How much does a warning letter actually cost?
It’s an important question, but an almost impossible one to answer confidently. Along with the direct costs of remediation, there are a variety of intangible expenses that simply can’t be quantified in full.
Add to this the fact that companies incur different expenses depending on the particular problems they’re facing and the issue of measuring the full impact of a warning letter only becomes more abstract.
While there is no hard-and-fast guide to measuring the costs of a warning letter, it is possible to shed some light on the hidden costs that typically follow one. To help you prepare financially as best you can and underscore the importance of maintaining quality standards, we’ve laid out five of the most expensive indirect costs of a warning letter.
Let’s start with the costliest first:
1. A damaged public reputation
When a company fails to comply with the Code of Federal Regulations (CFRs) or Good Manufacturing Process Requirements (GMP), the FDA makes the news public.
In today’s insatiable media environment, such news can find its way to traditional news outlets and spread virally through social media. Typically, the more consumers are affected by the problem, the worse you can expect the public backlash to be.
Depending on the situation, the effects of a warning letter or other significant enforcement action can spark an immediate PR nightmare as well as long-term effects as your reputation sours in the minds of consumers, costing significant amounts in lost business.
2. Competitor opportunity
Competitors are often quick to take advantage when bad news happens. To them, your misfortune is an opportunity to grab a bigger share of the market by luring your customers to switch to them.
Expect big marketing pushes from other companies in your space, offering deals to customers looking for an alternative. This can cut particularly deep into lost revenue as trust between you and lifetime customers erodes and new customers don’t even consider your products as they shop around.
3. Severed contracts
In addition to losing customer confidence, you should also expect to lose some of the larger contracts you hold with private companies and/or government entities.
How much other organizations distance themselves from you and your products typically depends on the severity of the warning letter, how it’s spun by the media and how it’s received by the public.
4. Angry stockholders
It’s not hard to imagine why stockholders take warning letters and other FDA enforcement actions extremely seriously: their money is at stake.
When stockholders start selling and stop buying your stock, your company can find itself in a hole that can be difficult to emerge from.
5. Distractions from growth
Warning letters can be a nightmare for your company internally as well as externally.
In addition to a possible brain drain that could result from talented personnel jumping ship, those that do stay have to focus their attention on fixing what went wrong and how to avoid further problems rather than developing great products and growing the business.
How to minimize the costs of an FDA warning letter
For companies that have received a warning letter, it’s almost always in their best interest to seek the advice from an experienced compliance consulting firm.
Expert consultants typically have direct experience working for or with the FDA and have intimate knowledge of the Agency’s expectations when it comes to compliance remediation.
[Read also:] 9 Ways an FDA Compliance Consultant Can Help Your Firm
Compliance consultants can analyze your processes and systems to identify root causes and craft a corrective and preventative action plan to remedy those issues according to GMP. In addition to solving problems, FDA consultants can also draft responses to the FDA, ensuring all correspondence satisfies exactly what regulators are looking for.
Hiring a firm to help your company rebound from enforcement action ensures nothing is missed during remediation and plans are in accordance with Agency expectations each step of the way.
Have you received a warning letter from the FDA or believe you may in the future? We have a staff of experienced FDA consultants who can help you right now. Click here to contact us or grab our free whitepaper: The Benefits for Pharma Companies of Working with an FDA Compliance Consulting Firm.