Clinic Stories

How to Destroy an Industry

There is a business concept called the cost of non-compliance, which means that not doing things right adds to the final cost. If you imagine how much this might be you likely think that 10 or 20% is added for rework, returns and such. Here is an example of how it can spillover to other projects and cost many times the original value.

In 1987 American Cyanamid, a pharmaceutical company based in Wayne, NJ (bought by American Home Products in 1994) had a poultry medication in field testing for FDA approval. Testing for safety and effectiveness was done at several independent facilities around the country and I was involved with some of the data monitoring. The drug had received basic approval and was being tested for use in combination with other medications. The person in charge of the field testing, I'll call him Shark, loved to be out in the field but was lax about writing up the data. At some point it became clear that a particular approval would be a long shot.

Late one morning Shark received a call from a contract lab in California. The research director said the FDA was conducting a raid and was collecting all data on trials that he had run there. Shark was already facing a dozen FDA agents in Princeton, NJ as were all other locations involved with the drug, a true cross country sting operation. A research lab had reported that Shark had come in at the end of a trial, said the results could not be right and proceeded to change key numbers.

The investigation took about two years. Shark pleaded guilty and was given a fine and probation. American Cyanamid paid a fine and agreed to reimburse the FDA for the cost of the investigation costing millions of dollars. I was told that the FDA went through 80 copy machines in Princeton, NJ alone. All data that was generated up to that point was voided and the drug was pulled from the market. It was never reintroduced. As someone involved with the testing I was warned that my phone line was likely tapped. I was never questioned by the FDA but people told me they were asked about statements I had made on the phone. The FDA increased the requirements for drug approvals in the poultry industry and all poultry medications in the pipe line of all companies had to start over. Because the cost of approvals increased many fold very few drugs were approved going forward. By the year 2000, all major pharmaceutical companies were out of the poultry business. The reduction of medications to prevent and treat diseases no doubt increased the cost of chicken and was an animal welfare issue.

American Cyanamid bought the US rights for this drug from Roche for $5 million. The total sales in the US were around $500,000 before it was taken off of the market. The total loss to the industry can never be accurately calculated but ran into many tens of millions of dollars, all due to non-compliance from one person's dishonesty.

For about two years after his conviction, Shark would call to ask if I knew anyone who was hiring. I do not know what became of him, but no one in the poultry industry hired him.

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