Ethex reaches the end of the road

KV Pharmaceuticals has announced that it is ceasing the operations of its generics subsidiary, Ethex. The move came as a result of a settlement agreement with the US Department of Justice and the US Attorney for the Eastern District of Missouri, which saw Ethex plead guilty to two felony charges, earning a fine of nearly US$26 million. However, KV noted that Ethex was a distribution operation, whilst KV owns all manufacturing and related intellectual property, meaning that KV will be able to continue to operate in the generics sphere in time.

The legal moves should herald the end of a very difficult period for KV, which has threatened to end the firm's existence. In May 2008, KV received complaints from a pharmacy in California and a distributor in Canada of oversized morphine sulphate products. In response, KV recalled specific lots in June 2008; that month Health Canada also issued a warning to consumers not to use the ratiopharm product, ratio-morphine, which was supplied by KV. KV's production began to unravel; in December 2008, the firm voluntarily suspended all shipments of FDA-approved drug products in tablet form, in order to allow the firm to review its manufacturing and quality systems. As part of this, Ethex recalled a single lot of hydromorphone tablets; as with the May 2008 complaint, the issue was one of oversized tablets. The FDA announced an inspection the same month.

This was followed by an announcement in January 2009 that the firm had voluntarily suspended the manufacturing and shipping of all of its products, with most products being recalled. The recall was initiated because the products may not have been manufactured under cGMP conditions. Adding to the firm's problems, in February 2009 it announced the loss of 700 jobs, as KV's lack of income began to bite. However, the situation began to stabilise in March 2009, when the firm announced it had entered into a consent decree with the FDA, giving KV an avenue to restart production once the conditions of the consent decree had been met.

The charges Ethex faced revealed more to the situation. When the May 2008 complaints arose, Ethex was required to submit Field Alerts to the FDA, which are required whenever a manufacturer receives information concerning a significant chemical change in a distributed product. KV did indeed issue a Field Alert for the morphine product, but the Department of Justice alleged that in the internal investigation sparked by this, the firm discovered incidences of other oversized drugs, including dextroamphetamine sulphate and propafenone. The DoJ alleged that these did not lead to Field Alerts being raised, a charge that Ethex has accepted.

In total, Ethex has been fined US$25.8 million in response to its guilty plea, and KV has announced that Ethex will cease operations. The firm is clearly hoping that ending Ethex will put a line under the issues it has faced, and give the firm a clean break to rebuild its operations and reputation. The manufacturing issues that ultimately led to the felony charges are still in the process of being resolved; but the FDA's consent decree should see the firm emerge from under this cloud in time. The news that Ethex wilfully hid the extent of the problems from the FDA, and thus from the public, was a more difficult stain to remove, and so terminating Ethex was perhaps KV's only real option to restore public confidence in its products once production restarts. The firm has sailed perilously close to disaster, but the settlement now announced should hopefully see it move it towards calmer waters.

Ian Platts – Editor, World Generic Markets