Moody's revises PharMEDium's rating outlook to negative after FDA warning letter; affirms B3 CFR

Global Credit Research - 31 Jul 2014                

 

Approximately $635 million rated debt affected

New York, July 31, 2014 -- Moody's Investors Service changed PharMEDium Healthcare Corporation's ("PharMEDium") rating outlook to negative from stable, while affirming its ratings including the B3 Corporate Family Rating and B3-PD Probability of Default Rating. Moody's also affirmed the B1 rating on the first lien senior secured facilities and Caa2 rating on the second lien term loan.

The change of outlook to negative follows the company's disclosure of receipt of a warning letter from the Food and Drug Administration ("FDA") in late July based on observation made during FDA inspection of PharMEDium's facilities in early 2013. The letter cited that PharMEDium violated certain quality requirements under the applicable Good Manufacturing Practices ("cGMPs") and demanded corrective actions within fifteen days upon receipt of the letter. Moody's believes the issuance of a warning letter indicates an escalation of regulatory and compliance risk facing the company and the entire drug compounding industry. The negative outlook contemplates the increased uncertainty on the company's operation and liquidity from the warning letter, if not resolved appropriately and timely, could lead to potential product recalls, or other enforcement actions or customer losses.

The affirmation of the B3 CFR, however, reflects Moody's expectation that the company will proactively manage the risks in order to resolve the issue and alleviate the FDA's concern in the near term. In addition, Moody's anticipates management will use its best effort to avoid service disruptions to customers while working through this issue. Barring potential disruption from the FDA letter, Moody's also expects the company to continue to grow its revenue and earnings, remain on-track with its deleveraging plan and maintain a good liquidity.

Ratings affirmed as follows:

Corporate Family Rating at B3

Probability of Default Rating at B3-PD

First lien senior secured credit facilities at B1, LGD3

Second lien senior secured term loan at Caa2, LGD5

RATING RATIONALE

The B3 CFR incorporates the business risk arising from PharMEDium's singular focus on the sterile compounding outsourcing service industry and heightened regulatory risk in light of increasing regulatory oversight of the industry. These upcoming changes, as contemplated in the Drug Quality and Security Act (DQSA) and recently proposed interim guidance on applicable Good Manufacturing Practices ("cGMP") for drug compounding industry (subject to final approval) by the FDA, could materially impact the company's operations and financial results. The rating also incorporates the company's small size, fragmented industry characteristics and aggressive financial leverage deployed in the capital structure as a result of the LBO transaction. Moody's expects debt/EBITDA to remain materially above 5.5x in the next 12-18 months.
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Question of the Day August 1, 2014 Ever since the indictment regarding compounded pain creams in California, the compounding industry has appearedr to ramp up training, advertising and promoting compounded pain creams, gels, etc. Is this going to turn out to be just the move the FDA and law enforcement was needing and wanting the industry to make? Doesn't it appear the industry thought the end of these type of compounded medications might be near or in danger so they have been pushing hard to keep the billion dollar industry producing as much money as possible?

Any Comments on this compounding pharmacy rep job in Dallas? Claims Transdermal pain therapy is a 30 billion dollar industry and growing.

Compound Pharmacy Reps, Stop and Look now!

Company Description ClinicalCorp, (with our partner Greg Normans 500 million dollar Great White Shark Opportunity Fund) is now looking for physician's with your specialty to participate in our Clinical Corp Coordinator program. Average physician's in our program generate approximately $4,000 - $8,000 a month in additional income for moments of their time. Simply put, patients fill out a HIPPA compliant 10 question survey, where by your desk manager takes about 60 seconds to upload 4 of these responses to our system. Compensation is 15 minutes of time at a rate of $150.00 per hour. If you have 200 patients a month who come through your doors, and they each fill a survey, you would be compensated $7,500.00 for your time. ClinicalCorp is employed by compounding pharmacies to report on Related Health Problems (ICD Classifications) where certain medications are used for treatment. It is important that the Physician have practical application and knowledge in these areas for their participation in our programs. Job Description Transdermal pain therapy is a 30 billion dollar industry and growing. It is an alternative non-addictive, non-narcotic and non-sedating pain therapy for patients of all ages. Take advantage of this exciting opportunity which offers the highest commissions in the industry through established pharmacies, compounding with only he highest quality PCCA based formulations. o Non-Narcotic o Non-Addictive o Non-Sedating o Targets to Site of Pain o Customized to Patient Needs o Made to Order o Minimal Systemic Concentration o Minimal Drug Interaction Risk o Customizable Formulations o Odorless o Private/Commercial insurance accepted Responsibilities: -Leverage existing physician relationships to market the products -Target and develop new customer opportunities to continually drive market penetration -Maintain a high level of product and technical knowledge -Keep strong relationships in order to easily bring other products/services/devices in the future Requirements: Already marketing transdermal pain, wound, scar or other compounded therapies If so, we'd like to speak with you if you are experiencing any of the following: Not able to offer your physicians a professional services agreement Compensation: Commission Only - You should be able to make a six figure income even at a part time status if you have the relationships, experience and drive. Reps take home $80,000 per year on the low end . . . Top reps take home $50K+ per month. Scripts adjudicate from $1,000.00 to $13,000.00 (per script) No compensation cap Our tiered compensation plan based on sales is ultra competitive Near Real-Time sales portal offering updates on a per script basis Click here to apply.

ID#: 216083066 Location: Dallas, TX

Read more at http://dallas-tx.geebo.com/jobs-online/view/id/216083066-compound_pharmacy_reps_stop/#YzfytBQasU0wFzEH.99

Attorney General Holder: Condemned Should Know Lethal Drugs

By Pete Williams

 

Attorney General Eric Holder said Thursday that condemned prisoners have a right to know the composition and sources of the drugs to be administered in carrying out the death penalty.

His comments, during an interview with Gwen Ifill on the PBS NewsHour, come as the Justice Department is working to complete a study, ordered by President Obama in May, on the growing controversy over lethal injection.

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FDA Outsourcing Fee Rates for 2015

http://regulations.justia.com/regulations/fedreg/2014/08/01/2014-18111.html

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This chat board will make you feel real confident about sterile compounding--NOT!

Thought you were gonna link this story. A compounding pharmacy is responsible for at least 5 deaths due to contaminated intratheical methylpred

Click to expand...

Sterile compounding is sooooo high risk. Scary. We are getting a clean room put in. We dont know the first thing about sterile compounding. Gonna hire an experienced compounding pharmacist.

Doctor M, Oct 4, 2012

 

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Very Interesting: MUST READ!! What Compounding Pharmacies Want From Greg Abbott: Compounding pharmacies' interests run far deeper than secrecy over the lethal injection drug supply--Richie's Specialty Pharmacy--one of his specialties is a pain cream

What Compounding Pharmacies Want From Greg Abbott

 

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And then there’s the money.
A week before Abbott’s ruling, the Austin-based watchdog Texans for Public Justice released a report on Abbott’s fourth-most-generous donor in the last year, Conroe compounding pharmacist Richie Ray. As TPJ notes, Ray catapulted into the top tier of Abbott-backers with a $250,000 donation in January—a few months after the mess in The Woodlands, and days after the first of this year’s wave of botched executions.
Because Ray’s pharmacy isn’t certified as a “sterile” facility that can produce drugs for injection, his pharmacy couldn’t be Texas’ latest source. And, in a statement provided to the Observer, Ray is unequivocal that his business has nothing to do with lethal injections: “Richie’s Specialty Pharmacy has never compounded drugs that were used for executions, and we never will. Furthermore, in my 17 years as a licensed pharmacist, I have never compounded drugs that were used for executions, and I never will.”
But as a national leader in pharmacy trade groups, and a major donor to pharmacists’ political allies, he’s taken an active role on behalf of the entire industry. So was Ray hoping to buy Texas’ secrecy, and protect a fellow compounder?
Mother Jones suggested as much in a piece that ran May 28, one day before Abbott’s office ruled to keep Texas’ drug source anonymous. And sure, any time a compounding pharmacy is outed as a source for death row, it’s bad press for the whole industry—but Ray’s political agenda is surely bigger and more complex than the death penalty drugs.
Compounding pharmacies are already locked in a bigger fight—one that more directly affects their bottom line—over how they’ll be regulated by the FDA. That fight involves lawmakers and lobbyists at the state and federal levels, and Ray and his staff have been instrumental in bankrolling compounders’ interests.
Until now, the FDA had oversight of big drug manufacturers, but compounding pharmacies—which had long been little mom-and-pop shops that made drugs for pets or lollipop medications for kids—were left to state regulation. As compounders have grown, so have horror stories about tainted drug batches shipped from compounders to customers nationwide. In its report TPJ recalled the case of Dallas-based ApotheCure, whose drugs killed three patients in Oregon in 2007. Cedar Park-based Specialty Compounding was linked to infections last year in more than a dozen patients. And most notoriously, tainted drugs from the New England Compounding Center killed at least 64 people and infected more than 700 more with meningitis.
That outbreak prompted a quick response from Congress: for the first time, large-scale compounding pharmacies are set for federal regulation, with standards similar to drug manufacturers. But which businesses will fall under federal watch as “outsourcing pharmacies,” and how much that’ll cost them, is all up to rule makers at the FDA.
“That’s kind of the issue that is still unresolved,” says Robert Floyd, an Austin lobbyist for the Alliance of Independent Pharmacists. “At what level does a compound pharmacist have to make a decision to be an outsourcing facility and meet federal licensing, pay federal fees … where is that line going to be drawn?”
That may explain why so many on Ray’s pharmacy staff bet so generously on support from U.S. Sen. John Barrasso of Wyoming in 2012, or why Ray has employed top lobbyists like Craig Chick, a former adviser to House Speaker Joe Straus, and David Marwitz, who also lobbies for the Texas Pharmacy Association. In his statement to the Observer, Ray said he’s worked for years to educate the public, and lawmakers, “about what appropriate quality evidence-based compounding services should look like and how they can best serve the public safely.”
Richie’s Specialty Pharmacy, isn’t a high-volume producer likely to be caught up in the outsourcing regulation—one of its specialties is a pain cream—but it’d be important to Ray to spread a message about compounding that’s less about meningitis outbreaks or lethal injections.
Floyd provided the Observer with a statement he says “reflects the position of most compounding pharmacies” on execution drugs. In brief, this is one fight the industry wants to be left out of:

While we have no formal position on compounding pharmacies’ preparation of drugs used in executions, the pharmacy profession recognizes an individual practitioner’s right to refuse to dispense a medication based upon his or her personal, ethical and religious beliefs. In a very few cases, compounding pharmacies have been asked by a state government to prepare drugs used in executions because pharmaceutical manufacturers have unilaterally restricted distribution. We believe state corrections agencies should work first with the pharmacy services providers—the companies that provide medications to prisoners within their systems—to source or compound drugs for executions before soliciting a traditional compounding pharmacy.

Before the twin controversies over some compounding pharmacies’ dangerous products—whether accidentally or intentionally lethal—the industry got little attention and light federal regulation. What the industry likely wants, most of all, is to keep it that way.