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Thursday, February 02, 2012

Birth Control Recall and the Impact of Litigation on Medication Costs

On 1/31/12, the world’s largest research-based drug company, Pfizer, announced that an automated packaging error led to a recall of the birth control medication, Lo/Ovral-28 and the generic counterpart, Norgestrel/Ethinyl Estradiol. The packaging issue had to do with the placebo pill being placed in the wrong order in the 28-day cycle and an inexact number of placebo (should be 7) or active forms (should be 21) of the medication. The placebo pill is one that does not contain the drug’s active ingredient, and thus, does not lead to birth control. The placebo pills are a different color than the active pills. This led a consumer to detect the error when she noticed a discolored pill in the middle of the package. Pfizer has advised that women who have taken these medications over the last several months to talk with their physician about beginning a non-hormonal barrier method (e.g., condoms) of birth control immediately. Switching pills would be another option of course, although Pfizer does not mention this for obvious reasons.

One million packs were recalled throughout the U.S. even though only 30 packages were affected and there are no known immediate health risks besides according to Pfizer. However, Pfizer does acknowledge that an unplanned pregnancy could result. An unplanned pregnancy does come with possible health risks, with the worst case scenario being death of the mother and/or child. Pfizer stated the following in a press release the next day:

“Because of our high quality standards, should we identify even one package that does not meet our high standards, we will voluntarily recall the entire lot.”

While this quote sounds good from a customer relations perspective, one is left to wonder if this recall still would have happened if it was not for the threat of litigation. Plaintiff attorneys did not waste any time trying to find women to sue Pfizer who may have suffered an unplanned pregnancy or health problems as a result of the unplanned pregnancy. Imagine, for example, the type of lawsuit that would emerge from a man alleging that he is widowed due to his wife dying in labor as a result of a pregnancy caused by a packaging error? Or the type of lawsuit that would emerge from a parent claiming that they want Pfizer to reimburse them for the entire cost of raising a child, including a college education?

Examining this in more specific financial detail, one online drugstore sells a pack of Lo/Ovral for 59.99. Other sites charge more and generics will cost less so for the sake of this example, take $60.00 as the average cost per package. This means Pfizer takes a roughly 60 million dollar loss as a result of this recall. A 60 million dollar loss for 30 packs? A 60 million dollar loss to maintain high quality business standards? Or a 60 million dollar loss to reduce the chance of one or more (e.g., class action) lawsuits for hundreds of millions of dollars that could literally end a company's existence. Lawsuits regarding unplanned pregnancies from faulty vasectomies, for example, have sought awards of over 600 million dollars. If you are the largest drug company in the world, would you rather take a 60 million dollar loss or increase the risk of a 600 million dollar loss? The answer is easy, especially for a drug marketed as being almost 100% effective in eliminating pregnancies.

Although Pfizer will take a temporary financial loss in this instance, the cost of the recall will likely be made up for by increasing the prices of other medications in the future. This is one reason why medications in the U.S. are generally more expensive than they are in other countries. One can have cheaper medications if they are willing to accept less research on their safety and efficacy and fewer attempts to quickly correct packaging errors when they arise.

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