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SPECIAL REPORT-U.S. rushed contracts to COVID-19 suppliers with troubled plants

Thu 2nd December, 2021 3:39pm
(For more Reuters Special Reports, click on  SPECIAL/ )
 (Updates with additional FDA comment)
    By Marisa Taylor
    WASHINGTON, Dec 2 (Reuters) - As the Trump administration
debated whether to declare COVID-19 a national emergency early
last year, a little-known U.S. health office issued a public
plea to Big Pharma.
    On March 6, 2020, the Biomedical Advanced Research and
Development Authority called on pharmaceutical and medical
device companies to develop a vast array of essential COVID
    Known as BARDA, a program within the Department of Health
and Human Services, the authority sought vaccines, testing
devices, treatments and other products. BARDA, created in 2006
to help companies develop medical supplies to address public
health threats, made clear in its call for proposals it was
seeking products to be made at U.S. facilities with a track
record of meeting Food and Drug Administration manufacturing
    Yet a majority of more than 50 companies so far selected to
develop and manufacture supplies in the United States did not
meet those standards, according to a Reuters examination of FDA
records and dozens of federal contracts issued by HHS under the
$60 billion COVID program.
    In all, less than 20% of the companies awarded fast-track
contracts examined by Reuters were experienced manufacturers
with a clean FDA record for their U.S. plants in the two years
prior. Four of every five either had no U.S. manufacturing
experience, poor domestic inspection results or serious recalls
before their COVID contract awards, Reuters found.
    “These are red flags,” said Peter Lurie, a former FDA
associate commissioner who is now president of the Center for
Science in the Public Interest. “The government ought to be able
to find companies in this country that aren’t tainted by
previous poor performance.”
    HHS, which oversees both the FDA and BARDA, said it takes
“our responsibility as stewards of tax dollars very seriously,”
and that it has an “outstanding” record of conducting contract
due diligence.
    Texas-based Luminex, a unit of Italy’s DiaSorin SpA
 DIAS.MI , is one example of a company recruited to the COVID
fight while under FDA scrutiny. In February 2020, the FDA found
serious manufacturing problems at its plants in Austin, Texas,
and Northbrook, Illinois, FDA records show.
    A month later, the company was awarded the first of five
COVID-19 contracts worth a total of nearly $19 million for new
tests that would be manufactured at the Austin facility, BARDA
records show. Luminex said the government contracts helped it
address a vital pandemic need and that the problems didn’t
impact its COVID tests.
    Other companies recently had product recalls that were
designated as “Class 1” by the FDA, signaling a serious risk to
health or even death.
    One was Smiths Medical, a unit of Britain’s Smiths Group Plc
 SMIN.L , awarded a $20 million contract from BARDA in July 2020
to expand its U.S. plant in New Hampshire to produce syringes.
In the years before, Smiths Medical had issued serious recalls
involving 20 different devices, including two devices that
received Class 1 recalls.
    Smiths Medical said it takes immediate action when an issue
is identified. “While accelerating our operations to produce
this critical equipment, safety and quality have remained our
top priority,” the company said.
    The FDA found “objectionable conditions” at three U.S.
plants operated by contract drugmaker Catalent Inc  CTLT.N  in
2018 and 2019 but allowed the company to address them without
the agency taking action. They included an Indiana vaccine
facility that was cited both years. The same plant was later
contracted to produce COVID-19 shots for Johnson & Johnson and
Moderna Inc.
    Catalent said it “takes these observations very seriously
and all observations are addressed.” The company said it is on
track to deliver over one billion COVID vaccine doses globally
by year’s end.
    The manufacturing problems have persisted since the COVID
contract awards. At least 21 of the companies reviewed by
Reuters have initiated serious product recalls of their COVID
supplies or received poor inspection results from the FDA at the
plants where they were expected to expand manufacturing to
fulfill the government contract. While there have not been
reports of patient injury or death, the manufacturing issues
have delayed vaccines and treatments and affected the accuracy
of diagnostic tests.
    As Reuters reported in May, Eli Lilly and Co  LLY.N  delayed
manufacturing of its COVID antibody treatment amid problems at
the plant producing it, after HHS agreed to pay it up to $1.2
billion. Separately, Emergent BioSolutions Inc’s  EBS.N  $628
million government contract was canceled in November after the
company struggled to manufacture COVID vaccines.
    The FDA said in a statement to Reuters that it relies on a
"variety of robust oversight tools" to ensure product safety and
   "Protecting patients is the highest priority of the FDA and
the agency is confident in the safety and quality of the medical
products we regulate, including the authorized and approved
COVID-19-related products," the agency said.  
    The COVID contracting spree, which began under former
President Donald Trump and has continued under the Biden White
House, came as FDA domestic inspections fell precipitously. The
Biden administration has outlined its ambitions for investing
billions more dollars into expanding the U.S. manufacturing base
for COVID vaccine production.
    What has not been spelled out is how pandemic-era
manufacturing quality is being evaluated. Leading into the
pandemic, FDA inspections of U.S. plants producing prescription
medicines and medical devices had dropped almost 25% between
2011 and 2019, FDA inspection data show; the numbers don’t
include pending inspection reports or inspections prior to a
product approval. Domestic inspections were further curtailed by
COVID restrictions during the pandemic, dropping almost 64% in
2020 and almost 80% in 2021 from the previous peak in 2011,
records show.
    “As a country we need people to trust the quality of our
vaccines, medical devices and medicines,” said Madris Kinard, a
former FDA public health analyst. “But the state of affairs when
it comes to oversight of any of these companies right now is
really worrisome.”
    HHS declined to answer questions about specific COVID
suppliers’ compliance or performance. The department wouldn’t
make its experts available for interviews. BARDA, an office of
HHS, said it couldn’t comment without agency approval.
    The FDA said it “cannot comment” on contract decisions made
by BARDA, as the agency said it generally did not participate in
discussions about such contracts in order “to avoid any
appearance that procurement or investment considerations may
influence the FDA’s regulatory decision-making.”
    The FDA said the drop in domestic inspections can be
explained in part by a 2012 statute change that allowed it to
prioritize facilities based on risk. As a result, the agency was
no longer required to inspect U.S. facilities on a specific
timetable and could focus on those with more regulatory
problems, including plants abroad. The FDA said the numbers
don’t reflect other ways it monitors companies for manufacturing
problems and that it has begun to increase domestic inspections.
    “We try to prioritize surveillance inspections by risk,” FDA
Acting Commissioner Janet Woodcock told Reuters. “We don’t
inspect a plant every time a new product is added. We may have
recent inspection data that showed everything was ok, we may
have data from another regulatory authority, we may have done a
remote assessment.”
    But the federal agencies sometimes operate in a vacuum. In
response to Reuters’ questions, HHS said BARDA considers
publicly available information about a manufacturer’s track
record under federal procurement regulations, but that nonpublic
interactions between a company and the FDA are considered trade
    “Companies’ historic interactions with the FDA are
considered commercial confidential and since these activities
were conducted prior to U.S. government funding, we can
encourage but cannot require the companies to provide those
previous interactions,” HHS said. The agency said it requires
companies to share such information after a contract award as it
relates to the actual product.
    Using the Freedom of Information Act, Reuters asked HHS for
any records related to BARDA’s interactions with the FDA or
performance assessments before or after contract awards. HHS
said no records were found.
    “If they don’t have records,” said former FDA official
Kinard, “then how can they claim they did any performance
assessments? Did they even talk to the FDA?”
    At its inception, BARDA was set up not as an official
agency, but as a program overseen by HHS’s Assistant Secretary
for Preparedness and Response (ASPR).
    The ASPR office, which wields a nearly $3 billion budget,
and BARDA work together to promote the research and development
of medical supplies. They aim to “reduce the time and cost,” in
ASPR’s words, of developing products by funding and helping U.S.
biomedical companies navigate what the office called the Valley
of Death, or the late stage of development where products have
“languished or failed” before regulatory approval.
    When the pandemic hit, BARDA’s plea for assistance from
manufacturers was met with applications by hundreds of
companies, many of which had little experience interacting with
the FDA, said two government officials involved in the process
who spoke on condition of anonymity.
    HHS experts rushed to familiarize themselves with the newer
firms, and cold-called companies they had already worked with
during previous outbreaks to supplement the applicant pool, the
two officials said. BARDA was tasked with choosing manufacturers
who could produce COVID supplies inside the United States,
whenever possible. HHS was so swamped with proposals it also
asked the Pentagon to help.
    Very quickly, the contracting process became controversial.
    BARDA experts were reviewing company proposals for COVID
products submitted through its own website. A second channel,
set up by Trump’s ASPR appointee Robert Kadlec and run by his
office, was also researching potential suppliers.
    In April 2020, Kadlec moved to reassign BARDA’s director,
Rick Bright, a veteran government health official. Bright fought
back with a whistleblower complaint that accused Kadlec of
ignoring FDA safety concerns and ousting him to cover up the
steering of contracts to political allies. Bright, who has since
settled with the government, declined to comment.
    Kadlec denied targeting Bright. But he said the United
States was overwhelmed by the need for supplies during an
emergency and that HHS agencies should have better prepared the
companies well before the pandemic.
    “What was intended was that the government would help create
these manufacturing capabilities that would be robust and
regularly tested,” Kadlec told Reuters. “They were not robust.
They were not invested in and they were not regularly tested. It
was a shit show.”
    Kadlec acknowledged the Trump White House meddled in some
COVID-19 contract negotiations. “I would suggest to you that any
president facing re-election in his last year of his first term
who also has a major public health crisis would politicize the
process,” he said. “Obviously the Trump persona was a hell of a
lot different than other presidents, and that magnified the
    For instance, he said White House officials directly
negotiated a $647 million ventilator contract with Dutch firm
Philips NV  PHG.AS  that a House subcommittee concluded
overcharged the federal government by hundreds of millions of
dollars. The negotiations for this new COVID-related contract
included White House adviser and Trump son-in-law Jared Kushner
and White House trade adviser Peter Navarro, the inquiry found.
    The House report also concluded that HHS contract officers
were excluded from the talks until the last moment. “By then,
the generous terms of the contract had already been agreed to by
the White House,” the report said.
    In an interview, Navarro confirmed he had a role in the
ventilator discussions. He said he regularly involved himself in
COVID supply discussions after meeting resistance from the FDA
when he insisted all the supplies should be manufactured in the
United States. But he disavowed responsibility for the cost.
Instead, he blamed Philips, which denied overcharging the
    A Kushner representative declined to comment and a Trump
spokesperson did not respond to questions. In November, Trump
told Navarro to defy a subpoena issued by a separate House
committee investigating the COVID-19 response.
    Lost in the public scandal were the manufacturing problems
the FDA said it found at a Philips ventilator plant in
California. Three months before the Trump administration
embarked on negotiations, the FDA designated the violations as
serious enough to order the company to take action. The agency
also cited Philips for failing to give notice that another
ventilator model manufactured at the plant could “cause or
contribute to a death or serious injury,” according to the FDA’s
    HHS announced it accepted delivery of more than 12,000 of
the Philips ventilators before canceling the remainder of the
contract in September 2020, shortly after the House findings.
    This past summer, Philips issued a Class 1 recall of 15
million sleep devices and ventilators amid concern a
polyester-based polyurethane foam could degrade “and be ingested
or inhaled by the user.” The company also recalled 22,300
ventilators in the U.S. government’s stockpile due to problems
with pressure levels when the devices were used on infants and
children; Philips said the recalled products, which included all
12,000 ventilators sold to the government for COVID, are being
corrected with a software update.
    “When issues arise, we work quickly to take action and focus
on the needs of our patients and the clinicians that serve
them,” said Philips spokesman Steve Klink.
    Several companies were wrangling with the FDA over
manufacturing problems at the very time they were negotiating
contracts with BARDA.
    The FDA, for instance, finished inspecting Luminex’s Austin
and Northbrook plants on Valentine’s Day 2020 and found serious
manufacturing problems, according to a warning letter the agency
issued to the company four months later. The FDA designated the
problems as “Official Action Indicated,” a recommendation for
regulatory action.
    The FDA also said in its warning letter that a Luminex
testing device, known as Verigene, failed to detect a patient’s
superbug infection. The patient did not receive appropriate
treatment and died two days later – possibly because of the test
failure – the warning letter states. The FDA said Luminex did
not properly inform the agency that it had removed the device
from the market after the incident, and that such violations
could impact a company’s ability to receive federal dollars.
    Luminex told Reuters it had properly notified the FDA about
what happened to the patient and complied with additional FDA
directives over the matter.
    The onset of the pandemic brought new opportunities for
Luminex. In March 2020, Luminex received FDA emergency
authorization for use of its new COVID-19 test kits. It vowed as
a result to dramatically expand manufacturing.
    In 2020 and 2021, Luminex issued Class 2 recalls for its
Verigene diagnostics system over problems including possible
inaccurate results. This February, Luminex secured an $11.3
million contract from the Biden administration, its largest to
    In a statement, Luminex said BARDA’s support helped it boost
manufacturing capacity by 300% during the pandemic and quickly
produce “high-quality tests to meet the expanding need.”
    Other test makers who received contracts had not operated a
U.S. plant previously.
    Diagnostics company Ellume secured a $30 million contract in
October 2020 under the Trump administration to develop at-home
COVID tests that were made in Australia. The Biden
administration in February awarded Ellume an additional $232
million, which the company said will be used to build its first
U.S. plant for future COVID manufacturing.
    In October 2021, the FDA issued a safety warning on certain
lots of Ellume’s COVID-19 home test because of the risk of false
positive results. The problems involved a “manufacturing issue,”
the FDA said. In November, the agency designated the company’s
voluntary recall as a Class 1, with 2 million affected tests.
    “The FDA is not aware of any confirmed serious injuries or
deaths related to the false positive results with the affected
Ellume COVID-19 Home Tests at this time,” the FDA said in its
safety warning. The company said none of its tests now on store
shelves are affected by the recall. Its U.S. plant is expected
to eventually produce 15 million COVID tests per month.
    Ellume told Reuters it “remains steadfast in its commitment
to deliver home tests to communities across the United States.”
    Other companies also experienced problems after winning
their contracts.
    Smiths Medical issued two separate major recalls for
products, both posing a risk of death, after being awarded its
COVID-19 contract to manufacture syringes. One involved syringes
that could malfunction and deliver too little or too much
insulin to diabetes patients. The other involved a device that
could leach aluminum into the blood of patients being treated
for hypothermia.
    Smiths said the recalled syringes used for insulin were
manufactured in the company’s New Hampshire plant but not
associated with COVID-19 vaccines. “The COVID-19 pandemic
created unprecedented staffing and supply chain constraints,”
the company said. “The incentive that BARDA provided allowed for
expansion of our domestic production.”
    One company decided to cut its losses early when it became
clear it couldn’t deliver. John L. Warden Jr., CEO of the
start-up Hememics Biotechnologies, said his company could not
develop its novel COVID diagnostic device in time to meet the
deadline set by Trump officials.
    “BARDA was doing its best but it was getting daily calls
from the White House. They were under enormous pressure,” Warden
said. “We were all told that our deadline was November 2020, and
the fact that it was around the election was not a coincidence.”
    Hememics had been offered $600,000 by BARDA. In the end, it
took $25,000 of funding for development and turned down the rest
so it could have more time before it applies for FDA emergency
    “We were frankly too inexperienced at that point,” Warden
said. “We just needed more time.”

 (Reporting by Marisa Taylor in Washington; Additional reporting
by Steve Holland; Editing by Michele Gershberg and Ronnie
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