Stericycle Recall Index Q2 2014
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1 Stericycle Recall Index Q2 PHARMA RECALL TREND 1
2 Quarterly Recall Index, Q2 The Stericycle ExpertSOLUTIONS Quarterly Recall Index analyzes cumulative recall data from the CPSC, FDA, NHTSA and USDA. Each quarter, the report investigates emerging trends within the recall industry and includes scorecards with key takeaways in each category. To say that auto recalls were top of mind during the second quarter of would be an understatement. The industry was the subject of near daily scrutiny, with regulators, politicians, consumers and the media alike focusing unprecedented attention on recall preparation and response. The auto sector s historic recall volumes notwithstanding, however, the Q2 Stericycle Recall Index found that recall rates in other industries remained relatively flat or even decreased throughout the quarter. The medical device sector, for example, experienced the fewest number of recalls since Q Similarly, the food industry saw the lowest amount of recalled units tracked in two years. Even in quarters when recalls are down, manufacturers, suppliers and other stakeholders face a number of complexities related to global recall execution that need to be addressed. To investigate some of these challenges in greater detail, we focused our Q2 Index analysis on the pharmaceutical industry. Read on to learn more about these issues and our analysis of the factors that are driving recall complexity in Q2. Q2 Medical Device Recalls were the lowest since Q Food Recalls were the lowest in 2 years 2
3 Pharma Recall Trend Report: Complexity Below a Calm Surface The second quarter of saw the fewest number of overall FDA recalls (comprising drug and pharmaceuticals, medical devices and food) tracked in the past two years. There were 495 events in total, a decrease of 10% from the prior quarter. This downward trajectory was also reflected in the percentage of overall national and international recalls, as both areas experienced a slight decrease from Q1. Within the pharmaceutical sector specifically, FDA Enforcement Reports documented 91 recalls during Q2. This figure is relatively consistent with the prior quarter, suggesting that pharmaceutical recalls continue to normalize following the activity spike in late 2012 and early 2013 related to compounding pharmacies. 91 Average number Pharmaceutical Recalls by quarter since Q Recalls 107 Recalls 95 Recalls 111 Recalls 64 Recalls 88 Recalls 91 Recalls Q Q Q Q Q Q1 Q2 Stericycle ExpertSOLUTIONS TM All rights reserved. 3
4 More Players While the number of pharmaceutical recalls did not grow significantly from Q1, the amount of companies contributing to events increased. The amount of manufacturers involved in a recall grew by 18% from Q1 for a total of 71. Further underscoring the industry s complexity, 86% of Q2 events were nationwide a trend that has been growing steadily over the last several quarters. Seventeen percent of pharmaceutical companies had two or more events in Q2 and three percent experienced five or more. ONE MANUFACTURER HAD SEVEN SEPARATE EVENTS, CONTRIBUTING TO EIGHT PERCENT OF THE QUARTER S RECALLS AND 12% OF THE TOTAL UNIT VOLUME. In two pharmaceutical recalls, a pharmacist was the first to spot the issue and alert the manufacturer. This underscores that it s not just the manufacturer or source suppliers who bear responsibility for ensuring patient safety. The entire distribution network including pharmacists, physicians and even patients themselves plays a role in recall execution and safety. It s critical that all of these stakeholders work together to ensure effective and efficient recall response and execution. INCREASE IN COMPANIES INVOLVED IN RECALLS 18% FROM Q1 4
5 The M&A Effect The second quarter of the year saw a flurry of M&A deals, making it the third most active quarter in the past six years. In fact, according to EvaluatePharma, the value of deals already exceeds 2013 s figure largely due to the strong second quarter. There are a variety of factors contributing to this activity, including: Financial Incentives: Merging with a global manufacturer could offer lower tax rates for many companies. Patent Issues: As old patents expire, many manufacturers don t have a full pipeline of new drugs with regulatory approval and seek to merge with other companies to stay competitive and profitable as a result. End of Blockbuster Drugs: The end of blockbuster drugs is also leading to more M&A deals, as manufacturers look to acquire companies with niche capabilities targeting specific diseases and health issues. OVER 50% OF THE COMPANIES INVOLVED IN Q2'S TOP SEVEN M&A DEALS EXPERIENCED AT LEAST ONE RECALL DURING THE QUARTER 50% IN Q2 The Index analysis suggests that M&A activity is emerging as another variable to complicate recall response. Over 50% of the companies involved in Q2 s top seven M&A deals experienced at least one recall during the quarter. This underscores the global recall execution challenges that often accompany pharmaceutical deals for example, combining disparate quality management systems and processes as the businesses become fully integrated. Stericycle ExpertSOLUTIONS TM All rights reserved. 5
6 The Unit Yo-Yo There were over 18.5 million pharmaceutical units recalled in the second quarter of. The affected units ranged from the single digits in one instance to more than four million in another event. ONE RECALL OF < 100 UNITS Flexibility and scalability are required to efficiently tailor recall response based upon the individual event s unique characteristics Many manufacturers experienced this dramatic fluctuation in recall size and scope firsthand. For example, two individual companies had one recall of less than 100 units and another of more than 10,000 during Q2. This broad scale illustrates the flexibility and scalability required to efficiently tailor recall response based upon the individual event s unique characteristics and also manage this response across different geographies and the FDA. ONE RECALL OF > 10,000 UNITS 6
7 Lost in Translation Twenty-four Q2 recalls affected the U.S. and at least one other country, contributing to 26% of the total recall activity. This is a trend that has been growing steadily in the pharmaceutical industry over the past several quarters in the third quarter of 2013, for example, just 12% of the recalls were global in nature. Among the countries impacted by Q2 recalls were Bahrain, Egypt, Italy, Libya, South Korea, Ukraine and the Philippines. Many of these regions experienced unrest and political upheaval leading up to and throughout Q2. In this environment, it s reasonable to assume that the challenges of consumer notification and product removal are further complicated. The geographically distributed global recalls witnessed in Q2 also underscore the language complications of recall response. Communication is a critical component of effective global recall execution. As such, manufacturers need the ability to not only quickly scale their response, but also ensure that all recall-related communications are translated to the respective languages and, in some cases, alphabets of the impacted regions. MANUFACTURERS NEED THE ABILITY TO NOT ONLY QUICKLY SCALE THEIR RESPONSE, BUT ALSO ENSURE THAT ALL RECALL-RELATED COMMUNICATIONS ARE TRANSLATED TO THE RESPECTIVE LANGUAGES. اهتباجتسا قاطن عيسوت طقف سيل ةعرسب ىلع ةردقلا ىلإ ةجاحب ةعنصملا تاكرشلا.اهنم تاغل ىلإ ءاعدتسا ةقلعتملا تالاصتالا عيمج ةمجرت نامض اضيأ نكلو Arabic I PRODUTTORI DEVONO ESSERE IN GRADO NON SOLO DI SCALARE RAPIDAMENTE LA LORO RISPOSTA, MA ANCHE GARANTIRE CHE TUTTE LE COMUNICAZIONI DI RICHIAMO RELATIVE SONO TRADOTTI NELLE RISPETTIVE LINGUE. Italian 제조업체가신속하게응답을확장할뿐만아니라, 모든리콜관련통신이각각의언어로번역되는것을보장하기위해뿐만아니라능력이필요합니다. Виробники повинні мати можливість не тільки швидко масштабувати їх реакцію, а й забезпечити, щоб всі пам'ятаємо, пов'язаних комунікації перераховуються у відповідні мови. Korean Ukranian Stericycle ExpertSOLUTIONS TM All rights reserved. 7
8 Recall Drivers of Complexity While the rate of pharmaceutical recalls remained relatively consistent with prior quarters there were a variety of factors at play during Q2 driving recall complexity, including: The above factors underscore the challenges of global recall execution. For example, a mislabeling issue could arise from working with a supplier unfamiliar with country-specific regulations. It s also possible that the pharmaceutical M&A activity witnessed during Q2 may have contributed to the complexity of executing recalls throughout the quarter. Time will tell if this M&A activity affects future quarters. As these organizations combine their quality management systems, for example, it s possible that the industry might experience an increase in events. We may never know the answers and, ultimately, determining the root cause of a recall is just one part of the equation. In the global economy, even the most vigilant manufacturer will one day be faced with a recall. As such, companies must invest as much energy in planning for a recall event as they do in preventing it in order to minimize the damage. 8
9 A MISLABELING ISSUE COULD ARISE FROM WORKING WITH A SUPPLIER UNFAMILIAR WITH COUNTRY-SPECIFIC REGULATIONS. In an industry where recall management varies based upon the size and scope of the event, geographic reach, severity of the issue and more, preparing to efficiently address these and other variables is no small task. However it s vital that pharmaceutical manufacturers and other stakeholders do exactly that, or patient safety is not the only thing they will risk. As we have seen in ongoing headlines on the auto industry s current challenges, failing to prepare for a recall can deliver a crippling blow to brand reputation. Stericycle ExpertSOLUTIONS TM All rights reserved. 9
10 The Recall Scorecard Auto Overview There were 194 NHTSA related recalls in Q2, an increase of 21% from the first quarter of the year. While auto recalls were top of mind for the media and consumers alike, the number of events in Q2 was actually not the highest in recent quarters Q saw 213 events. However, the quarter s complexities were reflected in an explosion of activity related to unit volume. Over 26.5 million NHTSA related units comprising autos, child seats, equipment and tires were recalled in Q2. This is an increase of 91% from Q1, which was already a record quarter for units. Autos were the key driver of this surge in activity, contributing to 86% of the quarter s total volume. Cars comprised more than 23 million of the total recalled units, by far the largest number of autos recalled in a quarter in the last decade. In fact, Q2 alone saw 1 MM more autos recalled than in all of 2013 combined. Auto Recalls 194 NHTSA RECALLS in Q2. This is up 21% from Q1 88% of these events were auto recalls CY 2013 Q2 Q2 is 1 MM more than all of 2013 combined Autos contributed 86% to the total recall volume 21.9 MM 23 MM 10
11 Total FDA Recalls Includes Food, Pharmaceutical, Medical Device 495 TOTAL RECALLS This is a decrease of 10% from Q1 37% of FDA recalls were global and 54% of FDA recalls were nationwide. Both experienced a slight decrease over previous quarters Medical Device Recalls 29.4M } 47% decrease in units 275 RECALLS Down 17% from Q1. The lowest number of med device recalls since Q % of recalls affected US & at least one other country 15.5M Q1 Units Recalled Q2 28% of 148 companies had two or more recalls However, Q2 s volume of recalled units was up 82% from Q companies were involved in a recall in Q2 Pharmaceutical Recalls 7% of companies had five or more recalls 26 recalls experienced by one company in Q2, contributing 18% to the total volume of activity 91 PHARMA RECALLS The amount in Q2, 32% of companies of which involved in were Class I recalls was up 18% From Q1 86% 83% of Q1 events were nationwide of recalls were nationwide a trend that has been growing steadily 81% of Q events were nationwide 26% 25% of Q1 events were global were global another upward trajectory 22% of Q events were global Stericycle ExpertSOLUTIONS TM All rights reserved. 11
12 Food Recalls 129 TOTAL EVENTS A decrease of 4% from Q1 The amount of recalled units decreased by 56% from Q1 Q2 saw the lowest number of recalled units tracked in two years 13% of events were nationwide a figure that has been decreasing over the past several quarters 2% of Q2 events were global trend that has been on a downward trajectory over the last 4 quarters 17% of Q1 events were nationwide 27% of Q events were nationwide 3% of Q1 events were global 7% of Q events were global 8% of Q events were global USDA Recalls 33% 24 74% Q2 saw the recalls increase in recalls decrease in most recalls from Q1 for a total pounds from Q1 tracked since of 24 Q companies were involved in a recall 38% increase from Q1 50% of recalls were initiated due to undeclared allergens CPSC Recalls 78 RECALLS in Q2, a decrease of 3% from Q1. However, the amount of recalled units increased by 54% from the prior quarter 101 Injuries were reported as a result of CPSC recalls, but no deaths 2 recalls of 1 Million or more units Heating Cooling Ventilation Contributed to 7 recalls the most events in this category in 6 quarters 12
13 Explanation of Stericycle ExpertSOLUTIONS and the Stericycle Recall Index Stericycle ExpertSOLUTIONS helps partners minimize risk to the public and to their company brand by executing and planning for product recalls efficiently, effectively and compliantly. Each quarter, we analyze cumulative recall data across six product categories. This helps our partners navigate the regulatory environment and identify trends. How the Stericycle Recall Index is Compiled The Stericycle Recall Index gathers and tracks cumulative data from the four primary federal agencies that oversee recalls in the United States: the Consumer Product Safety Commission (CPSC), the Food and Drug Administration (FDA), the Food Safety and Inspection Service (FSIS) of the United States Department of Agriculture (USDA), and the National Highway Traffic Safety Administration (NHTSA). Recall trends are calculated from FDA enforcement reports and news releases published on agency websites. FDA Data To track trends in food, pharmaceutical, and medical device recalls, the Stericycle Recall Index uses information publicly available in news releases posted on the FDA website. For additional insight into recalls governed by the FDA, Stericycle collects and analyzes data from the agency s weekly enforcement reports, which provide additional details including recall class, quantity of units affected and number of reported incidents. CPSC Data For further insight into consumer product recall trends, Stericycle analyzes data from CPSC recall announcements. When compiling statistics and analyzing trends for consumer product recalls, the Stericycle Recall Index uses standard product categories and hazards recognized by the CPSC. Stericycle ExpertSOLUTIONS TM All rights reserved. 13
14 USDA Data For additional insight into food recall trends involving meat, poultry, and egg products, the Stericycle Recall Index collects and analyzes data from recall announcements posted on the USDA s FSIS website. Statistics and trends are compiled using standard product categories, classifications, and reasons for recalls as recognized by the USDA. NHTSA Data To understand trends in the automotive industry, the Stericycle Recall Index analyzes data from NHTSA reports on recalls of autos, child seats, equipment and tires. Terminology Announced recalls represent those recalls documented in news releases published on agency websites. Enforced recalls refer to those recalls documented in weekly FDA enforcement reports that are summarized based on the FDA assigned Event ID. Their documentation can lag behind announced recalls by weeks or even months because the recall process may take time to complete. A Class I recall, according to the FDA, is a situation in which there is a reasonable probability that the product will cause serious adverse health consequences or death. A Class II recall is a situation in which the product could cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote. The FDA defines a Class III recall as a situation in which the product is not likely to cause adverse health consequences. 14
15 Stericycle ExpertSOLUTIONS TM All rights reserved. 15
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