F. Michael Ball, CEO
Richard J. Davies, Sr. VP and Chief Commercial Officer
John B. Elliot, Sr. VP, Operations
Thomas E. Werner, Sr. VP, Finance, and Chief Financial Officer
Richard J. Hoffman, Corporate VP, Controller and Chief Accounting Officer
Zena G. Kaufman, Sr. VP, Quality
Kenneth F. Meyers, Sr. VP, Organizational Transformation and People Development
Sumant Ramachandra, M.D., Ph.D., Sr. VP, Research & Development, Medical and Regulatory Affairs, and Chief Scientific Officer
Neil Ryding, Sr. VP, Devices
NO. OF EMPLOYEES: 16,000
GLOBAL HEADQUARTERS: Lake Forest, Ill.
“If you build that foundation, both the moral and the ethical foundation, as well as the business and the experience foundation, then the building won’t crumble.” —Henry Kravis
Most successful businesses have inspirational turnaround tales woven into their histories. Cantor Fitzgerald CEO Howard W. Lutnick borrowed, bankrolled and brokered his way back from the brink of extinction after terrorists wiped out two-thirds of the investment firm’s New York City staff; similarly, first-time CEO Ingar Skaug led a corporate cultural coup to reclaim profits (and emotional health) after the top management at Scandinavian shipping multinational Wilh. Wilelmsen died in a plane crash. And Steve Jobs reformed a near-bankrupt Apple with imagination, passion and creative genius.
CEO F. Michael Ball is still working on Hospira Inc.’s comeback yarn. The Lake Forest, Ill.-based company was plagued last year by a continuing string of recalls, bans, drug shortages, quality issues and technical failures spawned by manufacturing problems at its Texas and North Carolina factories. The firm is spending more than $375 million to rectify those problems and overhaul its entire U.S. manufacturing network.
“We [have] invested in remediation actions across our global footprint to improve our first-pass quality and to ensure consistent processes and improvement across our operational footprint,” Ball told shareholders at the start of Hospira’s 2012 annual report. “It was a busy, productive year. But it was not without challenges. Although we made progress on our number-one priority of reinforcing Hospira’s foundation, doing so involved a great deal of time, effort and expense, impacting not only our financial results but also our ability to supply product to our customers.”
Hospira’s fixes to its crumbling foundation stifled overall sales last year at $4.1 billion. Gross profit plummeted 20.3 percent to $1.1 billion as executives instituted a plan to buttress its quality, compliance and production processes in accordance with U.S. Food and Drug Administration (FDA) standards. Over the last two years, the agency has uncovered a heap of quality control issues at the company’s factories in Rocky Mount and Clayton, N.C.; McPherson, Kan., Austin, Texas; and Boulder, Colo.; prompting warning letters and 483 inspection reports that eventually triggered costly production shutdowns and nationwide shortages of oncology drugs. A House committee report released last summer virtually absolved Hospira of responsibility for the shortages, claiming FDA reprimands force generic drug makers to take “their manufacturing off-line simultaneous to other competitors…” Consumers, however, have not been as merciful: In April 2012, Jennifer Lacognata of Tampa, Fla., filed a class-action lawsuit against the company, claiming a shortage of a vitamin A medication that Hospira stopped making in 2010 caused her to lose sight in one eye. A federal judge ruled against her in July, contending the firm is not responsible for keeping a sufficient backlog of the drug to avoid potential shortages.
Though she lost, Lacognata’s lawsuit represents a new legal strategy by patients and/or their families to hold pharmaceutical firms more accountable for their manufacturing and supply chain blunders. Such gaffes resulted in the July recall of four injectable cancer drugs and a lot of injectable dextrose as well as its Symbiq and Plum A+ infusion pumps and Carpuject syringe cartridges containing morphine sulfate and hydromophone (narcotic pain killers). Though the problem turned out to be more extensive than first reported (affecting as many as 280 lots of 15 different Carpuject products), the FDA left the devices in circulation to avoid immediate supply shortages and instead alerted healthcare providers to visually inspect the cartridges for potential overfill and adjust doses when necessary.
Hospira’s manufacturing and quality missteps took a considerable toll on the company’s 2012 earnings (year ended Dec. 31). Remediation expenses reduced stock value by 66 cents and limited the Specialty Injectable Pharmaceuticals sales increase to a mere $8.5 million. Medication Management revenue, conversely, rose 3 percent to $1 billion despite the Symbiq and Plum A+ recalls.
Problems with the Symbiq infusion pump began in August, roughly five months after the company received FDA clearance for the enhanced 3.13 version of its advanced infusion system platform. Hospira issued a “correction letter” to inform customers of potential touch screen problems on two Symbiq pump models ranging from delayed responses, erroneous settings and failure to respond to instructions. Rather than advising customers to return the affected pumps, the letter provided explicit directions to confirm correct infusion settings and stop an infusion if needed.
Two months later, the FDA issued a Class I recall of the Symbiq pumps, warning that a touch screen malfunction could put patients in danger. Then in early November, the agency placed a voluntary hold on Symbiq pump shipments to new U.S. customers. The move, however, did not affect Hospira’s bottom line—Medication Management sales in North/South America jumped 4.6 percent to $846.8 million, according to the company’s annual report. Executives attributed the sales increase to strong demand for Plum infusion pumps and MedNet safety software, which links infusion devices with hospital pharmacies and information systems, enabling clinicians to better manage intravenous (IV) infusion data at the point of care.
Hospira’s tango with the FDA over its Plum infusion pumps unfolded similarly to the Symbiq saga, starting an Aug. 22 warning letter about quality problems at the Costa Rican factory that manufactures the device. Inspectors to the facility in April 2012 uncovered several problems with the Plum line of pumps, including a malfunctioning alarm system that engineers had redesigned after a February 2011 recall. The agency also claimed the company Hospira failed to prove it met deadlines for improving its relevant quality processes and management procedures at the La Aurora de Heredia plant.
Four months after receiving the FDA’s warning letter about its Costa Rican manufacturing deficiencies, Hospira issued a Class II field recall for its Plum A+ infusion devices. The company cited troubles with the pump’s door roller assembly, noting the mechanism could potentially lead to unrestricted flow and/or over-delivery of medication during the removal of the IV administration set. Designers refabricated the door roller assembly to improve its strength, and the company is expected to begin replacing the component later this year.