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How Much Does a Medication Recall Really Cost?

It’s the one phrase that can create panic in the hearts and minds of patients, medical staff and business professionals. “A medication recall has been announced”. In recent weeks and months, there have been several medication recalls which have sparked confusion, dread and fear in people who depend on the affected medications. Because of the types of medication involved, this latest product recall is predicted to be a very large and serious undertaking that will have some far reaching complications for the world’s health sector.

What is a Product Recall?

A product recall is the process during which goods that are deemed defective or faulty, are removed from the marketplace. The recall is usually the end result of some type of quality assurance process that deems a particular good to be risky or dangerous to consumers. Product recalls are not cheap and companies who issue them are doing so at a financial cost and at a reputation cost.

Why Do Product Recalls Occur?

Product recalls are very popular in cases where there is some type of non-compliance with a standard or regulation that governs the product in question. We often hear of product recalls for other items such as food and vehicles and they seem to occur quite frequently. These recalls can have lasting effects on the company’s finances and consumer confidence.

It must be noted that because more companies are outsourcing aspects of their production and manufacturing processes to other countries. Because of a now global supply chain and global business relationships, there is an added margin for error due to geographical factors; communication challenges; and differences in quality standards. Companies often have to choose between keeping costs low and the risk of creating sub-standard products.

Facts About The Latest Medication Recall

The latest medication recall targets popular blood pressure and kidney drugs that are used by millions around the world, and seems to be growing bigger with each day that passes. These medicines, which fall under the angiotensin II receptor blocker (ARB) class, are being recalled to ensure the safety of customers. To date, recalls have been issued for Valsartan, Losartan, Irbesartan, all variations of these drugs and other types of medication that contain amounts of these drugs.

In June 2018, the FDA found that there were “unexpected impurities” in the ARB class. This latest recall was initiated because of several concerning reports that the drugs contained trace amounts of the chemical N-nitrosodiethylamine (NDEA) and the chemical N-Nitrosodimethylamine (NDMA). Both of these chemicals have been classified as “probably human carcinogens” by the US Food and Drug Administration (FDA).:

Full List of Recalled Drugs

The full list of recalled drugs is available on the FDA website. However, you are urged to consult with your doctor before you stop taking your medication. This is because not all lots of valsartan, irbesartan and losartan contain the impurities and not all of them have been recalled. Also, there is the fear that the impact of suddenly stopping your medication may have greater complications for your health.

For more information on the impurities found in these ARB class products please visit the FDA website.

How Much Does a Medication Recall Really Cost?

A medication recall is very costly on the health industry. It can impact the customers and medical professionals. Road Scholar notes that product recalls can “wreak havoc on a company” because of the associated direct and indirect costs. Direct costs include product prices and advertising and transportation costs. Indirect costs include law suits, sales lost, fines and reputation costs.

When Merck & Co. Inc., a drug manufacturer out of the United States recalled its arthritis medication Vioxx in the early 2000s, it ending up costing the company $4.85 billion. This was due in part to settled claims and lawsuits from affected patients.

Another example is when Johnson and Johnson recalled over thirty million bottles of Tylenol in 1982, because they were laced with potassium cyanide. This mishap resulted in 7 deaths and cost the company over $100 million.

In 1997, Wyeth-Ayerst Laboratories recalled a popular weight loss drug, Fenfluramine/ Phentermine after it was reported by the FDA, that it could cause heart valve damage. This was one of the costliest medication recalls in history, in which victims were awarded close to $14 billion dollars.

Although medical drug manufacturers may be able to bounce back from a drug recall, the process can be a billion dollar catastrophe. The loss of consumer lives and the resulting lack of confidence in the company and its products, are perhaps the worst impacts that companies will face. One life lost is one life too many and no amount of compensation will bring back a loved one.

Calculating the Cost of a Medication Recall

Meirxrs, a human resources and research organisation, outlines how recall costs can be calculated. This tool can be useful to  companies who want to determine how much should be allocated toward their product recall prevention budget.

According to Meirxrs, the major costs of a product recall are:

  • Cost of Manufactured Goods
  • Product Disposal Costs
  • Change in Insurance Premiums
  • Business Interruption
  • Customer Reimbursement
  • Customer Damages
  • Retailer Reimbursements
  • Transportation
  • External Professional Fees
  • Sanitizing Production Facilities
  • Warehousing Costs
  • Internal Time and Expense
  • Loss of Brand and/or Reputation
  • Government Fines and Penalties

Steps Taken For Drug Recalls

Drug recalls have been initiated for a wide range of reasons. Reasons include chemical contamination; defective containers; failed stability testing; adverse drug reactions; mislabelling or poor packaging; and poor manufacturing standards.

The US National Library of Medicine National Institutes of Health notes that the FDA has outlined the following steps for medical companies who may be faced with a product recall:

1. Determining the incumbent of recall

2. Informing the FDA

3. Evaluating the health hazards

4. Developing and implementing recall strategy

5. Recall communication

6. Narration to FDA

7. Terminating a recall

The frequency of drug recalls has put the spotlight on the supply chains that keep the industry functioning. Because these supply chains span several continents, it means that there has to be greater focus on global regulation. Companies must also ensure that their manufacturing partners are meeting quality regulations and engaging in practices that meet imposed standards.


US National Library of Medicine National Institutes of Health: Drug Recall: An Incubus for Pharmaceutical Companies and Most Serious Drug Recall of History

Road Scholar Transport: How Much Do Product Recalls Really Cost? 

Barbados Government Information Service: Health Ministry’s Statement On Drug Recall 

USA Today: More Blood Pressure Medication Recalled Over Carcinogen Concerns — This Time, Losartan

Health Line: Another Blood Pressure Medication Recalled — Here’s What You Need to Know

24/7 Wall Street: The Ten Worst Drug Recalls In The History Of The FDA

Healthcare Colleges: Medicine Gone Wrong: A Timeline of Major Drug Recalls