Medical product giant Baxter International Inc. (BAX) has decided to recall all of its Colleague infusion pumps in the U.S. over the next two years. The decision is based on the final order of the U.S. Food and Drug Administration (FDA).
Baxter will either offer the Colleague infusion pump owners a no-cost replacement or offer them a refund. Under the replacement plan, the company is permitting its customers to exchange its Sigma Spectrum next-generation infusion pumps for Colleague infusion pumps without a charge.
Otherwise, the customers will get the pump’s depreciated value (minimum of $1,500 and $3,000 for single-channel and triple-channel pump, respectively) or the purchase price, whichever is lower. Moreover, Baxter will offer services and support to customers who continue using the Colleague pumps during the two-year transition period and will also provide them a transition guide to replace the pumps.
Infusion pumps are widely used to administer therapies, nutrients or fluids. However, these devices have been under the FDA scanner due to safety issues. The FDA has received more than 56,000 complaints of adverse events and reports of roughly 500 deaths related to infusion pumps over the past five years. The agency launched a new initiative in April 2010 to address infusion pump safety, requiring manufacturers to do more tests before selling these devices.
Baxter stopped selling the Colleague pumps in 2005 due to design flaws, battery failures and software defects. Thousands of Colleague pumps, which malfunctioned due to these defects, were seized.
Baxter entered into a consent decree with FDA in June 2006, under which, it has been pursuing remediation of Colleague infusion pumps. However, in May 2010, the FDA ordered Baxter to recall all the Colleague infusion pumps being used in hospitals due to the company’s failure to correct a serious device-related problem.
In its final order dated July 13, 2010, the FDA stated that Baxter has failed to correct the deficiencies in the devices within a reasonable timeline. According to the company, the recall will affect roughly 200,000 Colleague pumps. The company has recorded a pre-tax special charge of $588 million in first-quarter fiscal 2010 due to this product recall.
Baxter is a leading global medical products and services company that develops, manufactures and markets products to treat hemophilia (a bleeding disorder), kidney disease and infectious diseases. The company’s main competitors are Becton, Dickinson and Company (BDX) and Johnson & Johnson (JNJ).
Baxter’s products are primarily life-sustaining, offering a natural hedge against soft economic conditions. However, the company faces significant risks from product recalls which may drag its bottom line.
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