Main Menu

My Account
Online Free Samples
   Free sample   Management assignment impact of product recalls on pharmaceutical industry

Management Assignment: Impact of Product Recalls on Pharmaceutical Industry


Task: For this management assignment, you are required to prepare a dissertation on the topic “Past and current trends regarding product recall in the pharmaceutical industry within the UK:The impact on reputation and profitability”.


1. Introduction
The pharmaceutical industry is one of the most important industries since millions rely on the medicines to function, the necessity that will not disappear. The industry is currently at a crossroad in terms of medical innovations, and it is relied on to find cures for different health issues (Shewale and Parekh, 2011).

The pharmaceutical industry has been commonly criticized in the last decade because of high prices, over-intensive marketing and sales activities presented to the medical doctors, industry and clinical trials, along with the lack of transparency as well as the paucity of credible and honest information; however, the COVID 19 pandemic is changing the negative views (Kelleher et al., 2020).

In the pharmaceutical industry, it is not easy to get things wrong; however, when that happens, product recalls are coming into the picture. Therefore, it is important to recognise the process, implications and find new modalities to avoid a product recall.

A product recall represents a serious process because it highlights a situation which can be dangerous, and which requires an effective and rapid action to protect the population from getting harmed (Harmon et al., 2017). The reason why it is important to understand the process is to understand and recognize the situations which can lead to a recall along with identifying the scenarios that require a product recall.

The aim of the intended research is to recognise the impact of product recalls on the reputation and profitability of the pharmaceutical industry. The focus will be on reducing the causes as well as on mitigating the risk of future recalls. There have been a large number of organisations who have been issuing the product recalls. As a result, the marketing scholars are more focused towards the product recalls. A large number of researches on product recalls have emphasised the recall strategies of the organisations, responses from the recall as well as the perceptions of the consumers along with the consequences on the performance of the organisation. Moreover, there is a very smaller number of theoretical papers on this topic. The limited number of theoretical research papers on this topic indicates the requirement of theorisation within this research area. This requirement is also reflected within the fact that very limited theoretical perspectives have been utilised. The theories that have been used up until now include country of origin effects, attribution theory, perceptions of consumers and reputation (Wowaket al., 2015).

Moreover, the gap in what concerns the research in terms of pharmaceutical recall has also been identified. The recall preventions and management strategies, as well as their implications to organisations and stakeholders, represents areas which are not present in many research documents. Furthermore, many pieces of research in terms of product recall management are practitioner-driven; however, it is vital that further research guidelines be developed in terms of the best practices in recall management.

Therefore, it can be concluded that the number of researches did not increase at the same rate with the product recalls increase; the reason why it is important for further researches to be done; therefore, this aspect will increase the importance of the present research proposal and its future findings which will further contribute to the literature in what concerns the recall in the pharmaceutical industry within the United Kingdom.

1.1 Problem statement
The main problem as per this report is based on the questioning of the pharmaceutical industry regarding the lack of transparency in the manufacturing of pharmaceutical products and thus it is believed that the lack of transparency causes panic during product recall. In addition to that, there has been limited research in the aspect of product recall, so an extensive research would help in gaining a significant idea about the concept of product recall.

2. Literature review
2.1. Introduction

In the pharmaceutical field, a product recall represents a procedure of returning a batch or even the entire production run to the producer mainly because of consumer safety problems (Friedli, 2013). The pressure on the industry to practice Corporate Social Responsibility as a mean of sustaining competitive advantage in business is higher than ever, and the pharmaceutical industry has been intensely affected by this trend (Cheah et al., 2007).The pharmaceutical industry is facing challenging times because it attempts to keep up with the current demands; however, the focus should be maintained mainly on the safety of the population who use the final product (FDA, 2017). The product recalls have the potential to damage the reputation of an organisation, its profitability and integrity significantly; however, the fact that the number of recalls increased in the last years, unfortunately, did not generate any comprehensive studies (Dickinson, 2001).Despite the efforts being made by the pharmaceutical companies and the government to maintain a high standard of quality, the product recall is still increasing because the demand of drugs is increasing especially with the global Covid 19 pandemic; therefore, if actions are not being taken in a timely manner, the effect on the consumer could be catastrophic (Dickinson, 2001).

2.2. Theoretical literature review
2.2.1. The recalls concept

The product recall concept is receiving a great deal of attention from regulatory agencies, practitioners, consumer safety agencies, academics and third parties; therefore, it is a significant subject and must be treated appropriately (Collier, 2019).

According to the FDA (2017), the recall is being classified into three classes which represents the threat of the recalled drugs. Class I recalls is considered as being the products which are dangerous and could potentially cause serious health issues and even death (FDA, 2017). Class II recalls is considered as being the products which may cause temporary health issues or can have a slight threat (FDA, 2017). Class III recalls is considered as being the products which are unlikely to cause any health issues; however, they violate the manufacturing regulations and FDA labelling standards (FDA, 2017).

There are three levels of recall as well and they are consumer or user level, wholesale level and retail level (Choudhary, 2019). In the level of consumer or user, there is a variance in the product that is included in the retail or wholesale level.

The user or consumer may include hospitals, physicians, patients and consumers. The consumer or user-level recall is applicable in terms of Class I recall that indicates a particular drug causing serious harm to patients. At the wholesale level, the drug is recalled by all levels of distribution between the retailer and manufacturer and the recall of the products can be executed up to the wholesale levels. All the recalls based on Class I is executed to the levels of consumers, retailers and distributors or wholesale.

In cases of Class I recall, public announcements are made using electronic or print media. However, recalls of Class II is executed up to the levels of retail and wholesale and recalls of Class III is executed on the two levels of wholesale (Choudhary, 2019). At the retail level, pharmacies, hospital pharmacies, dispensing physician, retail groceries and institutions such as nursing homes and clinics are included. Overall, the recall procedure initiation's timeline is notified by the concerned department of drug control or by the drug manufacturers. Therefore, the three classes of recalls indicate the health hazards relative degree by the regulatory authorities of a country.

The class of product recall plays a vital role in terms of segmenting the hazards of health based on their impact. In the modern business world, it will not be possible to classify the hazards without levelling them into classes especially for the pharmaceutical industry where the health of the people is associated. While, the process behind a product recall varies based on the local flaws, still it is essential to classify the recalls according to the pharmaceutical industry rules and regulations.

In class I of product recall, a public alert is issued in terms of serious and adverse health consequences that can prove to be fatal if it is consumed. A public emergency is generally considered as this kind of product recall keeps the public health at stake(Goguen, 2019). When a pharmaceutical company manufactures a product, severe testing of the products before it reaches the market is being done; however, it still remains a possibility that the product can affect certain groups of people in different ways. Therefore, the class I recall plays a significant role here in terms of making the public alert and aware of the hazards associated with a drug.

In class II of product level recall, there is a remote probability of health hazard, and classifying them into levels that help in determining the exact effects of the hazards. The potentiality of a public alert is not emphasized but is subjected to change depending upon the scenario(Wagner, 2018). In addition to that, a situation can occur, where the exposure of a harmful product can cause medically or temporary reversible health consequences. Based on this class, the product is immediately removed from the market with immediate effect.

In class III of product level recall, the consumption of product is not likely to cause any health problem and a public alert is generally not issued. In this kind of scenario, the level of product recalls helps in segmenting the products according to its state of affect.

Therefore, the level of product recall is tremendously effective in terms of determining the extent of the effect that a particular drug can cause along with identification of the relevant party, which is responsible for such hazards.

2.2.2. Reasons for recalls
The reasons behind a product recall could be multiple, from not following the FDA regulations to causing serious illness and even death (Cheah et al., 2007); the reason why the FDA has strict rules for companies when it comes to recalling products. To determine the consignment recall level, any needs for patient awareness and ensure the recall will not happen again, the FDA requests a recall letter from the pharmaceutical companies which clearly states the reason behind the recall.

Having that said, according to the FDA (2017), there are four groups of recall developed for research purposes: labelling or packaging defects, contamination, health hazard and manufacturing defects.

Manufacturing defects. Defects or errors in the manufacturing process of a drug can potentially compromise the efficiency and safety of the drug (Freyr, 2019). The reason behind a drug being defective can be potentially based on pharmacological variability between originator and generic drugs or between batches of the drug. If the manufacturers are not aligned with the guidelines of GMP (Good Manufacturing Practice), then the relevant health authorities might ask for a drug to be recalled. In terms of manufacturing defects, the recall will act as an instruction for the customer about the importance of the product being changed or repaired. As per the standards of manufacturing, pharmaceutical products need to be manufactured with extreme care given the sensitivity of its association with people’s health. The manufacturing team of the company must emphasize to shift their focus from output to service and customer alignment. Overall, the literature of manufacturing defects suggests more investment in the area of significance and application of practices and guidelines.

Contamination. In certain situations, the process of manufacturing a drug might be potentially exposed to contamination by harmful or unwanted ingredients that cause reactions to its end users and eventually lead to health risk (Freyr, 2019). Contamination of a drug is completely unacceptable as there is the threat of life risk associated with it, so this is one major reason for the recalling of the drug. Contamination for example can be caused by negligence in terms of adding unwanted or harmful ingredients that makes the drug hazardous(Insurance Infornation Institute, 2020). The contamination aspect of product recall is based on the literature of microbial diversity that helps in identification of the microbial contaminants in products. In addition to fungal contamination in pharmaceutical products can lead to sever outbreaks as some groups of fungi are extremely difficult to treat with antifungal drugs.

Health hazard. In the majority of the scenarios, the risk associated with a particular drug is highlighted after it hits the market as the relevant health authority and manufacturers come across to know about the hazardous nature of a particular drug (Freyr, 2019). During such situations, agencies request for the drug's recall from the market to safeguard public health. In terms of health hazards, the relevant health authority for example understands the extent of the affect that can be caused by a certain drug. As per the literature of health hazards in product recall, after a hazardous drug is available in the market and it is consumed widely by the population base, a red alert must be issued immediately given the hazardous nature that can affect the customer base. If the hazardous reports are found to trigger an outbreak then the relevant health authority must immediately issue a warning so that even before the product is recalled, the hazardous product is isolated completely.

Labelling or packaging defects. The packaging or labelling of a drug is considered as a guide to its end-users, so any kind of mistakes in terms of labelling or containing misleading information can lead to misinterpretation and adverse reactions (Freyr, 2019). Therefore, if any mistake is found in the labelling or packaging of a drug, then a recall is issued by the relevant health authority. While packaging or labelling of products, situation can arise where a wrong date or ingredient gets printed and this can be extremely fatal especially for pharmaceuticals. Typically, it is the responsibility of the manufacturer to indulge in a voluntary recall so that the defective packaged and labelled products are immediately taken back from the market(Dingley, 2013). In the pharmaceutical industry, packaging and labelling is an extremely critical component in the manufacturing process as even the slightest of negligence can lead to fatal consequences. Overall, the literature of product recall based on labelling or packaging defects states that effective recall will instruct the customers regarding the warning of any particular danger that is posed by the associated defect.

According to Shewale, Chavan& Parekh (2014), the individuals who are aware of the past failure of the product are likely to judge the products of less quality in comparison to the individuals who are not aware of the previous recalls. Generally, it has been believed that the product recall can cause permanent damage to the brand, conduct detrimental to the reputation, minimise profits, and goodwill with the consumers. Due to product recalls, a large number of companies can experience lawsuits which can seriously impact the image of the reputation of the company as well as damage the corporate public relations. The recall of drugs put the lives of the individuals who have been using the drugs at risk of different life-threatening situations. A drug recall is one of the most effective means of public protection in terms of the potentially harmful or defective product.

2.2.3. Risks
Not recalling products on time could have enormous risks to the customers but also to the pharmaceutical companies. Therefore, risk management strategies must be out in place to assure an efficient way of handling the product recalls and to minimise the effects on businesses and more important on the customer's health.

According to the research conducted by Wand et al.(2010), the improvement of manufacturing performance and traceability through the optimisation of the production batch sizes as well as batch dispersion along with the risk factors have been identified. Within the supply chain, the quality of the products of an organisation is dependent not just on the quality of the product but also on the quality of the supplier. The unclear information regarding the product quality risk throughout the downstream and upstream supply chain members can result in the product damage crises. The argument behind this is that the better view of risk within the supply chain can decrease the threat of product damage.

The research regarding the behaviour of the firms within a recall, and the way they manage the recall is limited. A firm should be cognisant of the reputation of the organisation, organisational effect and the response of the organisation within deciding the course of action. The effective usage of print media including display ads, press, and flyers specifically recognising the media for the target customers and utilising them for communication can produce more efficient recalls as well as better protection of customers.

In today's world, recalling a drug can create panic among a certain section of the customers as the problems associated with a drug identified only after it hits the market and this leads to a severe risk of panic among people who have already taken the drug (Lee, 2019). In addition to that, there is also a risk associated with the late recalling of a drug if it is found to be hazardous. However, in the modern era of digitalization, educating and making people aware of the recall reason can mitigate the risks associated with recalling products.

The concept of risk in general refers to the possibility of something bad happening and it involves uncertainty about the implications and effects of an activity in regard to human values such as well-being, health, property, environment and wealth(National Research Council, 2015). In addition to that, the concept of risk can be divided into three parts, which are uncertain situation, occurrence likelihood of a situation and the effect. Overall, as per the ISO (International Organization for Standardization), risk can be defined as the combination of probability of an event along with the consequences.

In the context of pharmaceutical industry, risk associated product recall indicates that a pharmaceutical company must protect its customers from the risk of overdose or else it might lead into life-threatening situation. Therefore, the aspect of risk management in the pharmaceutical industry holds tremendous significance based on the consequences with the risk occurrence.

Relationship between recalls and businesses
In the recent years, product recall of domestic and foreign products has been causing public concern regarding the quality of products and this is tremendously hampering the business of organizations that is leading to loss of reputation and finances. Despite the concept of product recall being regarded as an effective tool for quality management of products, the business of the company involved in product recall, tends to take a worst hit. Overall, product recall can contribute to negative market reaction by hampering the business activities.

An outside panel oversaw the clinical trial of the pain killer of Merck named Vioxx. The company was urged to stop the trial and prevent the patients immediately from taking the drug. The reason behind this action was that the patients on the drug were twice as likely to risk a stroke or heart attack in comparison with the patients on placebo (Martinez et al., 2004). Therefore, it was announced by Merck that Vioxx withdraws from the international market. In 2003, the drug registered a world-wide sale of $2.5 billion, and over 100 million prescriptions were already written for it as it was introduced in the market in 1999. However, it had been determined for various years, by recommendations that using the drug results in heart problems (Martinez et al., 2004).

The demise of Vioxx rose the questions regarding the future of Merck as the top tier drug company and if it might be forced to the merger which was resisted by Mr Gilmartin for a long time (Martinez et al., 2004). The shares of Merck dropped, removing $26.8 billion from the market capitalisation. The shares fell by 27 per cent or $33 to $12.07 on the New York Stock. It was the biggest drop in terms of percentage for Dow stock as United Technologies Corp. lost about 28 per cent in the month of September in 2001. The shares of Pfizer were up by 1.4 per cent. Vioxx accounted for about 11 per cent of the global sales of Merck in 2003, and the loss was expected to cut about 20 per cent of the profit of the company in 2004 (Petersen and Singhal, 2017).

Although Merck was an industry leader, struggled mainly because of its inability to manage the new hit which its product took, and the patent protection was lost by the older drugs. The decision regarding the withdraw of Vioxx was based on the data from the huge three-year clinical trials (Martinez et al., 2004). The major purpose of the trail was to identify if Vioxx can prevent the recurrence of the precancerous growth within the colon. Suppose it was possible that would have opened a new profitable market for the drug. However, the trial also collected the data regarding the connection between Vioxx and heart problems. Prior to the recall, Merck also faced lawsuits from the individuals who suffered heart attacks while taking Vioxx (Martinez et al., 2004).

Moreover, the Attribution Theory defines the intellectual processes by which fundamental appraisals are made (Martinko, 1995). According to Martinko (1995), the theory has been based on the principle that the individuals are interested to understand, as well as control, the environments. The Attribution Theory has been applied to provide assistance in having an understanding of an extensive range of organisational phenomenon involving the ways of responsibilities, as well as blames are given to the individuals after the negative events (Graham and Folkes, 2014). On the other hand, apart from defining the causal inferences regarding individual behaviour, Attribution Theory can also assist in explaining the ways observers assign the blame and responsibility for the negative action of the organisation (Byun and Dass, 2015).

Apart from the Attribution Theory, there is no theory that has enough evidence to be able to compare the relationship between recalls and businesses. Since, this theory tends to provide assistance in terms of understanding organizational phenomenon, so emphasis upon this can tremendously help in analysing the extent of the negative action’s effect on recall and business.

Overall, product recall holds a strong relationship with business as recalling directly impacts the business position. It is very difficult to gain the trust of consumers in the pharmaceutical industry as a drug relates to life-saving factors. However, situations do arise where based on unfavourable circumstances companies are required to recall drug products to avoid causing harm to the population, so the business of pharmaceutical companies is directly related to product recalls (Van Der, 2015). The decision of Merck & Company to stop selling its painkiller Vioxx which was one of the company's most profitable drugs describes the relationship between a product recall and business. Then withdrawal of Vioxx caused a massive blow to the company's business as the shares of the company plummeted 27% in a single day (Freudenheim, 2004). In addition to that, Merck also faced a major challenge of replacing its top-selling drug as due to product recall, its financial position along with brand reputation was getting hampered.

2.2.4. Recalls impact on the businesses and economy
Recalling a product or a drug can significantly impact the business and economy based on the losses it incurs. Despite the refund or replacement aspect, the impacts are drastic as along with tarnishing the reputation of a company it can also lead to losses of billions of dollars(Nath, 2019).

The confidence of the public plays a significant role on consumerism because when the customers do not have faith in the company from where they purchase, then they do not pay for the commodities in the future and this is the major reason of recalls having devastating effects on a company's business and economy. Since smaller businesses operate without any brand recognition and robust cash flow, so they are more exposed to the risk of brand degradation and financial losses. However, the major companies are not resistant to product recalls as well but the main differentiating factor is based on its ability to endure the interim effects' recalls that rarely makes them suffer any economic troubles based on long-term. As per the law of consumer protection, suppliers and manufacturers need to tolerate all the costs associated with recalling of the products.

In this kind of situation that involves product recall; insurance coverage helps in minimizing the amount required to replace the defective products (Bernon et al., 2018). For multi-billion-dollar companies, it is relatively easy to overcome short-term loss, but the main issue is based on customers and shareholders losing their confidence and this might result in superior long-term implications such as dipping stock prices. In addition to that, recall's impact on a company's reputation and finances might be insoluble, so large organizations possessing extra flexibility must quickly work to preserve loyalty among customers and most significantly, the confidence of shareholders. Implementing fast actions and taking responsibility are the best possible ways to mitigate the impact on recognition of brands from recalling of products. Despite repair expenses and settlement claims being robust, reduction in pricing of stock usually tends to have a much bigger effect.

The effects associated with recalling of a product tend to be damaging in the short run, but there is no strong evidence that supports the enduring decreases in stock prices or sales(Liu and Zhao, 2015). Merck experienced brief financial consequences based on its product recalls, but it eventually was able to rebound with the stock prices and brands that show a strong recovery. Overall, recalls tends to generate a negative externality on the share price performance based on the consequences it brings along with it. Product recalls also brings along stricter supervision for future purpose and it makes effective institutional arrangement for constraining the management actions. The business operation and financial position face negative consequences of a product recall, as the financial losses exceed the direct cost of recalling the defective or hazardous products (Bernon et al., 2018). It has become crucial in today's world to appropriately compensate the buyers if there is a product recall, so the brand recognition does not hamper massively. Based on the severity or pervasiveness of the hazards in the product, it is not possible for the seller to profitably replace the defective products and thus it would avoid a recall announcement proactively. The market and the consumers can interpret a recall strategy proactively for signalling the defect as minor or non-pervasive. Therefore, the impact of recalls on businesses and the economy is massive that can potentially lead to degradation of business activities and eventual closure due to the losses they bring along with it.

2.3 Synthesis of Literature Review
A synthesis matrix helps to document the key points of each source and record how sources narrate to each other. Hence, the synthesis of literature review generally means summarizing and analysing the sources by arranging them to see how they are related to each other and executed to each of the variables or themes. Synthesizing merely means combining rather than summarizing the main points of each source, in turn by putting together the concepts and findings of various sources to make the whole academic points. The synthesis of the literature review shows the reader where the sources extend beyond and where they deviate. However, the overall literature review for the study focuses on the pharmaceutical field wherein a product recall demonstrates the returning batch process that focuses on the issues of consumer safety (Bortoli and Freundt, 2017). As per the overall literature review, it has been identified that the said industry is experiencing several issues as they efforts to embrace the contemporary requirements and demands and focuses on the issues that are concerned to the public safety who uses the final product. Though the industry is facing several issues, they are making their efforts in order to maintain high standard quality for their consumer safety.

The main focus of synthesis of the literature review focuses on the concept of product recalls, which is said to be the claim to return, replace, or exchange a product after a consumer or producer watch group finds out defects that may hamper consumers, hinder performance or generate legal issues for the manufacturers. The product recall within the study has been reflected considering the current scenario of the Covid-19 pandemic wherein a huge number of the public were infected. In addition to this, a concept of product recall has been approached within the overall study wherein it focuses on the procedure of product recall. This process addresses the reclaiming of defective and potentially unsafe products from consumers with compensation. Within the given context, recalls indicates the regular occur a solution of safety concerns over manufacturing defect in a product that could harm the public. Hence, the overall theoretical literature review typically focuses on the recalls conception that reflects on the reason for recalls, its risks, affiliation within the recalls and businesses, as well as recalls impact on the businesses and economy (Beg et al., 2020). Concerning the given conception of recalls, the present study reflects as well as focuses particularly on the impact of the recalls on the businesses and economy. Within the given section of the study, it is having been identified that the product recall or a drug can considerably impact the business and economy that are associated with the losses it acquires. Hence, as per the study, it has been identified that the occurrence of recall in health products is considerable over recent years. With the rising of these recalls and globalization over the internet, the effects of recall actions are significantly overstated. Thus, it can be said that the particular product failure can generally lead to recall, wherein it generates an impact on the sales, reputation, and finances of an organization. A recall is a way for firms to deal with the crisis that brings risk to consumers. Therefore, a decision of a firm not to claim a recall, given its product knowledge can pose a hazard to its consumers' health (Goldsmith, 2016).

Moreover, it has been identified that the issues related to product recall within the pharmaceutical are due to globalization, fast occurrence, and the capable market within the healthcare sector. Hence, the real wave of firms has set up shop in different nations, willing to capture the global international consumers. Besides, lack of value-added capabilities is also one of the key issues that affect the business and economy and that absorbs the manufacturing cost of the company by fixing and replacing defective products or repaying affected consumers. Therefore, it has been stated by a number of authors that recalls within the particular industry destroy the reputation of the company and can lead to multi-billion dollars in losses. However, the impact of recalls within the small business might not be able to overcome as they operate without strong cash flow and recognition of a brand. On the other hand, the larger businesses are better capable of dealing with the temporary impacts of recalls without suffering any permanent outcomes.

Furthermore, within the rising rate of recurrence of recalls and its impact, it can cause for firms on domestic and international scales, managing and preventing the effects of such crisis have to turn out to be a priority. As per the study, it has been found that the recall can be categorized as per the speed, intensity, and pose risks. Researches indicate that the recall negatively affects sales, productivity, potential, stock's valuation of the firms, causing losses of both the economic value of listed firms as the purpose of investors to carry on investing in private firms.

Nevertheless, it adversely impacts the brand, reputation, and expectations concerning the company claiming the recall that decreases the efficacy of advertising, enhances price sensitivity, making it difficult to increase prices to overcome losses on revenue and costs the brand equity (Sadgrove, 2016). It is said that the recalls are not limited to one particular industry or organization as they spread around the spectrum with quicker and more effective means of the international supply chains; transportation has conducted an extraordinary evolution. Hence, a number of daily products consist of parts that are produced from around the world. In an effort to stay competitive, firms have increased international supply chains, outsourcing, and offshoring at the product consistency cost (Bernonet al., 2018). In addition to this, recalls addresses the financial implications within the particular industry, wherein public confidence has a key impact on consumerism. In case the consumers are not able to trust the particular firms they buy products regularly, they do not prefer to pay for their products in the future, which will eventually ruin or have an impact on its productivity that leads to financial implications. Thus, this is the reason why recalls have disturbing effects on a company; whether it is small or bigger firms, they directly impact the cash flow and brand recognition.


(Cruz, 2018) 

(Choudhary, 2019)

(Downey, 2020)

(FDA, 2019)

(Magno, 2012)

Definition of product recalls

Action  of retrieving an unsafe and defective product from the market

Removal of the market products because of bad design or compromise in quality

Process of retrieving defective or potentially unsafe products

Correcting or removing products that violates the laws of FDA

Removal of hazardous materials or products that can cause death or injury or violates the safety standards

Principles of product recall

Seller informs the customers about the risk associated with the product

The agent or the dealer shall be instructed about the stoppage and return back of products

May be mandated by regulatory body or mandatory

Recalls are conducted voluntarily by the manufacturer under varous sections of FDA Act

The perception of a company is negatively linked to the post-recall brand attitude based on product recall

Rationale for product recall

Enhances company and customer communication

The progress of recall makes way for reconciliation between the recalled and delivered quality

Developing better pubic relation

Proper evaluation of health hazards and with the exact corrective measures

The concept is crucial for planning strategic reactions that enhances a better transparency

Reasons for product recall

Defective, infectious and hazardous product

Substandard or defective products that might or might not possess a health risk

Accidentally poisonous or ineffective

The products violating the standards set by FDA

Defective, dangerous or unsafe products

2.4 Positioning of Present Inquiry against the Literature Review
Through the literature review, product recall concept, reasons for recalls, the risk associated with the recall, relationship between recalls and business, and its impact on the business and economy could be assessed. However, the business environment is dynamic, and it changes continuously, which requires the positioning of the present inquiry against the literature review. Through the literature review, it was evident that there are three levels of a product recall, and they were categorized as Class I, Class II, and Class III. Where Class I is the most urgent level of recall, followed by Class II level occurs when a pharmaceutical product has slight chances of creating a serious illness. The last stage is Class III level, which includes the least hazardous pharmaceutical products that have a minor chance of causing the serious issue (Byun and Dass, 2015).

In the present, inquire it as well was found out that this is the standard classification used for categorizing pharmaceutical products. Most companies in the pharmaceutical industry of the UK use this classification standard because it helps them to plan when to recall the product from the market. Through this segregation, companies can plan their recall procedure so that their business procedure is not hampered, and they can recall their products at the right time.

The literature review gives four reasons for recalling the products, and these reasons are manufacturing defects, contamination, health hazard, and labelling and packaging errors.

Manufacturing defects. Defects or errors in the manufacturing process of a drug can potentially compromise the efficiency and safety of the drug (Freyr, 2019). The reason behind a drug being defective can be potentially based on pharmacological variability between originator and generic drugs or between batches of the drug.

Contamination. In certain situations, the process of manufacturing a drug might be potentially exposed to contamination by harmful or unwanted ingredients that cause reactions to its end users and eventually lead to health risk (Freyr, 2019).

Health hazard. In the majority of the scenarios, the risk associated with a particular drug is highlighted after it hits the market as the relevant health authority and manufacturers come across to know about the hazardous nature of a particular drug (Freyr, 2019).

Labelling or packaging defects. The packaging or labelling of a drug is considered as a guide to its end-users, so any kind of mistakes in terms of labelling or containing misleading information can lead to misinterpretation and adverse reactions (Freyr, 2019).

All these reasons make a pharmaceutical product harmful to human health and can cause some serious health issues. This is very much applicable in present time because recently the regulatory agency that monitors the medicines and healthcare products have recalled two medicines due to errors and health hazard. The first medicine that was recalled by the UK Medicines and Healthcare products Regulatory Agency is gliclazide 40mg tablets. This medicine was recalled because when the medicine was broken down and tested during stability testing, it was found out that the results were not as specified. Due to this, all the gliclazide were recalled from the market because they were hazardous to human health. The second medicine that was recalled in the UK was the nasal spray named Beconase aqueous nasal spray (Rees, 2020). This medicine was recalled because the UK Medicines and Healthcare products Regulatory Agency found out that there were errors in the decommissioning on 13th February 2020 and the action was completed within 48 hours. Due to this, all the Beconase aqueous nasal spray was recalled, and its production has been put to a halt. The medicine did not possess any major risk. Therefore, it was considered to be a Class III level category of the classification level.

Another aspect highlighted by the literature review was the risk factor associated with the delay in the recalling of the product. According to the analysis of the literature review, the recalling of products from the market can lead to the degradation of the reputation of the company. However, in the present time, the risk associated with the recall of pharmaceutical products can be efficiently mitigated. At the present time, there are risk management programs to help the pharmaceutical industry to manage their risk using three strategies, and they are risk reduction, risk assumption, and risk transfer. Through risk reduction, the companies can implement strict control measures in the initial stage so that there are no errors. Through risk assumption, the companies can lay down all the possible risks that can lead to the recall of products so that they can resolve the issues strategically (Pellerinet al., 2018). The last strategy is the risk transferring through which the company can share the risk of recall with its suppliers and can overcome the loss incurred during recall with their help. These are the strategies in the present time that allows pharmaceutical companies to efficiently manage and minimize their risk.

The final analysis that could be made through the literature review is the impact of the recall on the business and the economy. Through the literature review, it was evident that recall had a negative impact on the reputation of the company, and it affected the companies in the short run. This argument is relevant because, at the present time, recalling a product from the market affects the share price of the companies in a uni-sectoral nature. The recalling of pharmaceutical products can influence the stock market of the UK because the pharmaceutical industry contributes a considerable amount to the annual GDP of the UK. In any given year, the pharmaceutical industry of the UK contributed approximately 42 billion British pounds, which makes it a crucial GDP contributor. If there are frequent recalls in the pharmaceutical industry, then there is a chance that they will not be able to contribute to the national GDP. This would heavily impact the whole economy of the nation, which is an unfavourable situation because, in the year 2017, it was reported that the UK consumers of pharmaceutical products spent over 5.7 billion pounds on medical products (Stewart, 2020).

2.5 Arguments
Product recall is considered one of the serious issues in the company as it refers to the removal of the market product because of defects in the product that might not be safe when it goes to the hands of consumers. According to Zhong (2018), product recall in the pharmaceutical industry is more critical because it is associated with the health of the people and might be extremely dangerous for the consumers. The main cause of product recall in this industry is the quick and efficient means of transport; therefore, the transportation element has undergone an unprecedented transformation; however, most of the pharmaceutical that has earned higher revenue will be able to recover from the recall, but the companies that are recently started up might have to face a huge financial crisis in order to recover from the recall. The past, as well as the current trend of the product recall, might cause serious damage to the reputation as well as the profitability of the business.

According to Bortoli and Freundt (2017), the past trends of the product recall in the pharmaceutical industry went up in 2016 and were higher in the historical trends in 2004. This product recalls had an adverse effect on the reputation as well as the profitability of the industry. It is because the higher damages in the product have made the consumers of the industry feel that the industry is involved in unhygienic and unhealthy production. It has led to a decrease in consumer loyalty or satisfaction because of which the overall market has declined down to a certain level. In addition to that, the past trends of the product recall also had an adverse effect on the profitability of the industry. The decline in the reputation of the industry has led to an immense decline in the profitability of the business because when the product recall occurred the industry had to go through a financial crisis in order to recover from the same. Therefore, the lack of profit management had led to lower profitability.

According to Durrett (2016), the current trend of product recall in the pharmaceutical industry has changed from the past trend to an extreme level. Since the occurrence of the pandemic, COVID has brought huge changes in every form of business, the business of the pharmaceutical industry has changed and the growth of the same has slowed down to a certain level. Hence, the change in the product recall is that the rate of recall has increased with the expectation of a decline in incidents through the outbreak of coronavirus disease. The novel coronavirus has enabled the pharmacy industry to adapt to the disruption that has hit the productivity and the medical trials of the companies in various techniques. In the current trend, the productivity of the pharmaceutical industry has increased which has led to the increase in profitability and upsurge in a product recall. Therefore, it can be said that the industry is highly affected in terms of profitability and its reputation (, 2021).

There is a different overview of the past and present trends of product recall in the pharmaceutical industry. As per the historical facts, the pharmaceutical industry has faced a high rate of product recall because of which the medical industry in the UK had low goodwill and the revenue income had declined in the market. However, with the passing financial years, the industry managed to lessen the level of product recalls, which means that the industry has increased its level up in terms of productivity. Therefore, the industry had increased its profitability on a steady basis and had been able to gain immense reputation and goodwill in the business. However, the recent changes in the trend of product recall because of the COVID 19 have worsened the situation as the production level of the products in the UK has increased, as well as the recalls number. During the pandemic, the business of the clinical industry has got worsen in every corner of the world.

On the contrary, Desai et al. (2019), stated that the increase in the demand for personalized medicine globally has enabled the pharmacy industry to upsurge automation technologies for batch processes, replacement of scale development, and manufacturing. It has also been identified that leading pharmaceutical companies have automated up to 95% of the regulatory filling required for drug launches. As per the current trend of a product recall, it can be said that the level has been declined because of which the industries have increased their supply chain management with the help of incorporation with digital instruments, predictive analysis, and accurate tracking systems (, 2021).

Therefore, it can be said that the past, as well as the current trend of a product recall in the pharmaceutical industry, has varied arguments. The past trends have negatively impacted the industry; however, the change in the same or current product recall has helped the industry to increase their productivity as well as profitability and has also enabled to face slow-down in terms of growth. It can be said that the backdrop in the pharmaceutical industry has considerably changed outstanding to the co-operative method between the non-traditional key players as well as the existing traditional players to provide a more consumer-centric experience. In comparison, the lack of advancement and solutions the industries used to face many difficulties to recover from the recall. They had to face a financial crisis because of the rising product recall and thus, the product recall was hard to be controlled. On the other hand, the change in the trend of product recall is that the industry, now, has been able to recover the damages and to control the increasing level of a product recall. Therefore, the comparison indicates that the industry has been able to develop to an extreme level however, the product recall being slightly changed so far.

3. Conclusion
In a nutshell, it can be said that product recall is the antithesis of what a manufacturer that is mostly related to quality-conscious look for to achieve. Recalls occur, yet a rising, and regular trend could be high-priced, perhaps cause a temporary embarrassment for the firm, and is not acceptable for the community wholly, but in the long-term, it improves the quality and benefits the consumers. In the contemporary world, it is possible technologically for a manufacturer to practice an opportunity of innovative healthcare.

Hence, they could consider a culture, the circumstance wherein it takes place, the reasonable and functional challenges, the procedures it will be used alongside, etc. It has turned out to be crucial for industry proficient at enhancing their attentiveness and being prepared to develop strategic plans of action for risk evaluation and management for recall. Likewise, other stakeholders, that include consumers, administrative, and doctors, need to be positive so that patients can take pleasure in constantly safer and more helpful healthcare systems wherein no one desires to be involved in a product recall(Prakash, 2010). However, after analysing the overall study, it can be said that in case any uncertain situation arises which is unavoidable, then proper planning, training, and execution of the recall can result in the only insignificant operational and economic disturbance. Eventually, it can be said that a recall is an ultimate evaluation, a costly distraction from normal business schedules by a failure in operating processes and internal development.

Through this research, it was found that there is the different reason due to which pharmaceutical products could be recalled. These reasons were health hazards, various errors, and contamination of the products. Due to these reasons, the pharmaceutical products were recalled from the market. Manufacturing defects were also the reason because, with manufacturing defects, the medicines become harmful to human health(Better Health, 2012). These reasons further led to the risk to the pharmaceutical industry that could be disastrous for the company and its survival. It was found that if the companies did not recall the products on time from the market, then it has a negative impact on the reputation of the company. They may end up losing the consumer and the market share due to the harmful effects of their medicines on the people. These harmful effects of medicines can lead to panic and fear among consumers, and they may completely stop using products from the specific company. However, these risks can be minimized using three strategies, and they are risk reduction, risk transfer, and risk assumption. Furthermore, the research revealed that the recall affects the business and the economy as well because the pharmaceutical industries of the UK have a considerable amount of market share in the economy. The research revealed that the recall of pharmaceutical products caused the stock in New York to fall by 27%, from $33 billion to $12.07 billion(Neilan, 2004). Comparing the present inquiry against the literature review, it can be seen that all the aspects are relevant and applicable in the present time as well.

Aggarwal, R., and Ranganathan, P. (2019) Study designs: Part 2–Descriptive studies. Perspectives in clinical research.

Beg, S., Al Robaian, M., Rahman, M., Imam, S.S., Alruwaili, N. and Panda, S.K. eds., 2020. Pharmaceutical drug product development and process optimization: effective use of quality by design. CRC Press.

Bernon, M. et al. (2018) Product recalls: The effects of industry, recall strategy and hazard, on shareholder wealth.

Bernon, M. et al. (2018) Product recalls: The effects of industry, recall strategy and hazard, on shareholder wealth. Available at: Recalls (Accessed 27 March 2021).

Better Health (2012). Medicines and side effects. [online] Available at: [Accessed 19 Apr. 2021].

Bortoli, L. and Freundt, V. (2017) Effects of Voluntary Product Recall on Consumer’s Trust. Brazilian Business Review, 14(1), pp.204-224.

Byun, K. and Dass, M. (2015) An investigation of the effects of product recalls on brand commitment and purchase intention. Journal of Consumer Marketing.

Byun, K. and Dass, M. (2015) An investigation of the effects of product recalls on brand commitment and purchase intention. Journal of Consumer Marketing, 32(1), pp.1-14.

Cheah, E.T. et al. (2007) The Corporate Social Responsibility of Pharmaceutical Product Recalls: An Empirical Examination of US and UK Markets. Journal of Business Ethics.

Choudhary, A. (2019). Product Recall Procedure in Pharmaceuticals: Pharmaceutical Guidelines.

Collier, E. (2019). Food Product Recall Procedure Template - Free... [online] The Hub | High Speed Training. Available at: [Accessed 19 Apr. 2021]. Cruz, V. (2018).What is a product recall? Definition and examples. [online] Market Business News. Available at: [Accessed 19 Apr. 2021].

D’Souza et al. (2007) Improving quality in pharma manufacturing.The McKinsey Quarterly.

Denzin, N.K. and Lincoln, Y.S. (2017) The SAGE Handbook of Qualitative Research. (5thed.). Illinois: SAGE Publications.

Desai, A.N. et al. (2019) Changing epidemiology of Listeria monocytogenes outbreaks, sporadic cases, and recalls globally: A review of ProMED reports from 1996 to 2018. International Journal of Infectious Diseases, 84, pp.48-53. Dickinson, J.G. (2001) Most recalls due to FDA inspection findings. Medical Marketing and Media.

Dingley, M. (2013).Product recall or withdrawal? 7 facts every manufacturer should know. [online] The Matthews Blog. Available at: [Accessed 19 Apr. 2021].

Durrett, J. (2016) A decade of data: an in-depth look at 2014 and a ten-year retrospective on children’s product recalls. Kids in Danger.

EMEA (2020) Recall Index 2020 (2nded.). Stericycle Expert Solutions.

FDA (2017) Drug Recalls. Available at: FDA (Accessed 06 December 2020). (2021) Impact of COVID-19 on Pharmaceuticals Market Size Report, 2020-2027. Available at: Covid19 (Accessed 28 March 2021).

Freudenheim, M. (2004) MERCK AND VIOXX: THE COMPANY; A Blow to Efforts to Close in on Rivals (Published 2004).The New York Times. Available at: Merck&Vioxx (Accessed 18 March 2021).

Freyr (2019) 4 Common Reasons for a Drug Recall. Freyr - Global Regulatory Solutions and Services Company. Available at: Recalls (Accessed 18 March 2021). Friedli, T. et al. (2013) Leading Pharmaceutical Operational Excellence: Outstanding Practices and Cases. New York: Springer.

Gaffney, A. (2014) Number of Drug Recalls Surges at FDA, Led by Mid-Level Concerns. Available at: DrugRecalls (Accessed 07 January 2021). Goguen, D. (2019). Differences Among FDA Class I, II, and III Recalls. [online] Available at: [Accessed 19 Apr. 2021].

Goldsmith, E.B. (2016) Consumer economics: Issues and behaviors. London: Routledge.

Graham, S. and Folkes, V.S. (2014) Attribution Theory: Applications to Achievement, Mental Health and Interpersonal Conflict. London: Psychology Press.

Harmon, J. et al. (2017) Product Recall. (9th. Ed.). London: Law Business Research.

Insurance Infornation Institute (2020). Product liability, recall and contamination insurance | III. [online] Available at: [Accessed 19 Apr. 2021]. (2021) Pharmaceutical product. Available at: PharmaProduct (Accessed 29 March 2021).

Jonker, J. and Pennink, B. (2010) The essence of research methodology: a concise guide for Master and PhD students in management science. Heidelberg: Springer Science & Business Media.

Lee, B. (2019) Drug Recalls: What to Do and How to Find Your Medication Lot Number - GoodRx. The GoodRx Prescription Savings Blog. Available at: DrugRecalls (Accessed 18 March 2021).

Liu, Q. and Zhao, X. (2015).Corporate Product Recall and Its Influence on Corporate Performance. [online] atlantispress. Available at: [Accessed 19 Apr. 2021]. Martinez, B. et al. (2004) Merck Pulls Vioxx from Market After Link to Heart Problems. Available at: Vioxx (Accessed 7 January 2021).

Martinko, M. (1995) Attribution Theory: An Organisational Perspective. London: Taylor & Francis.

Munyon, T.P. et al. (2019) Consequential Cognition: Exploring How Attribution Theory Sheds New Light on the Firm-Level Consequences of Product Recalls. Journal of Organisational Behaviour.

Muralidharan, E. and Bapuji, H. (2009) Product Recalls: A Review of Literature. Ontario: Administrative Sciences Association of Canada.

Nath, T. (2019).How Do Recalls Affect A Company? [online] Investopedia. Available at: [Accessed 19 Apr. 2021].

National Research Council (2015).Understanding Hazards and Risks. [online] Available at: [Accessed 19 Apr. 2021].

Neilan, T. (2004). Merck Pulls Vioxx Painkiller From Market, and Stock Plunges. The New York Times. [online] 30 Sep. Available at: [Accessed 19 Apr. 2021]. Pellerin, C. et al. (2018) An analysis of foot and ankle device recalls by the food and drug administration. Cureus, 10(8).

Petersen, M. and Singhal, R. (2017) Vioxx: Too Risky for Merck?Kellogg School of Management Cases.

Prakash, B. (2010). Patient satisfaction.Journal of Cutaneous and Aesthetic Surgery, [online] 3(3), p.151. Available at: [Accessed 19 Apr. 2021].

Rees, V. (2020) MHRA announces two medicine batch recalls in UK. Available at: MHRA (Accessed 30 March 2021).

Sadgrove, K. (2016) The complete guide to business risk management. London: Routledge.

Sadhna, D. and Nagaich, U. (2015) Drug recall: An incubus for pharmaceutical companies and most serious drug recall of history. International Journal of Pharmaceutical Investigation, [online] 5(1), p.13. Available at:DrugRecall (Accessed 30 March 2021).

Shewale, S. and Parekh, S. (2011) Reinventing Patient Recruitment in Clinical Studies.The Monitor.

Shewale, S. et al. (2014) Pharmaceutical Product Recall: Lesson Learned. International Pharmaceutical Industry.

Stewart, C. (2020) Topic: Pharmaceutical industry in the UK. Available at: Pharmaindustry (Accessed 29 March 2021).

Wowak, A., et al. (2015) Throwing caution to the wind: The effect of CEO stock option pays on the incidence of product safety problems. Strategic Management Journal.

Zhong, J. (2018) Reputation of quality in international trade: Evidence from consumer product recalls. unpublished paper, University of Alberta.

Question Bank

Looking for Your Assignment?

Search Assignment
Plagiarism free Assignment









9/1 Pacific Highway, North Sydney, NSW, 2060
1 Vista Montana, San Jose, CA, 95134