Baxter Healthcare and the FDA came to an agreement regarding certain of Baxter’s infusion pumps. From the FDA’s press release (the press release link is bad, so here is a link to the FDA consent decree letter sent to Baxter):

Under the consent decree, FDA will allow the firm to continue to provide routine service maintenance, or to replace components, parts, or accessories for the Colleague and Syndeo Infusion Pumps that were already in the hands of customers before October 12, 2005. Baxter is also required to submit to FDA an acceptable detailed corrective action plan to bring the Colleague and Syndeo Infusion Pumps currently in use in the United States into compliance with the Federal Food, Drug, and Cosmetic Act (the Act). The agency recently issued a Preliminary Public Health Notification dated April 28, 2006 with recommendations for users, titled “Important Safety Recommendations for Baxter’s COLLEAGUE Infusion Pumps.”

The corrective action plan is due to the FDA for approval within 20 days. The plan will include the upgrades and modifications for pumps currently in use, as well as changes to bring Baxter’s operations into compliance with the FDA’s Current Good Manufacturing Practices (CGMP) and Quality System regulation (QSR).

Baxter claims an installed base of 200,000 pumps in the U.S., and 50,000 in the rest of the world. The scope of regulatory compliance issues and Baxter’s world wide operations (the manufacturing plan in question is in Singapore), will have a major impact on Baxter’s operations.

For certain customer accommodations and to adjust reserves previously established for remediation costs, the company expects to record a second quarter after-tax charge of up to $70 million (or $.11 per diluted share). Excluding this charge, the announcement does not affect the company’s financial outlook for the second quarter or full-year 2006.

Here’s some history of the pump situation, also from the FDA’s press release:

The most recent FDA inspection of Baxter’s Round Lake Facility, conducted on June 20-30, 2005, revealed deficiencies with the CGMP and QS requirements for devices, including the firm’s failure to implement adequate management controls over its quality system operations and corrective and preventive actions (CAPA) procedures. During this inspection, design defects relating to the reliability of both the Colleague and the Syndeo Infusion Pumps were also revealed.

During the course of FDA’s June inspection, Baxter initiated a voluntary world-wide hold on all Syndeo Infusion Pumps due to design defects that can cause the device to stop functioning. Also during the June inspection, Baxter initiated a voluntary world-wide hold on all Colleague Infusion Pumps due to a product design defect relating to a temperature sensitive component of the device’s timing circuit, known as the Y2A crystal, which causes the timing circuit to fail.

Before the June 2005 inspection, FDA conducted two previous inspections of Baxter’s medication delivery systems facility in Round Lake, Illinois, in September 2000 and June 2002, all of which revealed lack of management controls over the firm’s quality system operations and inadequacy of its CAPA and complaint handling systems. These deficiencies undermined Baxter’s ability to assure the quality of the devices manufactured at its Singapore plant. In September 1999, FDA issued a Warning Letter to the firm addressing its lack of CAPA procedures. In August 2001, another Warning Letter was issued to Baxter addressing deficiencies in its CAPA procedures.

The consent decree also resolves the disposition of Colleague and Syndeo Infusion Pumps that were seized by the Department of Justice on behalf of FDA in October 2005. The consent decree was entered today (June 29, 2006) by the U.S. District Court for the Northern District of Illinois.

Recently I’ve noted comments on the Biomed Listserv eliminating Baxter from consideration for future infusion pump purchases because of an apparent lack of interest in patient safety or quality. While a vendor selection process could find reasons to choose other vendor’s pumps over Baxter’s, a blanket dismissal of Baxter for this type of conjecture is unfair. The folks I know at Baxter are as concerned about this situation as anyone – their family members are as likely to be connected to a Colleague or Syndeo pump as anyone.

It’s not uncommon for one major vendor or another to have gotten sloppy and ended up in the FDA’s dog house. Major process and product problems have suspended entire product lines in the past at a number of top companies. The obvious need for oversight is why the FDA exists; I’m sure this is not the last case where the FDA’s diligence brings to light issues that require aggressive action.

UPDATE: Here’s a couple of stories from the Chicago Tribune on recent Baxter/FDA news. The older story includes the following tidbits:

…federal agents seized more than 7,000 devices, mostly pumps, distributed from two of Baxter’s suburban facilities. Defects in the pumps may have led to eight deaths and 16 serious injuries, the company and the FDA have said.

Colleague generated annual sales of about $170 million. Baxter generates about $10 billion in annual sales.

The most recent story provides some analysis on Baxter’s pump problems, which started back in 1999.

“This is a very serious regulatory step that allows FDA significant power to oversee and shape the rebuilding of Baxter’s quality systems in the coming years, as well as tightly control its commercial activities for the affected products,” Ben Andrew, analyst with William Blair & Co. in Chicago, said in a report last week. “While we can argue that this particular consent decree isn’t too bad–limited to just one product area whereas often they relate to entire business units–historically under this process FDA is a tough, deliberate taskmaster.”

Baxter said it intends to take a $70 million charge in the second quarter for remediation connected with the settlement. If Baxter fails to comply with tenets of the decree, the company could face penalties up to $10 million a year, the government said.

To be sure, North Chicago-based Abbott Laboratories in 1999 paid a $100 million settlement as part of a punishing consent decree. The FDA said Abbott ignored federal regulations and failed to comply with standards as far back as 1993.

It was not until late 2003–four years after signing its consent decree–that Abbott won approval to reintroduce dozens of diagnostic tests the federal government forced from the U.S. market in November 1999.

It was also hugely expensive for Abbott. It took the company four years of costly, exhaustive efforts to comply. Analysts estimate the ordeal cost Abbott more than $1 billion in penalties and lost sales.

So far, Baxter is also missing out on more than $150 million in annual pump sales, analyst and company figures show.