There is speculation that the problems at GlaxoSmithKline's manufacturing facility in Puerto Rico may prove to be more costly for the company than originally thought.
Earlier this month, the agency and the US Department of Justice seized batches of GSK's diabetes treatment Avandamet (rosiglitazone plus metformin), and its antidepressant, Paxil CR (paroxetine), saying they failed to meet quality standards. Shortages of both products are expected until the matter is resolved, which could eat into GSK's 2005 revenues.
Rumours have surfaced that the US Food and Drug Administration (FDA) may ask GSK to sign a so-called consent decree over problems at its Cidra, Puerto Rico manufacturing facility.
No discussions have yet taken place between GSK and the FDA over a consent decree that could lead to a halt of all manufacturing at the facility and a hefty fine. Concerns about the impact of the FDA's probe has already contributed to a 10 per cent decline in GSK's share price since the seizure.
Michael Leacock, an industry analyst with Nomura, said in a research note that GSK could be fined as much as $1.4m if it had to sign a consent decree, including disgorgement of profits made by GSK from selling the two drugs made at the plant.
In May 2002, Schering-Plough agreed to pay a record $500 million fine after signing a decree to improve manufacturing standards at its facilities in Puerto Rico and New Jersey used for the production of its antihistamine Claritin (loratadine).
The Cidra plant is the sole source of supply of Paxil CR and Avandamet for the US market, and has already been subject to FDA censure in 2002, November 2003 and December last year.