STATE OF THE NATION 2021 - UNITED STATES EDITION PRODUCT RECALL - Sedgwick
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STATE OF THE NATION 2021 PRODUCT RECALL UNITED STATES EDITION DATA , T R E N D S & PR ED I C T I O N S FO R U S I N D U S T R I E S brand protection
brand protection
The Sedgwick Brand Protection Recall Index remains an essential reference for
manufacturers and retailers seeking impartial and reliable perspective on past, present,
and future recall data and product safety trends.
The Index collects and analyzes data from the Consumer Product Safety Commission
(CPSC), the Food and Drug Administration (FDA), the National Highway Traffic Safety
Administration (NHTSA), and the U.S. Department of Agriculture (USDA), providing
businesses with insights and guidance they cannot find elsewhere.
This 2021 State of the Nation Recall Index goes beyond We trust you will find our analysis and predictions
our traditional quarterly reviews, bringing you not only insightful. Whether you read it cover-to-cover or focus
information about the latest quarter, but also offering a on sections of particular importance to your company or
year-in-review look at recall data and trends from 2020. industry, you’re sure to learn a great deal about what is
In addition, we provide a glimpse into January recall happening today and what is likely to happen next that
numbers. will impact your business.
Our analysis and predictions let you know what to One final note: this 2021 State of the Nation Recall Index
expect in 2021 as regulators and business leaders alike focuses on U.S. recall data and regulatory developments.
look ahead to a post-pandemic world and a continuation If your business also includes operations outside the
of what has been one of the most turbulent eras in U.S. United States, we encourage you to review our European
government history. Edition. Like this report, our European Edition shares
recall data from global regulatory agencies and offers
Insights from some of our strategic partners at leading expert analysis on product safety and regulatory changes
law firms, insurance companies, and communications impacting global companies.
firms offer further expert analysis to help you prepare for
the changes and trends in the regulation of food, drugs, European edition available here: LINK
consumer products, medical devices, and automobiles.
As U.S. lawmakers increasingly question whether
In an increasingly complex and regulated world, being
regulators are effectively protecting consumers and the
prepared for risks is essential, having the capabilities
number of new products grows every day, there has
to act quickly and effectively is critical. To find out
never been a more important time for companies at
more about our product recall capabilities, contact us
every level in the supply chain to be primed and ready
today: LINK
for recalls and related threats to their livelihood.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 3
CONTENTS
3
INTRODUCTION
6
SUMMARY
8
CONSUMER PRODUCTS
22
MEDICAL DEVICE
34
PHARMACEUTICAL
48
FOOD AND BEVERAGE
60
AUTOMOTIVE
74
CONCLUSION
75
ABOUT
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 5
SUMMARY
2020 was full of risk and great uncertainty for companies Arguably more important than regulatory collaboration, Litigation risks are increasing and evolving. The courts Regulatory inspections and enforcement will be
across all industries. While a year for the history books is however, is the fact that regulatory actions are may have moved more deliberately during the pandemic, fast and furious in the immediate post-COVID-19
now behind us, don’t expect much to change in 2021. In increasingly public, particularly for products regulated but new lawsuits haven’t slowed as the plaintiffs’ bar future. The pandemic will continue to limit regulatory
fact, expect COVID-19 to continue impacting regulatory by the CPSC and the FDA. We discuss this further within has remained persistent in finding and filing new cases. inspections, especially those that would typically include
oversight and enforcement activities for at least the first our industry commentary in the pages that follow. We’re seeing a high volume of typical civil claims, but on-site audits, product sampling, and environmental
half of the year. we’re starting to see a surge in lawsuits related to swabbing. But by mid-year, expect to see FDA inspectors
National regulators have a global impact. While the COVID-19. The Products Liability Litigation team at back on the road.
We may see regulators shift their priorities or degree of regulatory scrutiny and resources devoted Faegre Drinker offered this list of claims companies are
approach to rulemaking and regulation under the to product safety vary around the world, actions by already facing: Companies allegedly making counterfeit or fraudulent
Biden administration, but these changes take time. In the FDA, Health Canada, and regulators throughout products will be a priority, as will any manufacturers
• Failing to warn about the presence of COVID-19 in a
the meantime, there are five regulatory and business the European Union and United Kingdom have a global with spotty recordkeeping or past violations. With those
manufacturing or distribution facility.
considerations that companies across industries, and up impact. Expect this trend to continue as regulators inspections we expect an increase in warning letters,
and down the supply chain, need to plan for if they are to around the world make agreements to share more
• Sanitizers, protective gear, and disinfectants that pressure for recalls, regulatory sanctions, and negative
emerge as leaders in 2021 and long into the future. records and detailed reports from on-site audits and misrepresent the protection against viruses, germs, publicity.
investigations. With this approach, violations may and bacteria.
The regulatory agencies watching you are numerous. ultimately impact your business beyond the borders of • Products falsely claiming to protect against COVID-19. Product safety is the responsibility of the entire
An increasing number of companies are finding the the primary regulatory jurisdiction. • Dietary supplements and other foods that allegedly supply chain. It is well understood that manufacturers
products they manufacture subject to oversight by cure, treat, or mitigate COVID-19 and its symptoms. bear the brunt of product liability claims and regulatory
more than one regulatory agency. Not to mention their In fact, even if an enforcement action is based on one enforcement. But retailers and supply chain partners are
• Drugs and vaccines claiming to treat COVID-19 or
business operations are under constant scrutiny by the country’s investigation, it now often has an effect in increasingly implicated in product safety matters. As a
lessen its impact.
Federal Trade Commission (FTC) and the Department of multiple countries. We saw this with the discovery of result, these organizations are starting to take matters
• Testing claiming to detect COVID-19 or related
Justice (DOJ). Consider these examples: ineffective and contaminated hand sanitizer products. into their own hands.
antibodies.
In this particular case, the FDA was a leading force
• CPSC, FDA, and FTC may all have a hand in regulating with their efforts to protect consumers from dangerous • Products claiming to boost immune systems. Take Amazon for example. After scrutiny from the
face masks used to protect against the transmission of sanitizer products, recalling or placing them under • Exposure to COVID-19 from contaminated devices or CPSC and FDA, Amazon began imposing quality-control
coronavirus. import alert. Public warnings were even placed on packaging. requirements on firms selling supplements on its site. If
products that the agency had no record of ever reaching a seller cannot demonstrate the product it sells complies
• NHTSA and FDA both regulate automakers that • Failing to warn about potential side effects or impacts
U.S. consumers. While Health Canada and regulators with FDA regulations for labeling and cGMPs, the
shifted resources to produce medical devices. caused by drugs or devices.
across the EU took a similar approach, these products product will be removed. The mammoth e-commerce site
• U.S. Department of Transportation, NHTSA, and CPSC Drugs, medical devices, and food products are named
remained available on store shelves throughout Mexico. is seeking similar documentation for products regulated
have regulatory enforcement authority on products explicitly in this list, but similar claims may apply to by the CPSC.
such as lithium-ion batteries and micro mobility automotive and consumer product companies. While
FDA then took the precautionary step of issuing a
products. the Public Readiness and Emergency Preparedness Act
country-wide import alert on all hand sanitizers from With these broad observations in mind, let’s take a
• U.S. Environmental Protection Agency (EPA) is putting Mexico – the first time such a drastic step was taken. (PREP Act) aims to provide immunity from liability to, look at our predictions and recall data specific to each
its own stake in the ground on products traditionally Companies should be aware that this action is likely to among others, “entities and individuals involved in industry.
regulated by FDA, including hand-sanitizer wipes and happen again, and next time, the CPSC could flex its the development, manufacture, testing, distribution,
cosmetic products containing talc. regulatory muscle as well. administration, and use of such countermeasures,” expect
• Customs and Border Patrol supports FDA and CPSC those protections to be tested by the plaintiffs’ bar.
on regulatory enforcement, investigating, holding, or
denying imported products at the ports.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 7
CONSUMER
PRODUCTS
As we look at what 2021 has in store for CPSC
and the consumer product industry, much will
rest on the fact that the Biden administration has
an opportunity to secure a Democratic majority
within the agency. With that is likely to come an
increase in enforcement efforts, stricter safety
standards, and a shift from voluntary guidance to
mandatory standards.
The following pages outline what we see as the
top issues on the CPSC’s priority list.
CPSC estimates an annual average of
25,500 emergency department-treated
injuries (2017–2019) and 571 fatalities
that occurred between 2000 and 2019.”
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 9
Home Furnishings and Décor in the Spotlight
The Home Furnishings Association recently warned members
that the CPSC would be seeking to address issues related to
upholstered furniture flammability, furniture stability (including
tip-over risks), and formaldehyde emissions from composite
wood products in 2021. It would be no surprise to us since this
category is almost always the most impacted by recalls on a
quarterly basis.
It would also be a logical follow on from the CPSC’s recently published “Product
Instability or Tip-Over Injuries and Fatalities Associated with Televisions, Furniture,
and Appliances: 2020 Report.” In the report, CPSC estimates an “annual average of
25,500 emergency department (ED)-treated injuries (2017–2019)” and 571 fatalities
that occurred between 2000 and 2019. Those are staggering numbers. In response,
CPSC continues its consumer education campaigns as a parallel track to regulatory
enforcement. Now it looks like retailers and manufacturers are seeking ways to
educate consumers while limiting their own liability.
In late January 2021, a leading home furnishing brand announced it would require
U.S. shoppers to acknowledge and accept tip-over risks associated with certain
furniture and the recommendation they attach the furniture to the wall. In doing so, CPSC continues its consumer
consumers would provide their name and email address as personal identifiers. education campaigns as a
Nancy Cowles, executive director for Kids in Danger, said the move was “a good
parallel track to regulatory
step” because ensuring consumers are made aware of the safety risks is important. enforcement. Retailers and
But she also warned that her organization, Kids in Danger, is really focused on manufacturers are now seeking
making furniture more stable.
ways to educate consumers while
As it pertains to recalls, could the solution actually spur a new generation of limiting their own liability.”
product registration cards?
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 11
Battery-Related Risks, Oversight, and Enforcement New Phase of Oversight is Ecommerce in the Crosshairs
Continue to Evolve Coming for Internet of Things Over the course of 2020 we examined how Amazon
(“IoT”) Products ended up in the crosshairs of consumer product safety
Lithium-ion batteries have become ubiquitous to household devices, issues and product liability claims, and what it would
Before leaving office, former President Donald Trump
automobiles, toys, and gadgets of all kinds. Companies around the world turn signed the Internet of Things (IoT) Cybersecurity
mean for the industry. While we don’t yet have clarity
on when or how the legal and regulatory landscape will
to lithium-based solutions to power products despite significant risks. We Improvement Act into law. The ultimate result will be
change for ecommerce companies like Amazon, Alibaba,
the first federal regulations for IoT devices, which will
know the CPSC has long been concerned about safety issues associated with and others, we do expect it to happen.
include security requirements, as well as guidelines
these products, but its latest warning was meant for consumers rather than for managing disclosures about those devices’ security
manufacturers. vulnerabilities. It’s a signal that traditional product In fact, it’s clear that Amazon is feeling the heat. Third-
safety regulations and the world of data and privacy party Amazon sellers are reportedly receiving a flurry
have finally collided. Companies should expect the of requests for regulatory compliance documents
The CPSC recently urged consumers “not to buy or This warning is the latest phase in a product component
regulatory environment to continue evolving under a for the products they sell. It could be due to court
use loose 18650 lithium-ion battery cells” typically at the heart of safety issues for many product categories.
Biden administration, with more IoT product-related decisions or in an attempt to pre-empt an imminent
manufactured as part of larger battery packs. The From smartphones and laptops to hoverboards and
regulations on their way over the next four years. regulatory crackdown. Either way, third-party seller and
cells, which are intended for individual sale, are electric cars, lithium-ion batteries are notorious for
being separated, rewrapped, and sold individually fire risk. They have caused household devices, cars, and ecommerce businesses would be wise to catch up with
on e-commerce websites. The battery cells may have even homes to catch fire, resulting in numerous life- any regulatory record-keeping and ensuring the products
exposed metal positive and negative terminals that can threatening injuries. Recalls nearly always follow. One they sell are authentic, legal, compliant with regulations,
overheat, short-circuit, and ultimately result in “fires, Q4 2020 example was LG Chem Ltd.’s recall of home and safe for consumers.
explosions, serious injuries and even death.” energy storage batteries that could overheat and start fires.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 13
Increased Publicity of 2020 BY THE NUMBERS
Enforcement Actions
Product safety advocate groups have long
criticized the CPSC for a perceived lack of The CPSC announced 66 recalls in the fourth quarter packaging violations. It is worth noting, however, that
regulatory oversight and enforcement. Whether of 2020, bringing the annual total to 257 recalls. While despite this 241.7% increase in the number of Personal
or not those criticisms were fair, it was clear by this represents a 7% decrease in recalls quarter-over- Care product recalls from 2019 to 2020, the number of
late 2020 that CPSC leadership became more quarter, the real story is in the annual numbers. Despite impacted units increased by only 21.1% from about 1.1
aggressive and vocal in its enforcement actions. the far-reaching and long-lasting impact of the global million units to 1.3 million units.
pandemic, we saw a 7% year-over-year increase in
recalls from 2019 to 2020. This level of recall activity Injury risk was the top cause of 2020 recalls at 50
For example, Acting Chairman Robert Adler
maintained an average five consumer-product recalls events, with fire and childproof packaging violations
announced in mid-November that the CPSC
every week in 2020. close behind at 47 and 42 events respectively. Injury and
was referring to the U.S. Justice Department
a case for prosecution of a civil penalty. The fire risks have been the top two causes for recalls for
Department of Justice later disclosed that a Recalls in 2020 impacted just over 20 million units. Only the past three years. Not surprisingly, the vast majority
federal judge had ordered Walter Kidde Portable one event impacted more than 1 million units: a recall of of injury and fire-related recalls impacted Sports and
Equipment Inc. to pay a $12 million civil penalty 5.7 million children’s water bottles. Setting that singular Recreation and Home Furnishings and Décor products.
in connection with allegations that the company recall aside, six recalls impacted more than 500,000
failed to timely inform the CPSC about problems units and an additional 27 recalls impacted between
with fire extinguishers it manufactured. While 100,000 and 500,000 units.
the process followed its normal course, the JANUARY 2021 INSIGHT
CPSC’s announcement was an unusual publicity Looking more closely at the number of units impacted
ploy perceived by some as the regulator trying to by recalls, we saw a 116% increase in the fourth quarter,
take credit for the case. with an average recall impacting about 94,000 units.
That’s more than twice as large as the average third- The CPSC announced 10 consumer product
quarter 2020 recall. Overall, the average recall in 2020 recalls in January 2021, compared to a monthly
Consider a second example. The CPSC, along with
impacted 78,000 units compared to 90,000 units in average of 21 recalls in 2020. If recalls maintain
U.S. Customs and Border Protection, announced
2019. this pace for the remainder of the first quarter
in January the seizure of nearly 600 imported
of 2021, we will see less than half of the
girl’s bicycles that violated lead paint standards.
quarterly average number of recalls logged
Again, while the seizure is not unusual, a public The product category most often impacted by recalls in
since at least 1998.
announcement for some 600 units seems to 2020 was Home Furnishings and Décor with 57 recalls.
be, particularly when you compare it with other Close behind was Sports and Recreation products with
government releases issued around the same 54 recalls and Personal Care products with 41 recalls. Sports January 2021 recalls impacted just shy of
time for seizures of liquid meth, cocaine, and and Recreation and Home Furnishings and Décor products 200,000 units, compared to a monthly average
counterfeit masks for use in protecting against have been the top two product categories impacted by of 1.7 million units impacted in 2020.
COVID-19. recalls for at least the last nine years (since 2012).
Sports and Recreation products led with three
Regardless of your position in the supply chain Personal Care products, on the other hand, are typically recalls, followed by Home Furnishings and
and the type of products you manufacture, responsible for a small number of recall events each Décor with 2 recalls. Fall and fire risks were the
distribute, or sell, it’s likely that under a year. In 2019, there were just 12 recalls of Personal Care leading causes of recalls, each accounting for
Democratic majority CPSC will become even products. This anomalous activity in 2020 was largely three recalls.
more aggressive in publicizing its efforts to due to a significant number of essential oil recalls and
protect consumers. Now is the time to double- other personal products – all the result of childproof
check your records, and enhance your product
safety processes and procedures, before the
agency is granted more power – and greater
leeway in using that power – to protect consumers.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 15
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 17
BOAZ GREEN, OF COUNSEL,
NEAL COHEN LAW
WELCOME TO A NEW ERA OF REGULATORY ENFORCEMENT
Expect 2021 to be the start of a new era for the Consumer Product Safety
Commission (CPSC). With the opportunity to nominate a Chair and at least two
additional Commissioners over the next four years, the Biden administration has But when oversight of a supply chain is limited, there is CPSC-related items into broader bills. For example, tucked
significant benefit to a discreet batching system. into the “COVID-19 Regulatory Relief and Work from Home
the power to influence the direction of the CPSC beyond a single presidential term.
Safety Act” was a provision that instructs the CPSC to
For example, instead of one week of production, pare the adopt the California upholstered furniture flammability
batch down to one day. When sourcing a component from standard TB 117-2013. As part of this mandate, the Act
To begin, it is very likely that the Biden administration’s While some of the traditional proactive methods for requires manufacturers to apply a label to furniture that
multiple partners, change batch numbers when switching
first nominee to fill the vacancy for CPSC Chair will be mitigating product safety and quality issues may be less asserts compliance with this new standard. This label
suppliers or lots. Change SKUs following changes in
someone with consumer advocacy experience. With such effective during the pandemic, other options abound. requirement makes enforcement not just attractive for the
components or product redesign. This type of carefully
an appointment, an era of more active enforcement and CPSC, but easy. Once the law takes effect, expect the CPSC
designed protocol ultimately has the power to minimize
rulemaking can be expected. When other safeguards fail, remember customers can to launch an enforcement program utilizing both port and
recall exposure when a quality or safety issue is identified.
serve as an important warning system. By listening and retailer inspections to identify non-compliant products,
Where will increased scrutiny and enforcement come being responsive to the concerns raised, deciding when and either stop them at the ports or pressure companies to
from? to take action to prevent possible future incidents and Increased Presence at the Ports announce recalls.
mitigate the risk of enforcement action becomes easier.
Even before we see makeup of the CPSC change, the agency
Now is the time to get the house in order, before facing
Risks Created by a Strained Be more proactive when monitoring and responding to
is pushing for increased resources and expanded authority.
That includes a stronger presence at the ports, a concept double trouble: complete destruction of product shipments
Supply Chain consumer concerns. at the ports combined with regulatory enforcement actions
already endorsed by Congress.
Consumer preferences and demand have evolved by the CPSC, Customs and Border Protection, and possibly
significantly in 2020, driven in large part by the If you are not in the practice of monitoring social others.
Importers must be aware of these impending changes. A
COVID-19 pandemic. As manufacturers work to respond media, product reviews, third-party seller sites,
stopped shipment at the port translates directly to delays,
to these changes, sourcing high-quality raw materials and conversations with retail partners, now is the
time to start. Lower your threshold for launching an
but the impact doesn’t stop there. There are legal and Intellectual Property and Product
and components in the quantity needed is challenging. regulatory enforcement risks.
investigation based on the number or seriousness Safety Will Collide
of complaints. Ensure your teams are proactively
Complicating matters, detecting quality and safety When CPSC’s increased enforcement at ports first begins, Manufacturers and traditional brick-and-mortar retailers
identifying potential risks and issues, and escalating
issues stemming from suppliers is not happening in the agency may show some flexibility, allowing companies alike are growing increasingly concerned about Intellectual
quickly. These steps will allow you to identify and then
the traditional fashion, in the form of in-person audits, to correct technical violations such as a missing tracking Property (IP) issues, particularly when it comes to the
address potential issues earlier. Taking these steps also
inspections, and product reviews. With suppliers facing label or Certificate of Conformity. But after that first potential for fraudulent products to find a way into
demonstrates a commitment to safety which could help
only a fraction of the scrutiny experienced previously, violation, it is safe (and wise) to assume the agency will consumers’ hands. These industries are joining forces to
avoid the perception of a delay in CPSC reporting and
there is more incentive for them to cut corners to meet take a harsher future stance. Soon, companies should be pressure legislators and regulators to address concerns
the related enforcement risks.
new demands and accelerated delivery expectations. prepared for shipments to be held, and even destroyed, at over IP violations, especially as they relate to e-commerce
higher rates when compared to what was experienced 2019 and platform sellers. Legislators and regulators have taken
While these steps are focused on consumer interaction,
It is critical that companies take additional proactive and and 2020. notice. At the CPSC, Commissioner Dana Baiocco, for one,
there are also ways to limit potential exposure on the
precautionary steps to mitigate the risks created by their is very interested in curtailing the online sale of counterfeit
manufacturing side by improving traceability. Consider,
stressed supply chains. We should also expect CPSC to exercise its muscle in areas and fraudulent products by leveraging an increased
for example, how batching is handled. The definition of a
where it has gained new authority. Lawmakers also tucked presence at the ports.
“batch” varies greatly across the manufacturing industry.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 19IP is traditionally outside the scope of the CPSC’s jurisdiction. When Now is the time to get the house in order, before
it comes to the import of fraudulent, counterfeit products, regulation
falls more squarely under the purview of U.S. Customs and Border
facing double trouble: complete destruction of product
Protection. shipments at the ports combined with regulatory
enforcement actions by the CPSC, Customs and Border
But regulators understand that, when a product is fraudulent or
Protection, and possibly others.”
counterfeit, the violations often go beyond IP laws. For example,
counterfeit products likely do not meet relevant safety standards, and
were probably not tested by third-party laboratories. As the agencies
collaborate more frequently at the ports, increased enforcement is
a likely result. If Customs and Border Protection stops a shipment of
product for IP concerns, inspectors may also call CPSC to evaluate the
product for safety issues.
Surgical Approach to Legislation,
Enforcement will Broaden
Expect the CPSC’s approach to rulemaking and enforcement to be far
more impactful in the months and years to come.
Under the Trump administration, attempts at legislation were narrowly
focused. Most legislation was focused on specific hazards or products,
like furniture stability or portable fuel containers.
With both houses under Democratic control, there is greater appetite
for a comprehensive review of the CPSC and its statute (the Consumer
Product Safety Improvement Act). Key changes would likely include an
increase on the CPSC’s penalty authority, removing the controversial
Section 6(b) requirements limiting the CPSC’s ability to disclose product
safety information, and removing barriers to CPSC’s ability to pass new
mandatory safety standards.
Until then, recent announcements by the CPSC should serve as a
reminder that the agency will likely want to show that we are in a new
era. In the Commission’s mind, the bigger the announcement, the
better. Think enforcement activities like major recalls, sweeping port
inspections, and financial penalties. These are the types of activities
that will ultimately help the agency counter the perception that it
isn’t doing enough to protect consumers, and especially vulnerable
populations like children.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 21Talk to your legal counsel now about
whether you have the regulatory
approvals needed to continue production
once EUAs are rescinded. If not, be
prepared to shut down production.”
MEDICAL DEVICE
As we look ahead, here’s what medical device
companies need to think about in 2021 and beyond.
Emergency Use Authorizations (EUAs) Will
Come to an End
The time will come, possibly as early as mid to late 2021, that the FDA
will begin revoking EUAs, reverting to unapproved status medical
devices that were not approved by traditional means. From that
moment forward, legal protections currently offered to the companies
manufacturing or distributing these products will likely be non-
existent.
What that means for future product liability cases, class action
litigation, and regulatory enforcement may very well depend on
your ability to demonstrate a strong safety record and a history of
appropriate marketing activity (in other words, you did not commit
COVID-19 fraud). You should also be talking to your legal counsel now
about whether you have the regulatory approvals needed to continue
production once EUAs are rescinded. If not, be prepared to shut
down production of those unapproved medical devices and withdraw
devices from the market the moment the EUA is revoked.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 23COVID-19 Fraud will Draw Scrutiny It is critical that companies in this space work closely
From the FDA and DOJ
with FDA to the extent they are able. After all, software
Company records can be used
is, and will continue to be, a primary reason for medical
Suspected COVID-19 fraud will be a hot-button issue device recalls. as an indicator of a firm’s
across industries, and the medical device sector is compliance and may allow
no exception. In a “COVID-19 Product Regulation
Virtual Inspections will Inform us [FDA] to focus and limit
Enforcement Roadmap” recently authored by the team at
Morrison Foerster, legal experts warn that companies can Future Inspections and Regulatory time needed on an on-site
expect enforcement activities such as warning letters or Enforcement inspection, or in advance of
product recalls for products claiming to:
It is well-known that the number of on-site inspections
an inspection to later occur.”
• Provide any type of COVID-19 testing. of medical device facilities plummeted in 2020 as a
• “Treat” or “fight” COVID-19 or “inhibit” the virus. result of the COVID-19 pandemic. In response, FDA
has been seeking ways to remotely evaluate regulatory
• “Prevent” or “reduce the risk” of contracting
compliance. That process is no doubt going to involve
COVID-19; or
requests for various records and video meetings aiming
• Treat or reverse bodily symptoms caused by COVID-19. to evaluate a company’s due diligence and quality
But these risks go beyond allegations of product efficacy management systems.
and patient safety.
When speaking about the progress being made, FDA
If you need a specific example for just how damaging Assistant Commissioner for Medical Products Elizabeth
an accusation like this could be, consider the recent Miller explained that company records can be “used as
indictment of Decision Diagnostics Corp. (DECN) CEO an indicator of a firm’s compliance and may allow us to
Keith Berman. According to a Justice Department focus and limit time needed on an on-site inspection,
announcement, Berman was “indicted by a federal grand or in advance of an inspection to later occur.” In other
jury in connection with an alleged scheme to defraud words, proving you are running a tight ship could
investors by making false and misleading statements delay future scrutiny. Otherwise, be prepared to be
about the purported development of a new COVID-19 among the first companies receiving an unannounced
test, leading to millions of dollars in investor losses.” visit when FDA inspectors get back on the road. If this
approach proves to be beneficial to the agency, expect
these more detailed virtual inspections to be a long-
FDA Action on Artificial standing part of the regulatory oversight process.
Intelligence-Enabled Software
The FDA’s Focus Areas of Regulatory Science (FARS) Regulatory Enforcement will be a
highlighted several priorities related to medical device Collaborative Effort
safety, including the agency’s focus on improving the way
it conducts product safety surveillance. International collaboration will also be critical to
ensuring the safety of the global drug supply. We
know that many regulatory bodies are working out
As the FDA went deeper, the agency released a plan for
processes for sharing findings of remote and in-person
how it will develop and evolve the regulatory framework
inspections to better protect consumers worldwide.
by which it will oversee artificial intelligence/machine
Companies should plan for the inevitable fact that
learning (AI/ML)-based software as a medical device
any inspectors, regardless of the regulatory body they
(SaMD). While the framework offers helpful insight and
officially represent, will be sharing the information
direction from the FDA, it will be constantly evolving as
they collect with their counterparts around the world.
the agency learns more and the technology behind the
Whether it is findings from an on-site inspection or
software and devices progresses.
results of remote sampling, expect regulators to freely
share the information to protect consumers across
their borders.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 252020 BY THE NUMBERS
Recalls decreased slightly to 235 incidents in the fourth quarter,
down just 2.9% from 242 recalls in the third quarter and resulting
in a seven-quarter low. Despite this decline, we saw a total of 1,078
recalls in 2020, just short of our predicted 1,100 recalls for the year.
By comparison, 2019 saw a total of 884 recalls.
In a similar fashion, we saw a year-over-year increase in impacted
units. 2020 recalls impacted a total of about 467 million units, the
most units impacted by recalls since at least 2012. In 2019, recalls
impacted just over 430 million units. This record was in part due to
a quarterly record-high number of units impacted in the first quarter
of 2020, resulting from a single anomalous event impacting more
than 314 million units.
At 169 recalls, software issues were the top reason for recalls for the
18th time in the last 19 quarters, and the leading cause of recalls for
2020. But this does not carry over as the leading cause of recalls in
terms of impacted units. While 43 fourth quarter recalls, or 18% of
fourth quarter events, were the result of software issues, these 43
recalls impacted a mere 640,000 units, or just 1% of recalled units.
Other leading causes of recalls in 2020 were quality concerns and
mislabeling issues, accounting for 148 and 124 recalls respectively. By
comparison, software led 2019 recalls with 184 events, with quality
and mislabeling issues also among leading causes, triggering 117 and
105 events respectively.
JANUARY 2021 INSIGHT
The leading cause of fourth quarter recalls in terms of impacted
units was mislabeling, accounting for 22 million units. Mislabeling
was followed by quality issues impacting about 18 million units. The FDA disclosed 63 medical device recalls in January 2021,
compared to a monthly average of 90 recalls in 2020.
When we look at activity over the duration of 2020, 67.4% of
recalled units were the result of a product being manufactured January recalls impacted about 6.8 million units, with one event
outside of specifications. Nearly all of these units were involved in accounting for 63.7% of all affected units. Adjusting for that
the anomalous recall referenced above. In 2019, the leading cause of anomalous recall, the average January 2021 recall impacted
recalls by units was quality concerns, impacting 273 million units. In just under 40,000 units. By comparison, the average recall
2018, manufacturing defects were the leading cause, impacting 196 size for a 2020 recall was 433,000 units. In further evidence of
million units. the smaller size of January medical device recalls, 58 recalls in
January 2021 impacted fewer than 10,000 units.
Of fourth-quarter recalls, 84.3% impacted products distributed
nationwide. In terms of the global impact of recalls, 46.5% of Software issues were the leading cause of January 2021 recalls
U.S. FDA recalls impacted products distributed to international at 15 events, followed by Quality concerns with 12 recalls.
customers.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 27brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 29
KATE W. HARDEY, PARTNER,
MCGUIREWOODS
CONSEQUENCES OF A PANDEMIC-DRIVEN
DEVICE INDUSTRY
As companies and regulators around the world navigate a global pandemic,
nearly everything known about supply and demand or regulatory oversight
activities has been turned upside down.
The medical device industry is experiencing new make corrections. Much of this on the COVID-19 side
market entrants sparked purely by an increase in of things, but it is not limited to pandemic response
demand for COVID-19 devices such as diagnostic tests, products. This online research could also serve as an
ventilators, and personal protective equipment (PPE). indicator of where the FDA should focus its efforts even
Simultaneously the Food and Drug Administration when on-site inspections and other traditional oversight
(FDA) needed to find new ways to conduct oversight activities resume.
and enforcement activities in a remote or virtual fashion The biggest challenges will be for companies that, first products addressed through the EUA process, only
– all while prioritizing its support of the nation’s often unknowingly, go too far in trying to capitalize for the recommendations to change a few months later
coronavirus response. Opportunistic Marketing that Turns on pandemic-inspired consumer demand. These are as agency thinking and understanding of potential risks
into Fraud companies that, for whatever reason, want to get into also evolved. Those types of changes are a challenge
Through this process, there have been a few COVID-19 the COVID-19 market, and start making claims about the for businesses to follow and adapt in the normal course
When it comes to manufacturing-related risks, the
inspired consequences that the medical device industry efficacy of products in preventing transmission of the of business, let alone during a time of supply chain
supply chain continues be a concern for medical device
should expect to remain even when the pandemic is over. coronavirus, testing for infections (or antibodies), or disruptions, increased demand, and product shortages.
companies. In some cases, component manufacturers
treating someone who has contracted the virus. There are
are making false or exaggerated claims, often related
several companies that realized too late that the moment The impact of EUAs is also likely last far longer than
Creative Approaches to Regulatory to COVID-19. There have been many missteps here,
a medical-related claim was made, they entered the world the pandemic. The longer EUAs stick around, the more
particularly among companies that have the mindset
Oversight that claims may be made since only a component of
of medical devices. At that moment, FDA regulatory long-term the effects on the composition of the medical
oversight and enforcement actions became a reality. device industry. Many companies that benefited from
With inspections at record low levels over the last year, a product is provided and the claims provide ideas or
EUAs are currently evaluating whether to take the next
the FDA is becoming more creative in how it approaches suggestions for end use. This is absolutely not the case,
step of filing a 510(k) before the EUAs expire in order
regulatory oversight. For one, it is widely known that however, opening these component manufacturers up to Evolution of Emergency Use to be a medical device company for the long-haul.
scrutiny that could have been avoided.
the agency is utilizing virtual inspections where it can. Authorizations The reasons could vary – from viewing the move as a
Less discussed is that the FDA, in lieu of in-person
survival tactic that will help the company emerge from
inspections and traditional record reviews, is taking to These matters have the potential to worsen if a As long as the country is in a state of declared pandemic,
the pandemic to a strong desire to be a medical device
Google for insight on potential enforcement actions. manufacturer of a finished product adopts a claim, Emergency Use Authorizations (EUAs) will remain a
company long-term.
putting both companies at risk of regulatory enforcement critical component of regulatory guidance, oversight,
FDA staff are reviewing publicly available information actions. Violations to this end, however, have been rare and enforcement. Further, the process and protections
will likely continue to evolve. Either way, the medical device industry is more likely
on the Internet for discrepancies or violations in the and will likely stay that way. Manufacturers of end-use
to maintain something more similar to its current
marketing or positioning of a product. When something devices generally have a greater understanding of the
competitive composition than revert to its pre-COVID-19
runs afoul, instead of issuing warning letters, for less regulatory environment, specifically the guidance for In fact, changes in the EUA process have been one of the
business landscape.
egregious issues or concerns regulators are picking up making product-related claims. biggest challenges facing medical device manufacturers.
the phone or sending emails and telling companies to Consider the case of face masks and PPE – some of the
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 31Recalls are Driving Litigation As companies consider potential legal risk, keep in
mind COVID-19 products may benefit from some of the
Separate and apart from the pandemic response, indemnity provisions within the Public Readiness and
but still very much relevant to COVID-19 products, Emergency Preparedness (PREP) Act, these protections
medical device companies must understand the legal are not likely to be the blanket indemnification some
ramifications of enforcement actions – and specifically may think. There is always the risk that a plaintiff’s
product recalls. attorney tries to apply state law theories, pursue medical
negligence or malpractice claims, or even test the PREP
Increasingly, plaintiff consumer litigation law firms Act indemnity directly. Companies must prepare for this
are monitoring the FDA website for recall activity as eventuality, because even if the lawsuit ultimately goes
inspiration for lawsuits. In fact, it is almost inevitable away, it will have a lasting impact in the form of a costly
that a recalling firm will face at least one lawsuit as a legal expense, an operational distraction, and, the longer
direct result of the recall announcement. A lawsuit could it plays out, potentially, a damaged reputation.
come in several shapes and forms (or even a combination
of the following): To sum these consequences up with one overarching
piece of advice: be sure to think big and broad about risk
• Class action product liability,
and exposure within the medical device industry. While
• Unfair trade practices, regulatory safety issues should be a top priority, public
• State law violations (e.g., Prop 65 in California), and and private companies need to think holistically about
• Securities class action, to name a few. the risks faced in terms of state and international laws,
rules, statutes, and litigation. Too narrow of a focus on
any one of these will likely serve to increase your risk
Companies need to be careful about what is said
exposure somewhere else.
about the recall and underlying issues, and how it is
communicated. While there will be specific information
the FDA requires as part of the recall, be very careful
how the issue and actions are characterized beyond the
FDA process. Just one wrong word has the potential to
increase legal exposure.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 33PHARMACEUTICAL
As we look ahead, here’s what pharmaceutical companies
need to think about in 2021 and beyond.
Drug Quality and Current Good Manufacturing
Practices (cGMP) are Top Recall Enforcement
Priorities
Whether we look at prescription drugs or over-the-counter medications,
the leading causes of recalls and enforcement actions are typically the
same. From a recall perspective, we know that violations in Current Good
Manufacturing Practice (cGMP) regulations and quality issues are routinely
the top reasons for recalls.
Expect the FDA to have a continued focus on cGMP, especially when it
comes to foreign Active Pharmaceutical Ingredient (API) manufacturers.
It is critical for manufacturers, especially during a global pandemic, to be
even more diligent with ensuring suppliers are meeting standards and
quality requirements. Regardless of when it happens, companies need to
be prepared if the agency takes enforcement action or requires a recall that
reaches as far back as the last inspection or start of the pandemic. It is critical for manufacturers,
especially during a global
pandemic, to be even more diligent
with ensuring suppliers are
meeting standards and quality
requirements.”
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 35NDMA Continues to Trigger Recalls, Litigation COVID-19 Products Remain in
Valisure’s 2019 discovery of likely carcinogen N-Nitrosodimethylamine (NDMA)
the Spotlight
Remember that the definition of COVID-19 products
in heartburn and diabetes medications is having long-lasting ramifications.
is broad. It includes products recommended by health
officials to prevent the transmission of the coronavirus,
We continue to see a regular stream of NDMA-related blood pressure drug manufacturers that allegedly sold
as well as treatments and vaccines. Hand sanitizers is
recalls through 2020 and into 2021. We saw nine recalls the products they knew were contaminated with NDMA.
one product category scrutinized by the FDA. Dietary
due to NDMA in the fourth quarter of 2020 alone,
supplements making COVID-19 claims is another.
bringing the total to 36 for the year. By comparison, just On top of that, Valisure recently published a study
Safety of these products is a primary concern, but
12 recalls were announced for NDMA contamination in the Journal of the American Medical Association
suspected fraud is another hot-button issue.
in 2019. We suspect this story is far from over. Recalls (JAMA) Network Open which suggests ranitidine drugs
are likely to continue as regulators and pharmaceutical can cause NDMA to form under a range of conditions,
As of mid-November 2020, more than 1,200 fraudulent
companies grapple with understanding how and when including in the human body, thus increasing cancer risk.
products were identified by FDA. As at-home COVID-19
the contamination occurs. In fact, if you do an Internet search for ‘ranitidine,’ you
testing kits become more available, and consumers
may see ads from plaintiff law firms atop the results,
continue to look for ways to protect themselves or
In fact, it is very likely about to get worse. U.S. District along with links to multiple studies citing the drug’s link
recover from the coronavirus, fraud will remain a top
Judge Robert Kugler in New Jersey allowed fraud to cancer. We expect an increase in litigation in light of
priority. As long as COVID-19 remains a concern, these
allegations to proceed against several generic valsartan these findings.
products will stay in the spotlight.
The team at law firm Morrison Foerster recently
Regulatory Enforcement is Now a Collaborative Effort among published a “COVID-19 Product Regulation
Global Agencies and Independent Organizations Enforcement Roadmap” in which the authors offer the
below list of product claims most likely to spark FDA
The impact of Valisure’s 2019 discovery of NDMA In addition, collaboration among regulators worldwide
scrutiny. Expect enforcement activities such as warning
contamination sparked a string of product recalls, is proving even more critical to ensuring the safety of
letters or product recalls for products claiming to:
influential consumer protection efforts, and stricter the global drug supply. We know that many regulatory
regulatory enforcement. As a result, independent bodies are working out processes for sharing findings • Provide any type of COVID-19 testing.
organizations have seen how they, like Valisure, can have a of remote and in-person inspections to better protect • “Treat” or “fight” COVID-19 or “inhibit” the virus.
public role in protecting patients, and they are jumping on consumers worldwide.
• “Prevent” or “reduce the risk” of contracting
board to proactively monitoring drug quality and safety.
COVID-19; or
Companies should plan for the inevitable fact that
• Treat or reverse bodily symptoms caused by
From pharmacies to academic institutions, these any inspectors, regardless of the regulatory body they
COVID-19.
organizations are conducting their own investigations, officially represent, will be sharing the information they
testing, and publicizing any findings that call the safety collect with their counterparts around the world. Whether But it is not just the FDA that’s worried about the
of products into question. These efforts increased it is findings from an on-site inspection or results of dangers these products may pose to people and the
as COVID-19 kept the FDA from conducting on-site remote sampling, expect regulators to freely share the environment. The U.S. Environmental Protection
inspections. One example we shared in the Third Edition information to protect consumers across their borders. Agency (EPA) has taken action indicating that it sees
of the Recall Index was the petition from University certain products, like hand sanitizer wipes, falling
of Kentucky researchers to FDA, requesting a recall of under its regulatory purview. The EPA has called on at
Mylan and Hikma versions of an injectable diuretic after least one hand-wipe manufacturer to submit a recall
finding high impurity levels. plan, saying the product is regulated under the Federal
Insecticide, Fungicide, and Rodenticide Act. This is
not surprising given the all-hands-on-deck approach
to product regulation and safety during the pandemic,
and companies should only expect to see more of this
type of regulatory overlap and even collaboration.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 37Regardless of the type of
pharmaceutical product you
manufacture or its intended use,
now is the time to prepare for
increased regulatory oversight and Return Focus on Longstanding Priorities
enforcement in 2021 and beyond.”
The FDA’s Focus Areas of Regulatory Science (FARS)
highlights several issues that are directly related to product
safety, including a focus on the quality of compounded
drugs, technologies to reduce pathogen contamination, and
leveraging data to improve product safety surveillance.
Likewise, we know product safety risks impacting hot-button issues such as API
safety, opioids, cannabis, and vaping products haven’t fallen entirely off FDA’s
radar, but they have taken a back seat to pandemic response. Don’t expect
that to last forever. In fact, the tide may already be changing at the federal and
state level.
On September 10, 2020, the FDA announced the issuance of warning letters
to 17 website operators in China, Iceland, India, New Zealand, Pakistan, and
the United States involved in the illegal importation and sale of unapproved
and misbranded opioids. These letters are a reminder that the FDA will pursue
companies throughout the supply chain, making it even more important the
companies understand their risks up and downstream.
Meanwhile, Oregon cannabis regulators recently banned several additives that
potentially could harm marijuana vape users. Depending on the path the FDA
ultimately takes with cannabis and Cannabidiol products, growers, producers,
manufacturers, and retailers must all be prepared for increased regulatory
scrutiny, warning letters, and ultimately enforcement action at the state and
federal level.
Regardless of the type of pharmaceutical product you manufacture or its
intended use, now is the time to prepare for increased regulatory oversight and
enforcement in 2021 and beyond.
brand protection STATE OF THE NATION 2021 | Product Recall Data, Trends and Predictions for US Industries 392020 BY THE NUMBERS
About halfway through 2020, we predicted that
it would still be feasible for the drug industry to
experience a similar level of recall activity to 2019
– before COVID-19 response changed the way
businesses and regulators operate. Our prediction
became reality.
Even with minimal inspection and regulatory enforcement activity, we
saw 344 pharmaceutical recalls in 2020, representing a 2.4% increase
compared to 2019. While this is a small increase in the number of
events, 2020 recalls impacted nearly 133 million units, or 50.6% more
units than were impacted by 2019 recalls.
Fourth-quarter recalls impacted 84 recalls compared with 100 recalls
announced in the third quarter. This is a 16% decrease in recall
events quarter-over-quarter. These recalls impacted 30 million units,
representing a 11.1% decrease compared to the third quarter.
cGMP deviations and failed specifications were tied as the leading
cause of fourth-quarter recalls, each leading to 24 events. It marks
the sixth time in the last seven quarters that cGMP deviations were a
leading cause of recalls. Not surprisingly, it secured cGMP deviations
as the top cause of recalls in 2020. JANUARY 2021 INSIGHT
For perspective, cGMP deviations were the leading cause of recalls
in 2019, and the second-leading cause in 2018 followed by failed The FDA logged 23 pharmaceutical recalls in January 2021, with
specifications. just one of these events receiving the FDA’s Class I designation. By
comparison, the FDA announced 33 recalls in January 2020 and a
cGMP deviations were the top cause in terms of units in the fourth monthly average 29 recalls for the year.
quarter, impacting more than 24 million units or 81% of all recalled
units. Similarly, cGMP deviations were the leading cause of units January 2021 recalls impacted about 4.9 million units. That equates
recalled for the entirety of 2020, accounting for 63 million or 47% of to an average recall size of about 214,000 units. By comparison, an
recalled units. average 11 million units were recalled each month in 2020. The average
size of a pharmaceutical recall in 2020 was about 386,000 units.
Among fourth-quarter recalls, 64 impacted products distributed
nationwide, while just 5 affected products sent internationally. When Failed specifications, cGMP deviations, and sterility issues were the
we look at activity over the course of the year, 273 recalls impacted leading causes of recalls at five events each.
products nationwide, and 18 impacted products sent internationally.
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