A long legal battle seeking insurance coverage for a manufacturing issue at a Pfizer plant in 2017 has ended in defeat for AMAG Pharmaceuticals. A district judge in Massachusetts recently ruled in favor of AGLIC, AMAG’s insurer, denying the company the opportunity to recover business losses allegedly caused by “direct physical loss of or damage to” Pfizer’s property. In simple terms, this ruling means that AMAG will not receive compensation for the incident at Pfizer’s Hospira legacy plant in McPherson, Kansas.
The legal dispute began when AMAG filed a complaint against AGLIC in April 2021, accusing the insurer of improperly refusing to cover the losses incurred following a technical breakdown in Pfizer’s M6 filling room at the McPherson plant.
AMAG had sought regulatory approval and held marketing rights for Makena, a preterm birth drug that was withdrawn from the market in 2017. During that period, AMAG had contracted with Pfizer to produce Makena in the M6 segment at the McPherson site.
The issue in question involved a piece of equipment known as the M6 trayer, typically used in the manufacture of freeze-dried products.
While Makena is a liquid-filled product and did not require the use of the trayer, the equipment was used to hold the product. In November 2017, environmental monitoring alarms in the M6 filling room detected particulates in the manufacturing area. It took Pfizer 17 hours to identify the cause of the alarms—a leak of filtered compressed air from one of the M6 trayer’s lyophilized rake arms, which was resolved by simply adjusting a bolt.
AMAG’s complaint was based on the testimony of its then-VP of Quality, Oscar Sanchez, who speculated that a section of the air line had become dislodged, although he had never seen the air line in question, according to court records. Pfizer attributed the issue to a loose fitting, which was easily corrected to prevent recurrence.
The air leak resulted in mold formation on the M6 trayer, forcing Pfizer to halt production in the entire M6 filling room from September 12, 2017, to January 20, 2018. Before the shutdown, Pfizer had manufactured four batches of Makena, but due to the risk assessment related to the air leak and mold situation, these batches were never released. AMAG claimed that the failure to receive these batches cost the company over $30 million in lost sales and other incidental losses.
Pfizer’s McPherson plant has a history of problems. The facility, originally part of Hospira before Pfizer acquired it for $15 billion in 2015, received an FDA warning letter in early 2017 due to several issues dating back to 2014, including complaints about particulates in product vials.
The FDA criticized Pfizer for failing to prevent contamination and for not reporting the problem as required. In December 2018, the FDA issued another Form 483, highlighting multiple problems at the Kansas facility. Consequently, during the fiscal year, Pfizer increased its capital expenditures to modernize its Sterile Injectables network, adding new equipment and staff.
