Drug Maker's Dubious Distinction

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Drug maker Schering-Plough says it will pay the federal government a record fine of at least $500 million because of quality-control violations at its New Jersey and Puerto Rico plants.

The Food and Drug Administration said it was the biggest fine in the agency's history. It said FDA inspectors had found significant, repeated and widespread violations at four plants during inspections dating to 1998.

The FDA gave few details about the nature of the violations. But Schering-Plough - the maker of the blockbuster allergy medication Claritin - said all of its products on the market are safe and effective.

The four plants covered by the consent decree - in Kenilworth and Union, N.J., and in Manati and Las Piedras, Puerto Rico - will continue making prescription drugs, including Claritin and the allergy medicine Clarinex, asthma inhalers, skin products and the hepatitis drug Rebetol.

Under the agreement the company, the plants will operate under tighter FDA scrutiny, with extra reviews and reports required, through the end of 2005 - an unusually long period.

Schering also agreed to have outside experts ensure that manufacturing procedures at the plants meet FDA standards.

Also, the FDA said that Schering-Plough has agreed to stop manufacturing 73 products.

Analysts said the consent decree removes a cloud that has been hanging over the company for at least a year and a half. Wall Street responded positively, pushing Schering stock up just over 5 percent.

In a statement, the FDA said the fine and consent decree follow 13 inspections at the four plants since 1998, during which FDA inspectors found "significant violations" of manufacturing standards "related to facilities, manufacturing, quality assurance, equipment, laboratories and packaging and labeling."

"The defendants have had a history of failing to comply with (manufacturing standards) at these plants, which produce about 90 percent of the firm's drug products," the FDA said. "The decree affects about 125 different prescription and over-the-counter drugs produced at the Puerto Rico and New Jersey facilities."

The consent decree is subject to approval by a federal judge.

"The FDA wants to make absolutely sure that (Schering-Plough) toes the line and gave them some high hurdles to meet," said Kenneth Nover, a pharmaceutical analyst at A.G. Edwards. "I believe they're committed to that and will make all the deadlines in an orderly fashion."

Meanwhile, Schering-Plough disclosed that the FDA's criminal investigation office in Puerto Rico is investigating the company. Schering-Plough spokesman Bob Consalvo said the company does not know the focus of the investigation or any details.

In 1999, Abbott Laboratories, the nation's largest maker of diagnostic tests, agreed to pay a $100 million fine and stop selling more than 100 products until it corrected repeated quality violations dating to 1993.

Schering-Plough's manufacturing plant deficiencies led the FDA to delay for nearly a year the approval of Clarinex, the successor drug to Claritin, battering the company's stock.