CRO Pays $22.5M to Dr. Reddy’s to Settle Lawsuit

26-Mar-2013 - Last updated on 26-Mar-2013 at 08:33 GMT

Related tags Food and drug administration

Canada-based CRO Nordion paid $22.5 million last week to settle a lawsuit by Dr. Reddy’s Laboratories claiming Nordion breached its lab services agreement.

Formerly known as MDS Inc., Nordion was hit with the lawsuit in April 2009 after its Montreal-based bioanalyital facilities were cited for good laboratory practice violations by the US FDA (Food and Drug Administration).

“Although the bioanalytical operations were part of MDS Pharma Services, Nordion retained this potential liability following the sale of the early stage business,” a Nordion spokeswoman told us.

The agency invalidated MDS’ bioanalytical reports from 2000 through 2004 after issuing multiple Form 483s and warning letters following four inspections dating back to 2003. In April 2004, the FDA cited MDS in a Form 483 for its failure to evaluate contaminated plasma samples for a root cause in bioequivalence studies. The agency cited a number of deficiencies in the lab’s analyses of the degree of contamination, without assessing the extent of contamination.

In December 2004, the FDA came down on MDS with an even harsher critique of its practices, noting that the company “failed to demonstrate that the analytical methods used in several in vivo bioequivalence studies…could accurately measure the actual concentration of the active drug ingredient, or its metabolite.” The company also further failed to investigate the cause of anomalous results or to reassay affected samples, the FDA said.

Significant deficiencies in the company’s failure “to demonstrate the accuracy of your analytical methods in more than thirty studies for six different drugs confirm that there are widespread problems at your facilities in Saint Laurent and Blainville,” the FDA concluded in a 2006 warning letter.

The FDA later said it would not accept without further substantiation any of MDS’s lab reports. Dr. Reddy’s filed the lawsuit in April 2009, claiming a breach of contract in its lab services agreement. The company also said repeat study and mitigation issues cost it $10m and resulted in $70m in lost profits.

Nordion, however, “maintains reserves in respect of repeat study costs, as well as errors and omissions insurance,” a spokeswoman told us. The company “established a provision, currently $8.3 million, (Note 8 of Q1 2013 interim financial statements)” to address FDA issues related to its discontinued bioanalytical operations in its Montreal facilities, the spokeswoman added.

“We are pleased that we have resolved this claim and intend to continue to work towards improving operational performance and enhancing shareholder value,” she said.

The settlement is expected to result in a loss of $1.4m for Nordion because most of the settlement is covered by insurance, the company said in a statement. “Nordion intends to report these items in its quarterly reporting for its second fiscal quarter of 2013,” the company said.