Securing Corporate Credibility

Gil Bashe + Kristie Kuhl
CBI Annual Recall Summit

Agenda
• Develop essential knowledge base
• Recall communications audit
• Chart a path
• Understand challenges of doing right thing
• Alternatives?
• Workshop
• THE withdrawal
• Summary

Recall = crisis?
“When written in Chinese, the word "crisis" is composed of two characters. One represents danger and the other represents opportunity.” - John F. Kennedy

Develop essential knowledge base Steps before moving into a recall situation
1. Understand all required activities
2. Decision time: Recall or withdrawal?
• Level of risk to public health?
• Can the problem be fixed?
• Class I, II or III?

Recall submission process

Balanced response
Head: What are the facts?
Heart: How do I do the right thing?
Gut: Legal response?
Don’t respond with emotion – Don’t respond without emotion

Recall submission process
Recall submission must include:
• Product information
• Reason for recall
• Health hazard assessment
• Volume of recalled product
• Firm responsible for the violation/problem

Notify the public
Public notification process:
•Press release(s)
- State product information and description of problem
- Include depth of recall and clear instructions to customers
- Include return response form
• Recall notification letters
- Letter must state (in large bold print) “URGENT: DRUG/MEDICAL DEVICE RECALL or CORRECTION”

Evaluation
Review recall status
• Was the recall effective?
• Locate root of the problem?
• Plan, prepare, and prevent: develop corrective actions to prevent future occurrences

Media may be unfair
"The Virginia Department of Health and the Centers for Disease Control have concluded that the cardioplegia received from CAPS was the most likely source of the illness in the cluster of patients in early September,"
Rappahannock Area Health District, said at a press conference yesterday afternoon.

Since then, Armitage has said he believes that at least five or six other patients were similarly affected. Two of those patients
died, he said, one in January and one in June.
DON’T REACT

Recall communications audit
Planning a recall scenario communications audit
1. Determine most appropriate communication modes
2. Develop strategies to reach customers
3. Work with wholesalers/retailers to facilitate the process
4. Dispose of reclaimed products

Recall submission process
• Assess health hazard
• Collect information
• Submit recall
• Distribute press release
• Send notification letters
• Conduct recall audit

Communicating an expanding recall
Situation:
• Improper balloon deflation makes stents difficult to insert
• 3 patients died, 43 were injured
• Problem with insertion, patients with stents unaffected
• Costs - $45M in reversal of sales, $50M in write-down

Actions:
• Announced voluntary partial recall July 2, 2004
• Affected institutions receive package explaining procedure
• Class I recall expanded mid-July
• Frequent communication: institutions, patients and investors

Outcome:
• Media coverage balanced –
- initial coverage stated 30 complaints out of 450,000 stents in use
- patient safety message appears
- expanded recall announced day Martha Stewart sentenced
• Stock price declined a total of 7.6%

Chart a path to final outcome
Where do you want to be at the end of the recall…
with patients
with physicians
with suppliers

Chart a path to final outcome Situation:
• Recall of Accu-Chek Easy diabetes testing kit

Desired outcome:
• Keep patients testing
• Prepare to switch to next-generation device

Actions:
• Provided patients free older device & strips during transition
• Worked with 3rd-party professional & patient groups
• Ongoing communication with patients and HCPs

Results:
• Patients made switch to new testing device
• Maintained market share

Understand the Challenges
How do we meet corporate management’s desire to “do the right thing?”
• Balance safety and legal concerns
• Know how communication may be used in future citizen petition suits
• Align marketing, sales and legal messages

What does legal think?

Know the Alternatives
Negotiate with the FDA
• Black box
• Re-label
• Warning

Workshop
Situation
• Asthma BAI indicated for children 12-18 has faulty counter
• PharmaBreathe learned yesterday 3 children (ages 8,13, and 18) were hospitalized after using emergency inhaler and receiving no drug (faulty counter)
• The 8-year old died this morning
• Mothers of Asthmatics and Public Citizen have condemned PharmaBreathe through an Op Ed in today’s edition of the New York Times
What do you need to know?
What do you do?

Vioxx – THE withdrawal
Situation:
• Vioxx associated with increase risk of CVD
• Some Merck documents indicate knowledge in 1997
• FDA grants approval to market in 1999
• Warning label added in 2001
• AHA, NSA and AF ask Merck for additional testing

Actions:
• Merck provides sales reps with responses to CVD questions, calls program DODGEBALL
• Merck voluntarily withdrew Vioxx September 30, 2004
• Provides physicians with written communications for patients
• Holds conference calls

Results:
• Investigation into effects of other COX-2s
• Multiple, individual law suits
• Merck lost first suit

What has changed since J&J Tylenol?
• Regulatory expectations
• Public trust
• Image of healthcare industry
• Litigiousness nature
If we were Merck, what would we do now?

Summary
Reviewing key steps
• Decision to recall
• Corporate philosophy for customer interaction
• Recall submission process
• Notify the public
• Evaluate position
• Plan, prepare, prevent
• Address communications audit

Gil Bashe
Executive Vice President
212.508.9672
gbashe@makovsky.com
MAKOVSKY + COMPANY

Kristie Kuhl
Group Vice President
212.508.9642
kkuhl@makovsky.com

September 29, 2005 CBI Annual Recall Summit