The firm has had a torrid time at a number of its facilities in recent years (see here, here and here) but its Rocky Mount manufacturing plant in North Carolina, US, has become the focus of most of Hospira’s manufacturing woes ever since it was cited in a US Food and Drug Administration (FDA) Warning Letter in 2010.
Violations in cGMP and quality systems led to a temporary shutdown at the site and shortage of a number of drugs, and by February 2012 the plant was operating at less than 70 percent capacity.
Speaking at the Morgan Stanley Global Healthcare Conference in New York yesterday, Hospira Chairman Mike Ball said he remained confident and committed to the plant, with a remediation plan in Hospira’s control and the continual support of the FDA.
“Though FDA will never give the stamp of approval, it acknowledges what we are doing and it seems to be the right thing,” he said, adding a predicted timeline with “the bulk of remediation to be done by the end of 2013.”
He also said Hospira would continue to ramp up production, and though it “will be, and has been, bumpy,” the firm is not waiting for the FDA to call on them to do so but rather will use itself and third-party consultants to monitor and push up production levels.
However, Ball told stakeholders Hospira was constantly asking itself whether the level of output was appropriate to the level of remediation done at Rocky Mount? “The number one thing is remediation. When remediation and supply come into conflict, remediation wins.”
Such plans, however, suffered another setback in March when an FDA re-inspection resulted in a 483 citing 20 violations, three of which were repeat observations.
Marginally Better?
Increased efforts to remediate and boost supply at Rocky Mount and other troubled facilities have come at the cost of decreased profit margins, Ball admitted yesterday. However, he was confident that if these efforts are done correctly, Hospira can turn its attention to efficiency.
He said: “Efficiency will happen when we’re at a standard we’re looking at and supply is rolling out the door.”
Amongst its piers, Ball estimated gross margin to be around 45 percent, whilst Hospira’s is sitting in the mid-thirties.
However, Ball remained positive and told investors there is a “great opportunity” over the next few years to improve on this, as - on top of the remediation-supply efforts - a new facility in Vizag, India is currently producing exhibit batches and is set to begin commercial operations by the end of 2014.
Furthermore, there is an opportunity to increase margins by moving prices in line with the market, he added.