other significant products," Schein said.

"Our decision to destroy certain seized products was a financial one," Schein explained. "We chose to focus our resources on resuming manufacturing and the review and testing programs for INFeD, vecuronium and other important products."