On October 4, 2004, Britain’s MHRA suspended the Chiron Corporation’s license to manufacture, ship or market its Fluvirin influenza vaccine for three months. The MHRA’s press release (10/6/04) stated: “The suspension was imposed as a result of Chiron's failure to comply with the requirements of Good Manufacturing Practice, leading to concerns of possible microbial contamination of product.”  Britain had an interest in the purity of Fluvirin. Although most of it was to be shipped to the U.S., the remainder was to be distributed in Britain and in about 20 other countries.  The World Health Organization set the standards for production of inactivated influenza vaccine.  Chiron failed.

Pien, however, took the MHRA’s suspension in stride. The United States government’s current policy is not to be too concerned about global standards or “tests” when the interests of US corporations are at stake.

To duck, take cover and fight on, Chiron Vaccines announced in a press release on October 5, 2004, that the MHRA had temporarily suspended Chiron’s’ license to manufacture Fluvirin in its Liverpool facility for three months.  And Chiron stated it had slashed its expected earnings by more than half.  But most importantly, Chiron did not give up on selling its vaccine to U.S. consumers for the upcoming flu season.  It stated: “Chiron has initiated discussions with the MHRA to determine the appropriate corrective actions.” (24)  In fact the price of Chiron stock dropped from $45.42 on October 4, 2004 to $37.98 on October 5, 2004, a drop of 16.3 percent in heavy trading 25 million shares. (19)

Pien’s new mantra was the possibility of “appropriate corrective actions”. Pien still minimized Chiron’s vaccine contamination.  The FDA had not yet determined if it would allow the vaccine to be sold.  Besides, Pien had kept the lid on the deep nature of its problems at the Livermore plant.  Pien knew that the FDA would have to be critical of its own conduct if it found vaccine contamination at the plant.  The FDA had given Chiron and the preceding owners of the Liverpool plant a virtual pass on contamination since about 1999 through at least July 2003. 

Chiron was not new to the flu vaccine business.  In May 2003, Chiron acquired PowderJect, the prior owner of the Liverpool plant, and suddenly became the second largest vaccine maker in the world, second only to Aventis Pasteur. Chiron would be able to jump into the United States flu vaccine market as a major contender. Since its founding Chiron was committed to developing vaccines through the use of genetic engineering. Chiron acquired the Italian vaccine company Sclavo in 1992 and five years later bought the German company Behringwerke.  Chiron uses European subsidiaries to make about two dozen vaccines from mump to polio to yellow fever.  These vaccines, with the exception of Fluvrin and a rabies vaccine are not sold in the United States.  Chiron’s plan regarding Fluvirin and other vaccines paid off well in 2004 when vaccines accounted for about a third of Chiron's $1.8 billion in revenue, including $322 million from worldwide sales of Fluvirin. (23)

Chiron, however, did not purchase a first class vaccine factory in Liverpool.  It purchased a mess.  Chiron did not publicly disclose this fact.  The FDA on the other hand was fully aware of the plant’s problems since 1999 and deftly looked the other way so many times that Chiron could feel reasonably assured the FDA would do so again.

According to Sara Lueck, Wall Street Journal, Jeanne Whalen, Pui-Wing Tam, Associated Press, (11/5/04): (18)

The FDA, which is responsible for ensuring the safety of medicines entering the nation, says it relied on updates from the company, rather than inspecting the plant itself.…..

As it did with Chiron, the FDA typically relies on the companies it regulates to let it know when problems arise. The agency also does safety testing and monitors patients' reactions to drugs. Companies are required to report manufacturing troubles to the FDA and can face prosecution if they don't..….

Chiron, a biotechnology company with annual revenue of about $1.8 billion, acquired the Liverpool plant when it bought British vaccine-maker PowderJect Pharmaceuticals in May 2003.

The Liverpool factory had a history of problems by the time Chiron acquired it. After a 1999 inspection, the FDA sent the factory's previous owners a warning letter saying it found "significant deviations" from FDA standards, including failure to clean, maintain and sanitize equipment and utensils often enough. Dr. Crawford said there was a "clean-up of the plant" after that warning letter.

In 2000, British regulators ordered the recall of a polio vaccine produced at the factory, concerned it could be contaminated with mad-cow disease because it had been made with materials from British cows. The factory's owner at the time, Celltech Group PLC, was quoted in British press reports as saying there was no evidence that the materials came from infected cows.

On an inspection in June 2003, just as Chiron took over, the FDA found problems similar to those that led to the recent shutdown, including high levels of bacteria in unfinished vaccine, according to John Taylor, head of the FDA's inspection branch. Some in the FDA thought the findings were enough to warrant an official action, such as a public warning letter, recalls a person familiar with the inspection. An "official action indicated" frequently comes with a quick re-inspection of the plant. But the agency, finding no contamination in finished vaccine, decided on a less-severe ruling: "voluntary action indicated."

Chiron gave the FDA a plan to fix the issues, and the agency deemed the company's response adequate, Dr. Crawford says. This year's batch of vaccine, he says, "was not affected by what happened in 2003."

Chiron quickly ramped up production at the plant, committing $100 million to upgrade the facility, replace old equipment and expand. The results were almost immediate: The company was on track to boost its output of Fluvirin to 52 million flu shots in 2004, up by a third from 2003, with the majority slated to go to the U.S.

In late August, when Chiron carried out final tests on Fluvirin, it found a big problem: four million doses were contaminated with a bacteria the company later identified as serratia. On Aug. 26, Chiron's Mr. Pien told regulators and the press he believed "human error" in one manufacturing step had most likely caused the problem. The company ordered more tests and delayed shipping its flu shots until October.

FDA officials happened to be at the plant that day, to review its expansion plans. When notified of the contamination problem, they looked at some records and made a few suggestions but didn't conduct a full inspection. Dr. Crawford says Chiron was conducting its own investigation and would be reporting back to the agency. "Our understanding ... was that this could be overcome," he says.

At the time, U.S. officials believed there would simply be a delay in getting the flu shots and sought to reassure the public. "Ultimately, all people who need flu vaccine should be able to get their shots," said Julie Gerberding, head of the Centers for Disease Control and Prevention, in a conference call with reporters Aug. 27.

The FDA relied solely on Chiron to provide updates on progress with the problem, a step one former FDA chief criticizes. "You've got to act like a public-health agency, and that's what was not done," says former FDA Commissioner David Kessler, who left the agency in 1997 for academia. He says the FDA should have returned to inspect the Chiron plant sooner than it did. Dr. Crawford says inspecting sooner wouldn't have done any good. The FDA needed Chiron's report and finished batches of vaccine, he says.

The FDA began holding conference calls with Chiron at least every week to monitor progress. Throughout August and September, Chiron "appeared to be making progress," Dr. Crawford says. "Then the progress stopped." ….

In their September review, half a dozen British experts on biochemical engineering scoured the Chiron plant and determined the "whole production process" needed to be overhauled, says Kent Woods, chief executive of the U.K.'s Medicines and Healthcare products Regulatory Agency. He said the agency was concerned the plant lacked safeguards to ensure the vaccine was safe.

Unable to pinpoint the root of the problem, Chiron executives say they prepared a draft press release in September, saying the company might not be able to ship the vaccine to the U.S. But the press release was never sent. The company says its retesting convinced Chiron the vaccine was safe.

U.S. health officials say Chiron portrayed the British review as a routine matter. On Sept. 28, in a private meeting at the Department of Health and Human Services, U.S. officials asked Mr. Pien whether he expected any trouble from British regulators. He said he didn't, according to people who were there. Chiron declined to comment.

On Oct. 5, just as flu season was about to hit, British regulators suspended the Liverpool factory's manufacturing license for three months. The suspension, which can be lifted only after the company meets British standards, blocked all vaccine shipments.

Chiron's U.K. executives used a previously scheduled conference call with Mr. Pien and other Chiron executives before dawn in California to deliver the news. Mr. Pien then called U.S. health officials to tell them. A fax from British regulators announcing the suspension arrived at FDA offices just before 6 a.m.

The FDA had previously scheduled an 8:45 a.m. call with Chiron, when officials had expected to hear final results of the company's testing. Instead, they were in crisis mode. Mr. Pien asked whether the FDA could do anything to change the British regulators' decision, says a person who participated in the call.

Dr. Crawford says the FDA never discussed the possibility of trying to change the British regulators' decision. FDA officials say the discussion was focused on getting an FDA team to England to inspect the plant and touched on whether the FDA or the British regulators had authority over the plant.

Later that day, Health and Human Services Secretary Tommy Thompson tracked down Britain's health minister, John Reid, who was on vacation in France, and pressed him to allow an FDA team into the factory as soon as possible. Mr. Thompson urged FDA officials going to Liverpool to do whatever they could to salvage at least some of the vaccine, if it could be done safely.

On Oct. 10, the FDA team arrived at the Liverpool plant in a black minivan. Five days later, they came to the same conclusion the British had -- the vaccine was unusable. The FDA did random-sample testing of the vaccine, Dr. Crawford says, and decided it couldn't guarantee all the vaccine was safe.

After its inspection, the FDA said it believes the contamination occurred at the stage in which the vaccine is poured into vials. Chiron and the British regulators decline to detail what went wrong.

On November 7, 2004, Mike McGraw of the Kansas City Star wrote an article  based on newly discovered documents showing Chiron never came clean about the contamination at the Liverpool plant: (26)

The Kansas City Star obtained a copy of the FDA's 1999 inspection of the plant last week. The report was part of a lawsuit filed on behalf of a woman who allegedly became paralyzed as a result of a 1998 flu shot manufactured at the Liverpool plant.

Chiron settled the case earlier this year, but the details are sealed, said the attorney in the case. ….

Documents obtained by The Kansas City Star show the Food and Drug Administration five years ago noted that the plant, then owned by the British firm Medeva, had failed to correct longstanding problems. But the agency continued to allow the plant to supply the U.S. market despite clear departures from what the agency calls "Good Manufacturing Practices."….

The Kansas City Star determined that the Liverpool plant’s manufacturing process had not been validated, that is certified by the company as effective since the early 1990s.  In fact, the FDA had found problems in the Fluviron manufacturing process in June 2003 but didn’t take formal action.  Chiron was allowed to supply flu vaccine in America for the 2003-2004 flu season.

On November 7, 2004, the San Jose Mercury News reported:

On Jan. 28, as Chiron was preparing to start production of this year's Fluvirin shots, its top vaccine executive, John A. Lambert, said he was ``fairly confident'' the plant would be able to produce 50 million doses, 12 million more than ever before. He also said the Food and Drug Administration had inspected the plant the previous June and pronounced the facilities ``in very good order.''

Chiron planned to ramp up the factory's production using existing staff and ``a lot of the old Chiron expertise,'' Lambert said.

But Lambert's assurances glossed over the results of that June 2003 inspection. He did not reveal that inspectors had uncovered numerous problems at the Liverpool plant, some of them substantial.

The inspection took place as the plant was producing vaccine for the 2003 flu season and before Chiron in July had completed its purchase of PowderJect, the British company that owned and operated the facility.

Acting FDA Commissioner Lester Crawford has said the problems this year were different from those uncovered in June 2003.'

Despite his knowledge of all the problems at the Liverpool plant, Pien still looked for the FDA to approve the Fluvirin vaccine for use in the United States in the fall of 2004.  Pein had high hopes.  Lester Crawford, the FDA Commissioner, nominated by President George W. Bush seemed to be singing Chiron’s tune in that he was saying the problems in 2004 were different from the problems the FDA uncovered in 2003, implying that Chiron must have corrected at least some of these old problems.  Any good word from Crawford about the Liverpool plant, was, to Pien, a reassurance that Fluvirin could still be marketed in the fall 2004 in the United States.

In fact, until October 8, 2004, Chiron maintained the contamination of the Fluvirin was confined to a limited number of lots identified by Chiron’s own testing and that the vaccine was safe to be used in the United States.

According to a later online release by the FDA: (21)

On October 8, the FDA team met with senior leadership of Chiron.  Chiron presented the key results of their investigation, including negative retesting of all other lots, and indicated that they believed that the results, which they had planned to submit to the FDA, supported their conclusion that the contamination problem was confined to a limited number of lots identified by their testing. 

When would the FDA even inspect the Liverpool plant, was the question on Pien’s mind.

On October 9, 2004, the FDA inspection team arrived in Liverpool and met with 2 MHRA inspectors who would act as observers on the team. Finally, on October 10, 2005, for the first time since June 2003, the FDA inspection team initiated the inspection at the Chiron facility in Liverpool. (21)

Still CEO Pien anticipated the FDA would agree with the results of Chiron’s own investigation – that the contamination problem was confined to a limited number of lots identified by their testing.  The FDA did not agree.  In what must have been a total shock to Pien, on October 15, 2004 the FDA shut down Chiron’s flu vaccine operation in Liverpool, and then issued a damning timeline showing that Chiron wiggled around the facts as it tried for weeks to convince the FDA to give its vaccine a pass.  The FDA stated online in a timeline: (21)

FDA's inspection found significant deficiencies in quality control and concerns regarding the test results.  Although Chiron's retesting of the unaffected lots of vaccine has been negative for contamination, FDA has determined that it cannot adequately assure the sterility of these lots to our safety standards.

The gig was up for Pien and Chiron -- but only regarding the 2003-2004 flu season.  Pien was already anticipating the next flu vaccine season. Could Pien handle the pesky legal problems?  Could his executive cohorts David D. Smith, Vice President and Chief Financial Officer and John Lambert, Vice President of Chiron and President of Chiron Vaccines of Liverpool, England, handle the pesky legal problems.

As the guys who get got in Emeryville say, “Let the mea culpas begin!”

According to the Wall Street Journal, (11/5/04): (18)

Mr. Pien has apologized to Congress and pledged to work with regulators to resolve problems. The suspension on the Liverpool plant is scheduled to lift in January, pending approval by British authorities. Dr. Crawford says the FDA is "working lockstep" with British regulators "on getting the plant up and running." Still, in a recent conference call with analysts, Chiron identified a list of items that still need to be fixed before next year's flu season, including overhauling its manufacturing process and improving its quality-control systems.

For Chiron’s executives, it was a time to lawyer  up and shut up and call in the
chits from the local judges and people in the Department of Justice Chiron had
come to know and love.

CEO Pien still put his head on his pillow at night without too much concern.  Chiron had not fired him and was still cutting him a fat paycheck. How could that be?  His future looked like a walk through landmines.

The pesky legal problems only got peskier.

On October 12, 2004, the U.S. Attorneys office for the Southern District of New York issued a grand jury subpoena to Chiron seeking documents and materials relating to Chiron’s Fluvirin and UK regulators decision so suspend manufacture of the vaccine. (19 Par. 50).

On October 13, 2004, the Wall Street Journal reported that the SEC initiated an informal investigation of Chiron “to determine if the company failed to adequately disclose the extent of problems at the Liverpool, England facility that made its influenza vaccines.” (19, Par. 51) (Later in February 2005, that SEC investigation was elevated from informal to formal.)

On October 19, 2004 the Los Angeles Times reported Chiron hired Washington, D.C., defense attorney Robert S. Bennett to coordinate its legal strategy. Bennett is said to be concentrating on a criminal probe of Chiron by the Justice Department and an inquiry by the SEC.  Bennett was the attorney for President Bill Clinton during impeachment proceedings.

On Oct. 20, Chiron announced a $91 million write-off on its 2004 inventory of the Fluvirin.

What was CEO Pien’s reaction to this series of legal attacks?

Facing the Congress, New York prosecutors, lawsuits and the SEC, Pien worked on selling the next season’s flu vaccine. Pien promoted Chiron’s new method of vaccine preparation using dog kidney cells to accelerate the preparation process from five months (the current chicken egg process) to two months. According to Zina Moukheiber, Forbes.com (11/1/04): (27)

Chiron is racing to finish late-stage trials of a method that grows strains within clones of 1980s-era dog kidney cell.  It expects to seek regulatory approval by the end of the decade

.…..

In the late 1990s scientists at Chiron’s laboratory in Marburg, Germany were looking for a more predictable flexible incubation medium.  They settled on dog kidney cells.  With the proper cocktail of chemical nutrients, a cell line fermenting in a cylindrical vat at about 98.6 degrees Fahrenheit can generate millions of cells growing in suspension.  One strain of virus then infects all cells, producing a soup full of virus.  Scientists inactivate the virus with formaldehyde and purify the liquid of cellular debris.

In 1999, Chiron signed an agreement with Aventis to jointly develop and fund the technique.  Aventis had the rights to sell it in the U.S. anted Chiron in the rest of the world.  But this past January Agnates broke off its deal with Chiron to pursue a different approach using human retinal cells.  Chiron regained U.S. rights, and Agentis had to step a few years back in the race.

Michael De Wilde, who heads research and development at Aventis’ Pasteur division, says his firm’s work with human cells allows for more precise documentation of cell-line genetic traits, which is important in case something goes awry, such as cancer.  “The perception of safety is better,” says DeWilde, who claims that scientists are more in the dark with dog cell lines.  DeWilde also disagree with Pien’s assertion that the use of animal cell cultures can cut production time significantly. “It is an illusion,” he said.  Testing the vaccine in ferrets before moving on to humans will take six to eight weeks, eliminating any head start over the traditional egg method. 

Pien disputes Aventis’ interpretation.  Chiron plans to invest more than $100 million to refurbish the lab over the next three years, but one little bacterium has laid waste to its plans for now.

Pien was courageous in the face of SEC action, Congressional investigation, and the calling of a grand jury in New York.  Despite the fiasco of the shutdown of its 2004-2005 flu vaccine program, Chiron had better plans for the Liverpool lab – to grows strains within clones of 1980s-era dog kidney cell.  The question is inevitable: Did Chiron really not care much about the Liverpool plant in regard to its production of vaccine from eggs because in fact Chiron wanted to renovate that plant to produce vaccine from dog kidney cells?

As the old timers say in Emeryville, “The mob has the best lawyers and  judges money can buy.”

In October 2004, the first of several derivative shareholder lawsuits were filed in U.S. District Court, San Francisco.  The Judge “randomly” assigned to the first of these lawsuits was Vaughn R. Walker, and subsequently he took over subsequent related filings. 

Also, in October 2004, several lawsuits were filed against Chiron in Alameda County, which were eventually consolidated into one case, In Re Chiron Corporation Derivative Litigation, before Judge Ronald M. Sabraw.

Pien looked at his fortress Chiron, firmly ensconced in Emeryville, and sighed the sigh of total relief – Vaughn Walker and Ronald Sabraw were two judge who had a long history in Emeryville, and were not known to have stood in Chiron’s way over the years.  FBI Director Robert Mueller, had served as the U.S. Attorney in San Francisco, prior to his elevation to FBI director and he had not stood in Chiron’s way over the years. And as for that pesky grand jury summoned by the U.S. attorney in New York, the same prosecutor who put Martha Stewart into Camp Cupcake and fastened a telltale bracelet around her ankle, didn’t he know that that the venue for cases against Chiron was the Northern District of California?

So what kind of a past have Judge Vaughn R. Walker, Judge Ronald Sabraw and their associates and FBI director Mueller have in common with Chiron and its cronies in Emeryville? 

Next, the story about Chiron’s contamination of Emeryville itself and its citizens and the conduct of those characters, high and low, who killed a federal litigation adverse to Chiron’s interest in building its world headquarters, will be told. 

by Kathryn Joanne Dixon © 4/27/05 

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