Pharmacy chain CVS has over 2,000 store-brand health and wellness items, and it appears to have cut corners to cheaply source some of those products at the expense of its customers, according to a new report from Bloomberg.
CVS has twice the recalls on generic, over-the-counter drugs as competitor Walgreens, found the Bloomberg investigation, which analyzed data from the Food and Drug Administration. In the past decade, CVS had 133 recalls of generic-brand over-the-counter drugs compared to 70 from Walgreens and 51 from Walmart.
The prevalence of the chain’s recalls are linked with supplying drugs from tainted factories, the investigation concludes. FDA inspectors found bacteria-contaminated water in one now-defunct Florida factory producing fruit-flavored children’s medication for fever, allergies, and pain. In January, FDA investigators found standing liquid inside an air purifier, which later developed colonies of mold, at CVS’s generic Allegra allergy medication producer in India.
CVS has outsourced products from factories in order to save money, per Bloomberg, including from 15 manufacturers in the last 10 years that had previous problems with producing medications. Because CVS is a “private-label distributor” of its own-brand drugs, it can skirt FDA requirements to approve or reject the medications. Instead, the onus is on the manufacturer to approve the products. According to Kevin Schulman, a professor of medicine at Stanford University, when companies are asked to choose between quality and price, they often veer toward cheap means of sourcing items.
“The best way to make a low-price product is to skimp on quality and that’s what we’re seeing over and over and over again,” he told Bloomberg.
A CVS spokesperson told Fortune its recalled store-brand over-the-counter products make up fewer than 1% of the FDA’s drug recalls in the past 10 years. It also completes an average of 350 daily tests to assess the quality and safety of its products, the person said.
“CVS Pharmacy’s store brands are designed to maximize quality and safety, work as intended, comply with regulations, and satisfy customers,” the spokesperson said in a statement. “We work with manufacturers and regulatory agencies, such as the FDA, to ensure all quality and safety standards are met or exceeded.”
Beyond its recall rate, CVS, which owns the health insurer Aetna, has struggled to bring in revenue due to high medical costs in the insurance industry as patients return to hospitals for more intensive surgeries after the pandemic. In May, the company adjusted its 2024 earnings to $7 per share, compared to its previous forecast of $8.30 per share.
A growing recall problem
Though CVS has recorded more recalls compared to its retail competitors, growing recalls are an industry-wide issue. Pharmaceutical recalls skyrocketed to 517 events in 2023 compared to 363 the year before, a 42.4% increase, according to Sedgwick’s State of the Nation 2024 Product Safety and Recall report. However, while 2023 had the highest number of pharmaceutical recalls in a decade, those recalls affected far fewer products than past years.
Most of those recalls are due to poor temperature control, especially for over-the-counter medications, followed by failed specifications or failure to meet certain standards, and concerns over sterility, particularly for eye drops. Of the 131 pharmaceutical recall events that took place in 2023’s fourth quarter, 62 companies were impacted.
The increase in tainted generic-brand drugs led the U.S. Department of Defense to tap independent lab Valisure to test dozens of medications for dangerous chemicals in August 2023. The U.S. has increasingly relied on factories overseas, particularly in India and China, to produce generic medication, and concerns over the quality of non-brand name products have risen amid a widespread drug shortage crisis that has made it increasingly important to produce and supply effective medication.
“Supply chains have become more diverse at the same time as medicines have become more complex,” Sedgwick’s report said.
But U.S. authorities have not always kept a close enough eye on overseas factories to ensure they deliver safe products, former FDA inspector Massoud Motamed warned. He told NBC News in 2019 that the FDA failed to heed his warning that two factories in India and China had systemic issues impacting the production of blood pressure medication valsartan. Later, it was revealed the drug was contaminated with a substance also found in rocket fuel production.
“Growing up, we had this saying, ‘You get what you pay for,’” Motamed said. “We have that belief for everything except pharmaceuticals. If we want to drive competition and drive the price down, it comes at the cost of quality.”Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up for free today.
