Leiner: Fort Mill workers to blame for recent woes

FORT MILL -- Leiner Health Products believes former Fort Mill employees are to blame for the company's continued quality shortfalls and now legal woes, said Chief Executive Officer Bob Kaminski.

During a conference call with investors and reporters Tuesday, Kaminski said former employees who did not follow Leiner quality standards sparked the company's failed inspection by the U.S. Food and Drug Administration.

"Those people have been identified and relieved of their duties," Kaminski said.

In March, Leiner, a leading maker of generic vitamins and over-the-counter drugs, was issued a warning by the FDA for not meeting good manufacturing practices at its Fort Mill plant, located in the Lakemont Business Park off Carowinds Boulevard. The warning led the company to stop production and recall all over-the-counter drugs. Production has yet to resume, and Leiner laid off 500 Fort Mill workers in June to offset losses, company officials said.

Earlier this month, the FDA issued another warning related to the same violations, and last week, the U.S. Department of Justice announced it was investigating Leiner in connection to the FDA troubles, according to a document Leiner filed with the U.S. Securities and Exchange Commission.

The company has maintained its product recall was related to shelf-life issues. Kaminski only recited prepared statements Tuesday and did not field any questions.

Kaminski said the company has improved its quality control practices in recent months and hired a new vice-president of quality control. He said Leiner has received "generally positive feedback" from the FDA since the March inspection but added a timeline for Leiner's return to store shelves is not available.

He said the company has hired a leading FDA-related law firm to help navigate the justice department investigation. "We intend to cooperate fully," Kaminski said.

However, an analyst believes the investigation will hamper the company's return to store shelves.

"The impact is pretty negative as it relates to their customers," said Derek Leckow of Barrington Research, who follows Leiner and its competitors. "The immediate impact is they won't be able to produce any time soon, and that could prevent them from filling orders."

Leckow said Leiner's main competitor, Michigan-based Perrigo Co., recently cited increased earnings attributed to more orders since Leiner's production ceased this spring.

The best case scenario for Leiner is to consider outsourcing production so it can continue to meet demand from customers until the investigation concludes, Leckow said. He said the company is losing money because its revenue has dropped. Meanwhile, expenditures are rising as the company tries to bring its manufacturing practices into agreement with federal inspectors.

Leckow said Leiner's mistake has been not making quality control a top priority.

"As regulations rise, it's important for these companies to stay ahead of the curve and invest in quality control," he said. "It's part of doing business in this industry."

Yet, Leckow said there's still hope for Leiner if it meets federal standards, returns to the market and takes proactive steps to repair its reputation.

"This doesn't have to be a fatal blow," he said. "There are still plenty of options for this company."