Special Report: U.S. rushed contracts to COVID-19 suppliers with troubled plants – Reuters

WASHINGTON, Dec 2 (Reuters) – As the Trump administration debated whether to declare COVID-19 a national emergency early last year, a little-known U.S. health office issued a public plea to Big Pharma.

On March 6, 2020, the Biomedical Advanced Research and Development Authority called on pharmaceutical and medical device companies to develop a vast array of essential COVID supplies.

Known as BARDA, a program within the Department of Health and Human Services, the authority sought vaccines, testing devices, treatments and other products. BARDA, created in 2006 to help companies develop medical supplies to address public health threats, made clear in its call for proposals it was seeking products to be made at U.S. facilities with a track record of meeting Food and Drug Administration manufacturing standards.

Yet a majority of more than 50 companies so far selected to develop and manufacture supplies in the United States did not meet those standards, according to a Reuters examination of FDA records and dozens of federal contracts issued by HHS under the $60 billion COVID program.

In all, less than 20% of the companies awarded fast-track contracts examined by Reuters were experienced manufacturers with a clean FDA record for their U.S. plants in the two years prior. Four of every five either had no U.S. manufacturing experience, poor domestic inspection results or serious recalls before their COVID contract awards, Reuters found.

“These are red flags,” said Peter Lurie, a former FDA associate commissioner who is now president of the Center for Science in the Public Interest. “The government ought to be able to find companies in this country that aren’t tainted by previous poor performance.”

HHS, which oversees both the FDA and BARDA, said it takes “our responsibility as stewards of tax dollars very seriously,” and that it has an “outstanding” record of conducting contract due diligence.

Texas-based Luminex, a unit of Italy’s DiaSorin SpA (DIAS.MI), is one example of a company recruited to the COVID fight while under FDA scrutiny. In February 2020, the FDA found serious manufacturing problems at its plants in Austin, Texas, and Northbrook, Illinois, FDA records show.

A month later, the company was awarded the first of five COVID-19 contracts worth a total of nearly $19 million for new tests that would be manufactured at the Austin facility, BARDA records show. Luminex said the government contracts helped it address a vital pandemic need and that the problems didn’t impact its COVID tests.

Other companies recently had product recalls that were designated as “Class 1” by the FDA, signaling a serious risk to health or even death.

One was Smiths Medical, a unit of Britain’s Smiths Group Plc (SMIN.L), awarded a $20 million contract from BARDA in July 2020 to expand its U.S. plant in New Hampshire to produce syringes. In the years before, Smiths Medical had issued serious recalls involving 20 different devices, including two devices that received Class 1 recalls.

Smiths Medical said it takes immediate action when an issue is identified. “While accelerating our operations to produce this critical equipment, safety and quality have remained our top priority,” the company said.

The FDA found “objectionable conditions” at three U.S. plants operated by contract drugmaker Catalent Inc (CTLT.N) in 2018 and 2019 but allowed the company to address them without the agency taking action. They included an Indiana vaccine facility that was cited both years. The same plant was later contracted to produce COVID-19 shots for Johnson & Johnson and Moderna Inc.

Catalent said it “takes these observations very seriously and all observations are addressed.” The company said it is on track to deliver over one billion COVID vaccine doses globally by year’s end.

The manufacturing problems have persisted since the COVID contract awards. At least 21 of the companies reviewed by Reuters have initiated serious product recalls of their COVID supplies or received poor inspection results from the FDA at the plants where they were expected to expand manufacturing to fulfill the government contract. While there have not been reports of patient injury or death, the manufacturing issues have delayed vaccines and treatments and affected the accuracy of diagnostic tests.

As Reuters reported in May, Eli Lilly and Co (LLY.N) delayed manufacturing of its COVID antibody treatment amid problems at the plant producing it, after HHS agreed to pay it up to $1.2 billion. Separately, Emergent BioSolutions Inc’s (EBS.N) $628 million government contract was canceled in November after the company struggled to manufacture COVID vaccines.

The FDA said in a statement to Reuters that it relies on a “variety of robust oversight tools” to ensure product safety and quality.

“Protecting patients is the highest priority of the FDA and the agency is confident in the safety and quality of the medical products we regulate, including the authorized and approved COVID-19-related products,” the agency said.

STEEP DROP IN INSPECTIONS

The COVID contracting spree, which began under former President Donald Trump and has continued under the Biden White House, came as FDA domestic inspections fell precipitously. The Biden administration has outlined its ambitions for investing billions more dollars into expanding the U.S. manufacturing base for COVID vaccine production.

What has not been spelled out is how pandemic-era manufacturing quality is being evaluated. Leading into the pandemic, FDA inspections of U.S. plants producing prescription medicines and medical devices had dropped almost 25% between 2011 and 2019, FDA inspection data show; the numbers don’t include pending inspection reports or inspections prior to a product approval. Domestic inspections were further curtailed by COVID restrictions during the pandemic, dropping almost 64% in 2020 and almost 80% in 2021 from the previous peak in 2011, records show.

“As a country we need people to trust the quality of our vaccines, medical devices and medicines,” said Madris Kinard, a former FDA public health analyst. “But the state of affairs when it comes to oversight of any of these companies right now is really worrisome.”

HHS declined to answer questions about specific COVID suppliers’ compliance or performance. The department wouldn’t make its experts available for interviews. BARDA, an office of HHS, said it couldn’t comment without agency approval.

The FDA said it “cannot comment” on contract decisions made by BARDA, as the agency said it generally did not participate in discussions about such contracts in order “to avoid any appearance that procurement or investment considerations may influence the FDA’s regulatory decision-making.”

The FDA said the drop in domestic inspections can be explained in part by a 2012 statute change that allowed it to prioritize facilities based on risk. As a result, the agency was no longer required to inspect U.S. facilities on a specific timetable and could focus on those with more regulatory problems, including plants abroad. The FDA said the numbers don’t reflect other ways it monitors companies for manufacturing problems and that it has begun to increase domestic inspections.

“We try to prioritize surveillance inspections by risk,” FDA Acting Commissioner Janet Woodcock told Reuters. “We don’t inspect a plant every time a new product is added. We may have recent inspection data that showed everything was ok, we may have data from another regulatory authority, we may have done a remote assessment.”

But the federal agencies sometimes operate in a vacuum. In response to Reuters’ questions, HHS said BARDA considers publicly available information about a manufacturer’s track record under federal procurement regulations, but that nonpublic interactions between a company and the FDA are considered trade secrets.

“Companies’ historic interactions with the FDA are considered commercial confidential and since these activities were conducted prior to U.S. government funding, we can encourage but cannot require the companies to provide those previous interactions,” HHS said. The agency said it requires companies to share such information after a contract award as it relates to the actual product.

Using the Freedom of Information Act, Reuters asked HHS for any records related to BARDA’s interactions with the FDA or performance assessments before or after contract awards. HHS said no records were found.

“If they don’t have records,” said former FDA official Kinard, “then how can they claim they did any performance assessments? Did they even talk to the FDA?”

TINY OFFICE, TALL TASK

At its inception, BARDA was set up not as an official agency, but as a program overseen by HHS’s Assistant Secretary for Preparedness and Response (ASPR).

The ASPR office, which wields a nearly $3 billion budget, and BARDA work together to promote the research and development of medical supplies. They aim to “reduce the time and cost,” in ASPR’s words, of developing products by funding and helping U.S. biomedical companies navigate what the office called the Valley of Death, or the late stage of development where products have “languished or failed” before regulatory approval.

When the pandemic hit, BARDA’s plea for assistance from manufacturers was met with applications by hundreds of companies, many of which had little experience interacting with the FDA, said two government officials involved in the process who spoke on condition of anonymity.

HHS experts rushed to familiarize themselves with the newer firms, and cold-called companies they had already worked with during previous outbreaks to supplement the applicant pool, the two officials said. BARDA was tasked with choosing manufacturers who could produce COVID supplies inside the United States, whenever possible. HHS was so swamped with proposals it also asked the Pentagon to help.

Very quickly, the contracting process became controversial.

BARDA experts were reviewing company proposals for COVID products submitted through its own website. A second channel, set up by Trump’s ASPR appointee Robert Kadlec and run by his office, was also researching potential suppliers.

In April 2020, Kadlec moved to reassign BARDA’s director, Rick Bright, a veteran government health official. Bright fought back with a whistleblower complaint that accused Kadlec of ignoring FDA safety concerns and ousting him to cover up the steering of contracts to political allies. Bright, who has since settled with the government, declined to comment.

Kadlec denied targeting Bright. But he said the United States was overwhelmed by the need for supplies during an emergency and that HHS agencies should have better prepared the companies well before the pandemic.

“What was intended was that the government would help create these manufacturing capabilities that would be robust and regularly tested,” Kadlec told Reuters. “They were not robust. They were not invested in and they were not regularly tested. It was a shit show.”

Kadlec acknowledged the Trump White House meddled in some COVID-19 contract negotiations. “I would suggest to you that any president facing re-election in his last year of his first term who also has a major public health crisis would politicize the process,” he said. “Obviously the Trump persona was a hell of a lot different than other presidents, and that magnified the problem.”

For instance, he said White House officials directly negotiated a $647 million ventilator contract with Dutch firm Philips NV (PHG.AS) that a House subcommittee concluded overcharged the federal government by hundreds of millions of dollars. The negotiations for this new COVID-related contract included White House adviser and Trump son-in-law Jared Kushner and White House trade adviser Peter Navarro, the inquiry found.

The House report also concluded that HHS contract officers were excluded from the talks until the last moment. “By then, the generous terms of the contract had already been agreed to by the White House,” the report said.

In an interview, Navarro confirmed he had a role in the ventilator discussions. He said he regularly involved himself in COVID supply discussions after meeting resistance from the FDA when he insisted all the supplies should be manufactured in the United States. But he disavowed responsibility for the cost. Instead, he blamed Philips, which denied overcharging the government.

A Kushner representative declined to comment and a Trump spokesperson did not respond to questions. In November, Trump told Navarro to defy a subpoena issued by a separate House committee investigating the COVID-19 response.

Lost in the public scandal were the manufacturing problems the FDA said it found at a Philips ventilator plant in California. Three months before the Trump administration embarked on negotiations, the FDA designated the violations as serious enough to order the company to take action. The agency also cited Philips for failing to give notice that another ventilator model manufactured at the plant could “cause or contribute to a death or serious injury,” according to the FDA’s database.

HHS announced it accepted delivery of more than 12,000 of the Philips ventilators before canceling the remainder of the contract in September 2020, shortly after the House findings.

This past summer, Philips issued a Class 1 recall of 15 million sleep devices and ventilators amid concern a polyester-based polyurethane foam could degrade “and be ingested or inhaled by the user.” The company also recalled 22,300 ventilators in the U.S. government’s stockpile due to problems with pressure levels when the devices were used on infants and children; Philips said the recalled products, which included all 12,000 ventilators sold to the government for COVID, are being corrected with a software update.

“When issues arise, we work quickly to take action and focus on the needs of our patients and the clinicians that serve them,” said Philips spokesman Steve Klink.

INSPECTIONS AND CONTRACTS

Several companies were wrangling with the FDA over manufacturing problems at the very time they were negotiating contracts with BARDA.

The FDA, for instance, finished inspecting Luminex’s Austin and Northbrook plants on Valentine’s Day 2020 and found serious manufacturing problems, according to a warning letter the agency issued to the company four months later. The FDA designated the problems as “Official Action Indicated,” a recommendation for regulatory action.

The FDA also said in its warning letter that a Luminex testing device, known as Verigene, failed to detect a patient’s superbug infection. The patient did not receive appropriate treatment and died two days later – possibly because of the test failure – the warning letter states. The FDA said Luminex did not properly inform the agency that it had removed the device from the market after the incident, and that such violations could impact a company’s ability to receive federal dollars.

Luminex told Reuters it had properly notified the FDA about what happened to the patient and complied with additional FDA directives over the matter.

The onset of the pandemic brought new opportunities for Luminex. In March 2020, Luminex received FDA emergency authorization for use of its new COVID-19 test kits. It vowed as a result to dramatically expand manufacturing.

In 2020 and 2021, Luminex issued Class 2 recalls for its Verigene diagnostics system over problems including possible inaccurate results. This February, Luminex secured an $11.3 million contract from the Biden administration, its largest to date.

In a statement, Luminex said BARDA’s support helped it boost manufacturing capacity by 300% during the pandemic and quickly produce “high-quality tests to meet the expanding need.”

Other test makers who received contracts had not operated a U.S. plant previously.

Diagnostics company Ellume secured a $30 million contract in October 2020 under the Trump administration to develop at-home COVID tests that were made in Australia. The Biden administration in February awarded Ellume an additional $232 million, which the company said will be used to build its first U.S. plant for future COVID manufacturing.

In October 2021, the FDA issued a safety warning on certain lots of Ellume’s COVID-19 home test because of the risk of false positive results. The problems involved a “manufacturing issue,” the FDA said. In November, the agency designated the company’s voluntary recall as a Class 1, with 2 million affected tests.

“The FDA is not aware of any confirmed serious injuries or deaths related to the false positive results with the affected Ellume COVID-19 Home Tests at this time,” the FDA said in its safety warning. The company said none of its tests now on store shelves are affected by the recall. Its U.S. plant is expected to eventually produce 15 million COVID tests per month.

Ellume told Reuters it “remains steadfast in its commitment to deliver home tests to communities across the United States.”

Other companies also experienced problems after winning their contracts.

Smiths Medical issued two separate major recalls for products, both posing a risk of death, after being awarded its COVID-19 contract to manufacture syringes. One involved syringes that could malfunction and deliver too little or too much insulin to diabetes patients. The other involved a device that could leach aluminum into the blood of patients being treated for hypothermia.

Smiths said the recalled syringes used for insulin were manufactured in the company’s New Hampshire plant but not associated with COVID-19 vaccines. “The COVID-19 pandemic created unprecedented staffing and supply chain constraints,” the company said. “The incentive that BARDA provided allowed for expansion of our domestic production.”

One company decided to cut its losses early when it became clear it couldn’t deliver. John L. Warden Jr., CEO of the start-up Hememics Biotechnologies, said his company could not develop its novel COVID diagnostic device in time to meet the deadline set by Trump officials.

“BARDA was doing its best but it was getting daily calls from the White House. They were under enormous pressure,” Warden said. “We were all told that our deadline was November 2020, and the fact that it was around the election was not a coincidence.”

Hememics had been offered $600,000 by BARDA. In the end, it took $25,000 of funding for development and turned down the rest so it could have more time before it applies for FDA emergency authorization.

“We were frankly too inexperienced at that point,” Warden said. “We just needed more time.”

Reporting by Marisa Taylor in Washington; Additional reporting by Steve Holland; Editing by Michele Gershberg and Ronnie Greene

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