Surgical gown recall sets Cardinal back $96M

UPDATE: Jan. 31, 2020: Cardinal Health said Thursday it is initiating two voluntary field actions affecting approximately 2.9 million procedure packs that contained surgical gowns deemed potentially unsterile due to a manufacturing issue. The moves comes a little more than a week after Cardinal voluntary recalled about 9.1 million of the standalone gowns.

As of Thursday, Cardinal estimated a $96 million charge during its fiscal second quarter of 2020 related to inventory write-offs and other remediation costs related to the recall. Cardinal is scheduled to report quarterly earnings before markets open Feb. 6.

In Thursday's update, Cardinal also shed more light on the source of the problem. The company said there were previously red flags as a result of working with Chinese supplier Siyang HolyMed.

"In spring 2018, Cardinal Health learned this supplier outsourced some of its production to a non-registered, non-qualified facility. At the time, Cardinal Health conducted a quality review supported by laboratory testing and concluded there was no impact to its products. Based on the results of the quality review, the company determined a field action was not necessary, and therefore did not coordinate any such action with the FDA," the Thursday statement said.

Of the 2.9 million packs involved, about 375,000 that include other separately packaged components can be corrected by discarding any gowns, while more than 2.5 million contain gowns are not separated from other components and must be returned.

Cardinal said the kits, manufactured between September 2018 and January 2020, were placed on voluntary hold at the time of last week's gown recall. Depending on a customer's specifications, the number of gowns in an individual kit may vary. The affected gowns included in kits are a subset of the 9.1 million counted in last week's recall figure, Cardinal said. The company said it will provide customers with details on handling the affected packs around Feb. 3.​

Cardinal said it is "engaging third-party experts to conduct a comprehensive review of quality assurance processes and business practices and committing to the execution of corrective and preventive actions." The company also tapped John Weiland, former president of C.R. Bard, to chair a special committee overseeing Cardinal management's work on the recall.

Cardinal Health is voluntarily recalling 9.1 million surgical gowns over a contract manufacturing issue that may have compromised their sterility, the company told customers Tuesday. Cardinal discovered that a contract manufacturer made the Class II medical devices at unapproved locations, leading it to quarantine the products and place a hold on distribution.

It's the latest step in Cardinal's response to the issue, which it previously alerted customers to on both Jan. 11 and Jan. 15, prompting a statement from Center for Devices and Radiological Health Director Jeff Shuren last week saying the FDA is tracking impact of potential supply chain disruptions alongside the company.

"We apologize for the hardship caused by the recall, and are doing everything we can to help resolve this issue for our customers and the patients they serve," the company wrote in a statement.

Details of the quality problems and Cardinal's response to them have trickled out in January. Cardinal told customers it learned of problems with environmental conditions at a site that makes gowns last week, leading to a voluntary product hold. At that stage, in a recommendation endorsed by FDA, Cardinal wanted customers to segregate and discontinue use of the affected surgical gowns.

"There are very real consequences that medical device supply chain disruptions can have on patients, and we’re committed to taking steps we can to mitigate any adverse patient impact," Shuren said in FDA's statement last week, adding that the agency was not aware of any patient harm related to the issue at that time.

This week, Cardinal went a step further, issuing an urgent medical device recall notice covering single-sterile and bulk non-sterile Non-Reinforced Surgical Gowns, Fabric-Reinforced Surgical Gowns and RoyalSilk Non-Reinforced Surgical Gowns made between September 2018 and January 2020.

Of the 9.1 million gowns covered by the recall, 7.7 million units have already been distributed. The gowns went to around 2,800 facilities, each of which will need to take action.

Pulling that many products from the market could affect the availability of gowns. Cardinal is aiming to mitigate the risk of disruption by increasing output of similar products, working with competitors Owens & Minor and Medline to get their gowns to customers and providing gowns designed for use in higher-risk procedures.

The mitigating actions are needed in part because Cardinal cannot rely on the contract manufacturer at the root of the recall for support. Cardinal has stopped working with the company, which is no longer registered with FDA. The contract manufacturer is accused of making some gowns at sites that were neither registered with FDA nor qualified by Cardinal.

Some of the surgical gowns subject to the sterility concerns shipped as part of Cardinal's Presource Kits, which feature multiple components needed to perform particular procedures. The kits are outside of the scope of the recall, although Cardinal plans to issue a separate field action focused on them later. For now, Cardinal is advising customers to stop using the affected surgical kits.