Abbott Runs Into FDA Buzzsaw, Faces Major Marketplace Crisis

Second largest diagnostics manufacturer forced to pull a multitude of lab test products

BY NOW, MOST OF THE clinical laboratory industry knows that Abbott Laboratories, Inc. signed a consent decree with the Food and Drug Administration (FDA) on November 2, 1999.

Under terms of the consent decree, Abbott paid a $100 million fine and will pull a number of test kits out of the marketplace. The original date for this action was to be December 6, 1999. But today in a U.S. District Court, the consent decree was amended, allowing Abbott to sell the affected products through January 10, 2000. This is to give clinical laboratories and blood banks additional time to adjust to the situation.

The impact of this consent decree will be significant. Abbott is taking a $168 million charge this quarter to cover the fine paid to the government and write down the value of the affect- ed inventory. In addition. Abbott disclosed to analysts that it expects to lose about $250 million in revenue during 2000 as a result of the FDA’s action.

Test Kits and Reagents

Within the laboratory industry, there has been much discussion about the meaning of the FDA’s action against Abbott and how it relates to the quality of Abbott’s test kits and reagents. Abbott’s influence is considerable, since it markets 325 different tests.

At issue is Abbott’s adherence to the FDA’s Good Manufacturing Practice and Quality System for a six-year period starting in 1993. The FDA claims that, despite repeated inspections and warnings, Abbott failed to comply with these manufacturing requirements.

Widespread Resistance

Concern about manufacturing practices and quality is justified. The FDA’s requirements are consistent with ISO-9000 manufacturing guidelines. These spell out a work process which is designed to build products correctly, by design, thus eliminating the need to inspect the output to identify defects.

This is where the term three sigma and six sigma originates. This is a manufacturing process that, when “in control,” produces less than six defective parts per thousand or per million, respectively. Obviously, if the process is “out of control,” identifying a small number of defective parts becomes difficult, if not impossible.

In the case of Abbott, breakdowns in monitoring and documenting the manufacturing process gave the FDA reason to question whether Abbott’s manufacturing processes were consistently “in control,” thus insuring that the finished products meet specifications.

The FDA’s consent decree was to insure that Abbott’s manufacturing processes were unquestionably producing a consistent and high-quality product. Since, by design, finished output is not inspected, this is a prudent step.


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