Pfizer’s Hospital-Drug Problems Won’t Go Away
Investors have mostly been willing to hold their nose over Hospira as Pfizer’s stock surged this year.
(Bloomberg) -- Buying Hospira was supposed to open a bright new pharmaceutical future for Pfizer Inc., but problems from the company’s past keep haunting the world’s largest drugmaker.
When Pfizer agreed to pay $17 billion to take over Hospira in 2015, the deal was presented as a bet on biosimilars -- cheaper versions of brand-name biologic medications that could steal the thunder from some of Pfizer’s rivals’ biggest products. The move would position Pfizer as the biggest player in a burgeoning medical marketplace.
It hasn’t worked out that way. The biosimilar market in the U.S. has been slow to develop amid legal wrangling over drug companies’ intellectual property. In the meantime, the staid injectable-drugs business at Hospira’s core has given Pfizer repeated headaches in the form of manufacturing problems and drug shortages.
“Hospira was supposed to be fixed by now,” said Sam Fazeli, an analyst for Bloomberg Intelligence.
On Tuesday, Hospira was to blame for another blow to Pfizer. The drugmaker cut its sales expectations for the year, saying the business’s woes would be a drag on its overall sales. Pfizer now expects revenue of $53 billion to $53.7 billion, down from a July estimate of $53 billion to $55 billion. About $500 million of the shortfall could be traced to Hospira, Fazeli said. Sales in the business that houses Hospira fell 14 percent in the just-ended third quarter.
Investors have mostly been willing to hold their nose over Hospira as Pfizer’s stock surged this year. Through Monday’s close, the shares had gained 19 percent this year, making the company one of the best performers in the Dow Jones Industrial Average. On Tuesday, Pfizer pulled back by about 1.6 percent in afternoon trading.
Lingering Headache
In the three years Pfizer has owned Hospira, it hasn’t figured out how to fully resolve issues that predate its ownership, though there were concerns about Hospira’s manufacturing when the deal was consummated. When analysts raised the issue on a conference call at the time, a Pfizer executive said the company was satisfied that the matter was well in hand.
“We visited Rocky Mount. We visited Costa Rica, and we visited Vizag,” said then-head of manufacturing Tony Maddaluna, rattling off the names of three Hospira facilities. “We feel very comfortable that the issues raised by the regulators have been addressed or are being properly addressed.”
However, problems with Hospira have persisted long after the deal was cinched. Thirty Hospira-made drugs were recalled since January 2017, according to a Food and Drug Administration database. The recalls were done for reasons ranging from sterility issues involving human hair to the presence of particulate matter such as stainless steel in saline. Some antibiotics weren’t as strong as they were supposed to be.
Many of the drugs were in short supply. The FDA is sensitive about taking tough enforcement actions against companies that make a high number of drugs in shortage for fear they could make the situation worse.
A crucial Hospira plant in McPherson, Kansas, received a warning letter from the FDA on Feb. 14, 2017. The letter came after problems with cardboard and other “visible particulates” in sterile-injectable drugs produced at the facility. During an inspection, “our investigators observed multiple examples of practices that represent significant risks to the sterility of your finished products,” the FDA said in the letter.
A spokesman for the FDA didn’t immediately respond to a request for comment.
“We continue to believe that we can bring the legacy Hospira facilities up to Pfizer’s world-class manufacturing standards.,” said Steve Danehy, a Pfizer spokesman.
Promised Fixes
Chief Executive Officer Ian Read, who will step down from that role at the end of this year, said on an October 2017 earnings call that the company had “a robust action plan in place” and believed it would make substantial progress this year in reducing drug shortages in the business. But the sterile-injectable shortfalls are lingering.
The continued delays are “so incredibly frustrating,” said Erin Fox, an expert on drug-supply issues at the University of Utah Health, who monitors drugs shortages. “Pfizer keeps moving the dates back.” It originally promised that most of the shortages would be fixed by the end of 2017, she said. Now many may not be resolved until 2020, she said.
Pfizer currently isn’t shipping adequate supplies of many “very basic medications all hospitals need,” Fox said in an email, including pain medications like fentanyl and morphine, local anesthetics such as lidocaine and bupivacaine, and rescue medications such as epinephrine. The gaps are forcing hospitals to find workarounds and alternatives, resulting in extra work for hospital staff and potentially putting patients at risk.
Albert Bourla, who will take over from Read as CEO next year, said Tuesday that fixing Hospira is a priority for Pfizer. While the generic-drug business faces a roiling price war in the U.S., Bourla says there is a chance for Hospira to grow in China.
“The focus right now is to stand up this business,” Bourla said on a call with analysts. “We need to make sure that we segregate it from Pfizer in providing some autonomy.”
To contact the reporters on this story: Cynthia Koons in New York at ckoons@bloomberg.net;Robert Langreth in New York at rlangreth@bloomberg.net;Anna Edney in Washington at aedney@bloomberg.net
To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett
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