”W '—" Illllllllllllllllllllllllllllllllllllllllllllllll 3 1293 10659 5808 , ,-_ $7 1 "" ""‘ ’ / 'ffis'l , WESIS . V9.19/ fl / , ‘I (K, I’ - /- I t tug/4432:1242 , ‘ ’-f”" e’ " l’ . . - / .- -/ , ,-,t .1, F V” 1'” 4%,”, /5 'uyi’izsv' 1:. , 6'6” ’1 7-91 37(64/64 9/ cgrfifgix $ 5 r r, ' r»- ,pzl /r{// I fi, 7/ // d s ._ _‘ _ ‘_ ‘ i" l I H i 1 This is to certify that the thesis entitled AN ECONOMIC STUDY OF THE NEW TAMPER-RESISTANT PACKAGING REGULATION presented by VAL ER I E HAMM has been accepted towards fulfillment of the requirements for M.S. PACKAGING degree in Major professor Dr. Hugh E. Lockhart Dateh‘sz’fl J) /qS/7/ 0-7639 MS U is an Affirmative Action/Equal Opportunity Institution hASLJ RETURNING MATERIALS: Place in book drop to LJBRAfiJES remove this checkout from “ your record. FINES will be charged if book is returned after the date stamped below. ‘ 1 l sa;:;r . . _. t ., MAR 2 91.994 .33”? I'm-v. : "" fill; 2'" ‘vs/ '- .34 ‘l I I“ I. '9.~¢€'.: l ‘9 shit 1; 1;. 5 a 1k 9 a 9? 3525319.; (“v-F i A §5§§4s JUL 2 2 2009 AN ECONOMIC STUDY OF THE NEW TAMPER-RESISTANT PACKAGING REGULATION BY Valerie Hamm -A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of ' MASTER OF SCIENCE School of Packaging 1983 ABSTRACT AN ECONOMIC STUDY OF THE NEW TAMPER-RESISTANT PACKAGING REGULATION BY Valerie Hamm In November 1982, the FDA issued a regulation requiring tamper—resistant packaging for all over-the-counter (O-TBC) drug products for retail sale. This sudden legislation resulted in many economic problems for all involved. These economic effects were studied through the use of a mail-in survey which gathered specific economic information from both tamper-resistant packaging supplier companies and tamper- resistant packaging user companies. The companies required to use tamper-resistant packaging experienced many new costs due to the new regulation. Their total cost increase per package, however, was quite a bit lower than the actual price increases their customers are now paying for the company's products. The tamper-resistant supplier companies also experienced many additional costs due to the tamper-resistant regulation. Their total costs seem to be lower than the dollar value of their increased sales from tamper-resistant materials or machinery. Even though their gains outweigh their costs from this regulation, the suppliers indicate they will pass their costs on to their consumers. ACKNOWLEDGEMENTS I would like to express my appreciation to my committee members Dr. Hugh Lockhart, Dr. Richard Brandenburg, and Mary Zehner for their help in this study. I would also like to thank all the companies who parti- cipated in this project, who took the time to gather this information and to complete the questionnaire for me. Most especially I would like to thank my parents for making it possible for me to go to graduate school. ii TABLE OF CONTENTS List of Tables Introduction History of Tamper-Resistant Packaging The New Regulation: 21 CFR Parts 211, 314 a 700 A Comparison of the Child-Resistant and Tamper- Resistant Packaging Regulations Pre-Regulation Economic Predictions for Tamper- Resistant Packaging Economic Study General Results of Pharmaceutical Company Survey General Results of Supplier Company Survey Product Price Checks Errors Conclusion Notes APPENDICES A. List of Products Affected by Child-Resistant and Tamper-Resistant Regulations B. 21 CFR 211.132 C. 21 CFR 134.8 D. 21 CRF 700.25 E. 21 CFR 200.50 F. 21 CRF 800.12 G. Survey Cover Letter iii Page 10 14 20 35 51 55 56 63 65 66 68 74 76 78 80 TABLE OF CONTENTS (CONTINUED) APPENDICES (Continued) H. Survey - Pharmaceutical Companies 1. Survey - Supplier Companies J. Data - Pharmaceutical Companies K. Data — Supplier Companies Bibliography iv Page 81 88 92 102 106 Table N0. 10 11 12 13 14 15 16 LIST OF TABLES Title Size of Population, Sample and Returns for Pharmaceutical Companies Respondent's Area of Responsibility - Pharmaceutical Companies Sales Volume - Pharmaceutical Companies Different Measures of Company Size Most Common Tamper-Resistant Materials In Use Before the Regulation Percent of Packages Already Tamper-Resistant Before the Regulation Most Commonly Used Tamper-resistant Materials and Devices and Average Cost Per Package Size of Pepulation, Sample and Returns For Tamper—Resistant Supplier Companies Respondent's Area of Responsibility — (Suppliers) Nature of Business - Supplier Companies Sales Volume - Supplier Companies Average Machinery/Equipment Costs to Supplier Companies Labor Changes for Supplier Companies Due to Tamper-Resistant Legislation Changes in Advertising Costs for Supplier Companies for One Year Following the Tamper- Resistant Regulation Changes in Sales Volume for Supplier Companies for One Year Following the Tamper-Resistant Legislation Will Supplier Companies Pass Increased Costs on to Their Customers? 23 25 27 28 29 35 37 39 41 43 44 46 48 SO Table NO. 17 18 19 20 LIST OF TABLES (CONTINUED) Title Supermarket Purchases Drugstore Purchases Average Costs - Pharmaceutical Companies Average Costs - Supplier Companies vi 57 59 I N TRODUCTI ON Between September 30, 1982, and October 2, 1982, seven people died in the Chicago, Illinois, area from cyanide poi- soning. It appears that the person(s) responsible for the deaths replaced the ingredients in Extra Strength Tylenol Capsules with the poison and put a few contaminated capsules in each of eight containers. They then replaced them on the shelves at the front of retail displays where they were quickly purchased. The victims, having no indication that the product had been tampered with, consumed the medication and died. In order to protect the public from further product tampering crimes, State and local governments proposed various laws and regulations concerning the packaging of over-the- counter drug products. Cook County, Illinois, approved an ordinance in early October requiring that all O-TBC drugs sold in that county be in sealed containers.1 The city of Chicago also proposed a similar ordinance.2 In order to assure uniform guidelines for all manufac- turers of O-THC drugs in all geographic markets, the FDA decided to develop and issue a regulation at the national level to protect the public from the possibility of O-TBC product tampering. The government realizes that they can not guarantee that products will be tamper—proof, but they feel certain it is possible to make them ”more resistant to tampering."3 This new FDA regulation will preempt the various State and local packaging requirements that have been issued.4 HISTORY OF TAMPER-RESISTANT PACKAGING Tamper-resistant packaging has been available since the early 1900's. It is most commonly used as a device to reduce pilferage, consumer product sampling, and cap switching which is done to take advantage of lower prices. It has been required for certain products, but the reason for this was to insure product sterility or quality such as with opthalmics,5 milk6 and liquor.7 Tamper-resistant packaging has not yet been used to prevent a determined individual from getting to the product without alerting the purchaser. THE NEW REGULATION: 21 CPR PARTS 211, 314 and 700 The new regulation amends Title 21 of the Code of Federal Regulations and its following parts: 211 Drugs-Manufacturing, Labeling, Laboratories, Packaging Containers 314 Administrative Practice and Procedure, Drugs 700 Cosmetics, Definitions, Prohibited Cosmetic Ingredients Under Part 211, the regulation establishes a requirement for tamper-resistant packaging for O-T-C drug products which will improve packaging security and assure the safety and ef- fectiveness of the drug products.8 The regulation requires that O-TBC drugs for retail sale be in tamper—resistant pack- ages. (See Appendix A for list of specific products affect- ed.) These are defined as packages "having an indicator or barrier to entry which, if breached or missing, can reason- ably be expected to provide visible evidence to consumers that tampering has occurred."9 Labeling for these products must contain a statement a- lerting consumers of the specific tamper-resistant feature of the package. This statement must be placed such that if the tamper-resistant feature were damaged or missing, the state- ment would be unaffected.10 The FDA does not specify what must be used to provide tamper-resistance, but gives suggestions for currently avail- able packaging systems which they believe are capable of meet- ing the requirement of their rule. Their intention is to leave the area Open to new technologies, while specifying which currently available devices are considered appropriate. Drug products that are not packaged in tamper-resistant packages, or are not properly labeled under 21 CFR 211, are considered to be adulterated or misbranded.11 These same general principles apply to new drug products and cosmetics under Parts 314 and 700 respectively. The following indicates effective dates for 21 CFR 211.132: I. Requirements for tamper—resistant packaging. A. February 7, 1983. 1. For all O-T-C Drugs and Cosmetics most vulnerable to tampering. Includes: Oral, vaginal and rectal drugs (other than tablets and sup- positories), otic drugs, nasal drugs, opthalmic drugs. B. May 5, 1983. 1. For all tablets and suppositories which are less susceptible to tampering. Includes: Oral and vaginal tablets, and vaginal and rectal suppositories. II. Requirement for label statement and requirement that barrier to entry be distinctive. A. May 5, 1933. III. Requirements that all stocks held for sale (including in retail stores) be in compliance with the regulation. A. February 6, 1984.12 Some amendments have been made to the rule since its writing. Definitions have been clarified and products have been excluded from a part or all of the regulation. The FDA also stated that one of their previously approved tamper— resistant packages is no longer considered appropriate for this rule. The wet seal or cellulose band, as currently manufactured, does not meet the requirements of the regula- tion.13 A COMPARISON OF THE CHILD-RESISTANT AND TAMPER-RESISTANT PACKAGING REGULATIONS The regulations requiring tamper-resistant and child- resistant packaging are very similar. Both affect the O—T-C drug industry, therefore similar economic effects would be expected. Unfortunately, this type of study was not done following the child-resistant regulation, so we cannot esti- mate the economic effects of tamper-resistant packaging by comparing the two. What can be done, however, is to compare how and why the regulations were written and see which areas were likely to produce the largest economic effects. This might be impor- tant if the FDA does extend the tamper-resistant regulation to other industries, although in 48 FR 16660 they indicate no plans for broadening the sc0pe of the regulation.14 Child-Resistant Packagigg The need for child-resistant packaging was recognized because children were dying from accidental poisonings caused by ingesting hazardous household products. In the early 1960's, the United States government began making efforts to decrease the number of these deaths. Their efforts centered around informational programs and various forms of publicity intending to teach adults to keep toxic substances out of the reach of children. These programs proved to be ineffective, so in September of 1970, the government decided to take an- other direction in solving the problem. The FDA created a committee which proposed a set of performance standards for safety closures to be used on hazardous substances kept in the home. (See Appendix A for list of products covered.) These standards were set in the Poison Prevention Pack- aging Act.15 The special packaging required by the Act is in- tended to reduce the risk to small children by either pre- venting access to the substance, or by preventing access to a harmful amount of the substance. The regulation does not specify a specific type of package to use, but gives quanti- ties and measurements which the designers must insure the package meets. The closures are to be tested and cannot be designated child-resistant unless they pass these protocol tests given in the regulation. Tamper-Resistant Packaging The reason for writing the tamper-resistant packaging regulation was different from the reason for child-resistant packaging. It was not accidental entry into the package that created the need for this regulation, but deliberate entry by someone intending to do harm, even before the product reached the home. Because many of these serious tampering crimes occurred in a short period of time, the FDA issued an im- mediate final rule. The lengthy preparation time available with the child-resistant regulation was not allowed for the tamper-resistant regulation. The tamper-resistant packaging regulation does not include an effectiveness test for the new packages as the child-resistant regulation did. There is no quantitative measure of exactly how resistant to tampering the package must. be. This may prove to be a problem for the industry since the determination of whether a package shows "visible evidence” of tampering is a personal judgement. Some comments from a con- sumer focus group on tamper-resistant packaging reflect this variety of opinion. After being shown a bottle with a seal over its mouth, consumers said: "I'd feel better if there was an exterior device as well as (an) inner seal...something like a shrink band. Maybe it's silly, but I'd just feel more comfortable."16 vs. "If you have a sealed bottle, then overwrap is superfluous packaging, even under the circumstances. I mean, I would feel comfort- able enough with a film-wrapped package...'17 These differing opinions may result in economic effects for the pharmaceutical companies if consumers believe one type of tamper-resistant package is less effective than another. PRE-REGULATION ECONOMIC PREDICTIONS FOR TAMPER-RESISTANT PACKAGING The economic effects of this new regulation were a major concern to many during the preparation of its details. The government studied the parts of the industry that would be affected and made their predictions as to the extent of the impact. O-TBC industry members also made their own predic- tions, which tended to be quite a bit higher than those made by the FDA. These estimates will be summarized in the follow- ing section, and later compared with the actual results. The economic consequences of the legislation were consi- dered by the FDA before issuing the regulation. The expected problems were discussed in the Federal Register and the FDA's solutions were explained. They felt that one single, early effective date for the regulation would cause unnecessary economic problems because the industry would be forced to compete for scarce resources. Those companies unable to get the resources would have to discontinue marketing their product after the effective date. This would also produce a ”serious strain“ on the packaging machinery industry, which might not be able to produce the needed equipment. These problems would make the cost of compliance unnecessarily high for the manufacturers and, in turn, the price of O—TBC drugs to consumers. 10 11 As a solution to these potential problems, the FDA issued sequential effective dates. This Spread the demand for the resources over a longer period of time, allowing supplies to meet demand and insuring that the highest risk products would be tamper-resistant immediately. In order to eliminate the costs associated with imme- diate removal of non-complying products from the retail shelves, the regulation would have to apply only to those products produced after a final effective date. The serious- ness of the problem, however, suggested that a final effective date be set, after which all products sold would have to be in tamper-resistant packaging. The earlier this date was, the higher the costs associated with that step would be. To reduce these problems, the FDA set their final date 15 months following the regulation's writing and explained why they expected this to create few problems. The FDA believes ”the market will be significantly depleted of products in non-tamper-resistant packaging within a relatively short period of time,” therefore the retail level effective date of February 6, 1984, will have little economic effect.18 Even after this statement, the agency indicated that they were un- certain of future economic problems, therefore they are allowing for changes in this area. Potential economic effects will be observed and if they are found to be severe, the agency will review the need for the date and what that date should be. This will happen far enough before the retail level effective date occurs, that any changes can be taken into account by those who will be required to use it. 12 These economic problems were considered by the FDA be- fore the issuing of the regulation, hoping they could reduce or prevent high costs to the industry. There were many other economic effects which could not be avoided, and the FDA tried to estimate these costs. The following list summarizes the FDA's expected economic effects caused by this regulation. The FDA did put dollar values on their estimates. The following quotes and estimates come from 47 FR 50449: ”The rule will affect approximately 2 billion retail packages per year.“ “Approximately 10-30 percent are already packaged in ways defined as tamper-resistant, therefore will only need labeling statements and distinctive indicators or barriers to entry.” ”All costs seen are not all attributable to final rule since it can be expected that many manufac- turers would have gone to some sort of tamper-resistant packaging even without the regulation.“ ”Expert Technical Committee on Tamper-Resistant Pack- aging estimated unit costs of tamper-resistant packaging to range from a fraction of a cent for some popular packaging systems, such as shrink seals, to several cents per unit for bubble packs and manual seals." ”If unit costs average 1.0 to 2.0 cents per retail package, aggregate recurring costs for tamper-resistant packaging would be $20 - $40 million per year." ”Costs for new packaging equipment is not expected to have a significant impact on the average cost per package. The cost of packaging equipment varies widely from less than $100 to over $100,000 per unit.“ “The one time change in labeling for all affected pro- ducts is expected to cost $5 - $10 million.” “The agency does not believe that the industry will experience significant costs for stocks of obsolete packaging at the six month effective date.“ 13 ”The 15 month retail level effective date may result in some returns of non-tamper-resistant packages to manufacturers.” The agency believes these will be “very small” in volume and confined to the smallest retail level. “Thus, the agency believes that the total cost of conversion to tamper-resistant packaging would not be sufficient even in its entirety to warrant desig- nation of the rule as a major rule.“ Other economic predictions were made after the regu- lation was written. The PrOprietary Association estimated that new packaging for the non-prescription drug industry would cost the consumer 2 cents to 10 cents per package.19 An analyst with a leading securities firm predicted that better closures would raise prices 1 percent to 2 percent.20 Another potential economic problem area is the area of product lia- bility. Non-compliance with the regulation can cost anywhere from $2000 to $50,000, but compliance does not guarantee pro- tection from these fines.21 In the case of deliberate product tampering which results in injury, juries will decide the ex- tent of compliance and whether the manufacturer is free from liability. Insurance for the manufacturing companies may pro- tect them from huge liability suits, but will also add to the cost of O-TBC products.22 Economic predictions were also made for the supplier industry affected by this regulation. Many felt the suppliers would benefit by increased sales volume. Some supplier com- panies observed a sudden increase in stock value immediately following the regulation, an obvious indication that experts expected a significant increase in business for the tamper- resistant packaging suppliers.23 ECONOMIC STUDY Reasons for Study This study was done in order to investigate the economic effects of the new tamper-resistant packaging regulation on all companies involved. The information might be important to members of the industry who are interested in estimates of implementation costs for tamper-resistant packaging. The in- formation could also be helpful to the FDA, to determine pro- blem areas of this regulation. This would be useful if the government extends the regulation to the food or cosmetic industry, although the FDA currently maintains that the scope of the rule will not be broadened. Methodology The findings of this study are based on information de- rived from questionnaires sent to 138 companies who are in some way involved with tamper-resistant packaging. Some of these were drug manufacturing companies which were required to use tamper-resistant packaging for some of their products and others are those companies which supply the materials, com- ponents and equipment used to make tamper-resistant packages. A variety of these companies were contacted (82 suppliers and 56 users) and asked to specify exactly how this regulation affected them economically. Not only were specific topics 14 15 covered, but comments were encouraged to explain misleading dollar values or other irregularities. Those who received the surveys were also asked to indicate any economic effects their company may have seen which had been overlooked in the survey. Although these commments resulted in information not given by all respondents, they also allowed for clarification of an- swers which might otherwise have been misunderstood. Before the actual study was done, a test survey was used to improve the quality of the questions and to insure that no economic areas were omitted. Sample surveys were sent to two material suppliers, two machinery suppliers and two pharma- ceutical companies. After revisions were made, the actual surveys were sent out with a cover letter explaining the study, a stamped- return envelope, and a phone number to call if any questions arose. The respondents were given one month to complete the survey. (See appendices H & I for surveys.) Sampling Process Population: It is difficult to determine the population sizes for the tamper-resistant packaging industry. It is only a small por- tion of a much larger industry and it is often hard to sep- arate the two. The 1983 Physicians Desk Reference for Non-Prescription Drugs was used to determine the population size for the drug manufacturing companies. From this reference, all the 16 companies which manufacture O-TBC drug products covered by the new regulation were counted. The total number of these com- panies came to 82.24 This number was verified by a member of the Proprietary Association who said their association con- sists of approximately 80 members who represent 80-90% of the industry. Determining the population size of the tamper-resistant packaging supplier industry was not as direct. The 128; Packaging Encyclopedia Buyers Guide for PackagiggMaterials was used to find all United States suppliers of packaging materials, components or machinery which could be used to pro- duce tamper-resistant packages. The categories used for the count were 3 A. In the Machinery Section: 1. Blister form, fill and seal 2. Tamper-proof capping 3. Neckband applying 4. Tamper-indicating labeling 5. Shrink packaging, sleeve wrapping 6. Shrink tunnels B. In the Packaging Supplies and Materials Sections: 1. Tamper-indicating closures 2. Cellulose bands 3. Foil bands 4. Plastic bands 5. Blisters (for this study blisters and bubbles are being considered the same for two reasons; The Glossary of Packa in Terms gives almost identical definitions for tfie two package forms and people in industry seem to interchange the two terms.) 17 This estimate of pOpulation size may be much larger than is actually true because I cannot be sure that all companies on this list supply materials to the O-TBC drug industry. I have excluded all distributors of these packaging materials from the list because they only sell the materials produced by those companies already counted. Using this method, the pOp— ulation size for tamper-resistant packaging suppliers was determined to be 332, but it is likely that the actual number is much smaller. Sample Size and Content: The sample used for the O-TBC drug manufacturing indus- try consists of 56 companies from throughout the United States (68.3% of the population). Because survey responses tend to be better when sent to a specific individual rather than a general title, these surveys were sent to employees who have had some contact with Michigan State University. The names came from lists of people attending industry courses at the Michigan State University School of Packaging, inter- viewers at Michigan State University's Placement Center, Michigan State University alumni and others known by members of the Michigan State University School of Packaging. The supplier company sample consists of 82 suppliers (24.7% of the population) from all over the United States. These names also came from a variety of different lists, in- cluding placement service interviewers, former Michigan State Univeristy Packaging students, advertisers in various 18 packaging magazines, tamper—resistant packaging suppliers from a Packaging Digest list, members of the PMMI packaging show in November 1982, and contacts of the Michigan State University School of Packaging. Although the samples came from lists, the author be- lieves the purpose of the lists were diverse enough to pre- vent the problem of too much similarity between companies sampled. Sampling Method: The sampling method used is similar to a disproportional, unequal, stratified sampling plan (or controlled sampling).25 In this type of sampling plan, unequal numbers of the dif- ferent categories (stratums) are used and the actual numbers used are not proportional to the total population. Unequal sample sizes are appropriate in this study because we are not trying to compare the two samples (drug manufacturers and suppliers). The samples are disprOportional because it would have been uneconomical and impractical to make them both pro- portional to their population size. Sampling the same per- centage of suppliers and users would have required a supplier sample size of well over 100 companies, something I was unable to do. Reducing the number of drug companies sampled in order to get their percentage as low as that of the sup- pliers would have resulted in a sample size of twenty - a num- ber too low for statistical accuracy. 19 Time of Study: The study was conducted during May of 1983, soon enough after the regulation's writing that the information was still uncollected, but late enough that most companies had time to gather the costs. GENERAL RESULTS OF PHARMACEUTICAL COMPANY SURVEYS Pharmaceutical survey data is contained in Appendix J. Of the 56 surveys sent to the drug manufacturing com- panies, 20 were returned as usable. The 20 surveys were used to calculate a return of 35.7%, a typical return percentage according to our survey specialist. Five out of the 20 surveys returned were considered not applicable because they did not supply the over-the-counter market. One other questionnaire said it was too early for them to give exact dollar figures and they felt estimates were not appropriate for our study. After substracting these surveys which were not applicable to our study, a total of 14 usable questionnaires were obtained. This represents a usable return of 25%, which is 17% of the total industry. TABLE 1 SIZE OF POPULATION, SAMPLE AND RETURNS FOR PHARMACEUTICAL COMPANIES ~Returned Usable Population Sample Surveys Surveys Number 82 56 20 14 % of Sample 35.7% 25.0% % of Population 68.3% 24.4% 17.1% 20 21 Area of Responsibility Question 1 asks for the area of responsibility of the person completing the questionnaire. The purpose of this was to see if a certain type of employee was more likely to com- plete the survey. Almost all of the returned forms were com- pleted by a member of some sort of packaging department. This is probably because the packaging people are most directly affected by this regulation, the most knowledgeable about the subject and therefore, more likely to complete the question- naire. TABLE 2 RESPONDENT'S AREA OF RESPONSIBILITY PHARMACEUTICAL COMPANIES PaCkagingoooeooeoeeoooeoeoeee.12 Production/Manufacturing...... 1 Purchasing.................... l mTALOOOOOOOOOOOOOOOOOOOO00.0.14 Company Description Questions 2 and 3 give descriptions of the companies questioned: the general purpose of the firm and whether its market is local, regional, national or international. These questions were intended to insure we did not have responses from peOple not affected by the regulation. The results show that one national and thirteen international pharmaceutical companies responded to our survey. This is fairly typical of most of the United States pharmaceutical companies, many of which are subsidiaries of large international corporations. 22 Annual Sales This question asked for the annual sales of the respond- ing companies. We wanted the sales for the divisions involved in tamper-resistant packaging so that we might find what por- tion of the business tamper-resistance occupies. This was not possible, however, since it appears that everyone responded with total corporation sales. Another reason for asking this question was to determine the difference in size of those com- panies surveyed. The companies participating in the study range in size from $100million in annual sales to over $1 billion (see Table 3 for number of responses from each sales dollar range). Most United States pharmaceutical com- panies are very large (sales over $100 million), but there are a few smaller companies. These small firms did not respond to our survey, therefore their economic effects are unknown and not necessarily the same as for the larger companies. 23 TABLE 3 SALES VOLUME (PHARMACEUTICAL COMPANIES) Sales Volume Number of Responses $ 5 - $ 10 Million $ 10 - $ 50 Million $ 50 - $100 Million $100 - $250 Million 2 $250 - $500 Million 4 $500 - $750 Million $750 - $ 1 Billion 1 $1 Billion and Over 5 No Answer 1 Unknown by Respondent l 14 24 Products Affected by Regulation Question number 5 asks how many different products each company manufacturers which are affected by the tamper- resistant packaging regulation. This shows another aspect of company size; some responding companies have as few as two O-T-C products which are affected by the new regulation while others have as many as 29 (see Table 4 for various measures of company size). Some comments indicate that at least one company feels they have too many products affected by the re- gulation to even list them all. 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Most companies had to purchase some type of equipment which added to their costs from this regulation. The average com- pany purchased four machines at a total cost of $150,655. The maximum number of pieces of equipment purchased was 14 and the maximum total price paid by a company was $820,000. Although the initial outlay for these machines could be very high, when depreciated and amortized over the number of packages they produce, cost per package is very small. The four companies that did respond to this question with per package costs show that the average cost increase due to machinery purchases is 1.85 cents per package. The FDA had originally predicted that machinery costs would be insignifi- cant, but because the average cost is almost 2 cents per package, they would probably feel differently now. Line Speeds The purpose of Question 8 was to see if the pharmaceuti- cal companies had decreases in their line speeds because of the regulation. Costs for this cannot be determined because of the different factors which can cause slower speeds: use of manual labor, generally slower equipment or more downtime. Each factor has a different costs associated with it and those will have to be determined by each individual company. It may 31 be easier to assign a cost estimate to this problem knowing that the average company experienced a 19% decrease in line speed because of the need for tamper-resistant packaging. The range of reductions in speed went from 5% to 50%, so some companies are running at one-half their original speed which can be very costly. Comments from our repondents indicate that not all of these slower speeds are permanent. Some re- quired temporary manual labor during the change-over process and one company indicated that only some of their new packages (5%) required line speed reduction. Labor Changes This asks if the pharmaceutical companies experienced a change in labor costs due to the tamper-resistant regulation. It is related to Question 9 in that the slower line speeds may be a result of an increase in the use of manual labor. Fifty percent of the group did mention that the regulation resulted in an increase in the number of man hours required to maintain production. Costs, again, will vary with each company, de- pending on their wage rates and the number of increased hours. Cost increases for the sample group ranged from $16,000 to $200,000 and were to be amortized over 250,000 to 60 million packages. This makes the average cost increase due to labor less than a penny per package (0.39 cents). Some of these labor changes were only temporary and could have gone as high as 50% for certain companies. Although the norm appears to be an increase in labor usage, one company did say they experienced a $60,000 32 decrease in labor hours, to be amortized over 3.5 million packages (1.7 cents per package). Graphics Changes Question 10 asks whether the pharmaceutical companies had additional costs due to graphics changes required by the regu- lation and all companies questioned said yes. Some companies responded with costs per package of $0.0003 to 50.00225 for various packages. A few comments in- cated that cost per package would be ”minimal” or ”insignifi- cant.” Others gave total costs ranging from $100 per package type to $500. These costs were generally one time, mecanical changes or plate changes. Another graphics cost that one com- pany felt would be significant was the scrap resulting from the May 1983 deadline, but they did not estimate the dollar value of this. Total cost per company depends on how many products re- quired the new graphics. For this study, total costs ranged from $200 to $1500. These costs will be insignificant for the high volume pharmaceutical industry. Reasons For ChoosingThmper-Resistant Devices Question 11 tells why the pharmaceutical companies chose the particular tamper-resistant devices that they did. Cost was not mentioned as a major factor in itself; effectiveness and compatability with existing packaging had more bearing on their decisions. Some companies also said more than one fac- tor was considered in making their decision. Two companies 33 claimed to have chosen the “most effective Option,“ but not surprisingly, they are using different devices. Although this question did not pinpoint one major reason for choosing the tamper-resistant device used, it did show that cost seems to be an important factor, and system compat- ability was the method used to keep costs down. Advertising Changes Question 12 asked the pharmaceutical companies if they made any advertising changes because of the new packaging. All companies responded with a "no“ except one that felt this question did not apply. It is obvious, however, that many of these firms are currently advertising the fact that they now have tamper-resistant packages. The contradictions between their responses and their actions may mean that they did not increase the amount of advertising being done, but only the content of their current ads. Costs Due to Retail Effective Date The regulation has a final retail level effective date after which all packages on the retail shelves must be in complying packages. Because it is possible for the companies to experience losses due to this requirement, I asked what they planned to do with these non-complying packages, and what losses they expected. One company felt this either did not apply to them or the costs were unavailable, while the other 13 said they expected most non—complying packages to be gone by that time. One of these companies obviously expected to 34 have some packages left on the shelves (200,000), which they will repackage, at a cost for materials and labor, of $11,600. They also said they expected a loss of approximately $15,000 because of packages returned to them after that date. Sales Volume Changgg This question asked whether the pharmaceutical companies expected any change in sales volume because of this regula- tion. It was expected that some companies might increase their market size if they became tamper-resistant much faster than the competition, if they were always tamper-resistant, or if they had a better tamper-resistant solution than the com— petition. Only one company indicated an expected volume in- crease of 1.3 million packages, but they did not comment on the reason for this. Effect on Cost to the Consumer The final question asks whether the companies expected their cost increases to be passed on to the consumer and if so, what the cost per package would be. One half of the res- ponding companies said they are not going to pass the costs on to their customers, but only one estimated they would be ab- sorbing 2 - 3 cents per package. Those passing their costs on are expecting to increase prices up to 15 cents per package (average is 7.5 cents), well over the FDA prediction of 1 - 2 cents. GENERAL RESULTS OF SUPPLIER SURVEY Supplier survey data is contained in Appendix K. Of the 82 surveys sent to the various supplier companies, 48 were returned. This means that 59% of the sample completed the questionnaire, a return percentage better than expected for this type of survey. Eight of the 48 surveys returned were not applicable either because they did not supply the O-TLC trade, they did not know who used their materials or they were distributors of supplies only. Excluding these 8 surveys, there were 40 usable questionnaires. This means 49% of the sample responded with usable data and 12% of the total industry contributed to this study. TABLE 8 SIZE OF POPULATION, SAMPLE AND RETURNS FOR TAMPER-RESISTANT SUPPLIER COMPANIES Returned Usable Population Sample Surveys Surveys Number 332 82 48 40 % of Sample 58.5% 48.8% % of Population 24.7% 14.5% 12.1% 35 36 The first four questions of this survey relate to basic information about the company and the employee who completed the survey. Respondent's Area of Responsibility This question asks the person responding to explain their specific area of responsibility. The surveys were fil- led out by people from many different areas within the com- pany, but most came from members of the sales or marketing de- partments (24). These again, are the departments most know- ledgeable about tamper-resistant packaging for this type of of company. 37 ¢ vN HfiaQH nucocomeou can H v mocHaom: zoom no muoHHmmsm muoHHmmsm H H H m MH mucocoqeou muoHHmmsm noc3o H H H H b ocHnooz mocuo muH6um< mcHusu06uscmz mchmxomm ucoEommcoz nOHmm uncumwsoom \cOmu0560um AmmdemmDmv MHHHHmHmZOmmmm m0 m mqmdfi oumuomuoo \mcHuoxuoz o oE=Ho> moHom m on: acmqaoo oz umfioz m m 0H m GH 5 gases mucocomeoo can N H N auocHnomz :uom uo muoHHamsm nuoHHmmsm H N b HH m acocoaeou muoHHmasm H m H e ocHnom: :oHHHH: coHHHH: coHHHHz coHHHHz moon: cad couozmcmcm omNIoon ooHIomm oMIon cHIm coHHHH: mm mez maddm HH mdmdfi 42 Products Supplied by Surveyed Companies These questions tell which materials and equipment are supplied by the companies questioned. The results show that the responding questionnaires came from companies supplying all FDA recommended tamper-resistant devices except aerosol containers. They supply fifteen different types of materials and a large variety of equipment used to produce or apply these materials (see Appendix K, Questions 5 and 6, for a list of specific materials and equipment supplied). New Equipment Purchases This question asks whether the supplier companies in- creased production capacity and, if so, did they do so by buy- ing new equipment. Many of these companies did need to in- crease their production capacity because of the new tamper- resistant packaging regulation and some of them will do this by purchasing new equipment. The companies needing new equip- ment were the material and component suppliers who had to purchase many different types of equipment, therefore spent different amounts of money (see Table 12 for average machinery costs and see Appendix K, Question 7, for exact pieces pur- chased). The maximum amount spent was close to $3 million for one company, but the majority of the companies reported no costs for new equipment. Because of this, the average costs do not have much meaning. Machinery costs for supplier companies intending to see an increase in demand depends on whether they 43 currently have excess capacity of whether they are expanding their product line because of this regulation. TABLE 12 AVERAGE MACHINERY/EQUIPMENT COSTS TO SUPPLIER COMPANIES Average Number Average Cost TotaI Cost Machines Purchased Each Machine (Average) Machine 0 - - Suppliers Component 7.6 $100,160 $758,357 Suppliers Suppliers of Both Machines 0 - - and Components TOTAL 7.6 $100,160 $758,357 44 Labor Changgg This question asks about labor changes caused by the re- gulation. Although it was determined that most supplier com- panies experienced no change in the quantity of laborers used, 28% of them increased their production capacity by increas- ing labor hours. The actual number of hours associated with this increase in labor can only be surmised. Only one com- pany responded to that portion of the question, and even then, they indicated an increase of 750 hours but did not say what unit of time that covered. One company did give a dollar value of $25,000 to their additional labor costs and another said it was difficult to measure (see Table 13). TABLE 13 LABOR CHANGES FOR SUPPLIER COMPANIES DUE TO TAMPER-RESISTANT LEGISLATION Average No No Increased Answer Change Increase Decrease Cost Machine 1 8 2 $25,000* Suppliers Component 1 l4 9 0 Suppliers Suppliers of Both Machines 5 0 and Components TOTAL 2 27 11 0 $25,000 *Determined from one response only. 45 Advertising_Changg§ Question 9 asked about the changes in advertising caused by the tamper-resistant regulation. Approximately 40% of the suppliers questioned chose to increase their advertising ex- penditures by either 50% or an average of $21,916 per year (see Table 14). The machinery companies appear to be making the largest changes in advertising dollars, while the other types of suppliers are spending a little less. 46 mom 6 coocoHuomxo >62» umnu coumoHccH usn .mumoo uchHuuo>cm :H ommouocH .ousmHm umHHoc o: o>mo moHcmano 03H.a 83.3» S H 3 H .298. mHoHuoumz a auochomz oom.hHm m N :uom mo nuoHHmasm muoHHmmsm wwH.NNm HH H NH ooH>oa\HmHuoumz moHcmano oom.bNm e m H auochom: ommouocH onmouocH ommouooo owcmco uncommom ucHHoo oz 02 oomuo>< ZOHBD¢ zH mmwz>H.Nm mN o eH H qgeoe mucocoaeou can ooo.omN m H e mochomz zoom mo muoHHaasm muoHHmasm amNm.mmm.Nw 0H m unocoaeoo muoHHmmsm www.mwo.Hm m N H ocHnoo: owmouocH unmouocH ommouooo odcmcv uncommom umHHoo 02 oz ommuo>< ZOHH mmddm 2H mm02¢mu mH mamdfi 49 Effect on Cost to Customers With Question 11, we tried to see whether the supplier companies were going to increase the cost of their product to their consumers (pharmaceutical companies). There were some obvious problems in understanding the intended meaning of this question. The question and responses read as follows: Do you expect your additional costs caused by this regulation to be passed on to your customers? - We did not incur additional costs due to this regulation. - Yes, we will pass costs to our customers. - No, we will absorb additional costs. Many people, after having written that they purchased new machinery, increased their labor hours and/or have almost doubled their advertising costs, responded to the above ques- tion by saying ”we did not incur additional costs due to this regulation.” I Some possible reasons for this discrepancy might be that their increased sales volume has offset any other costs or, as one company mentioned, they have identified new products due to this regulation, therefore the costs are being ap- plied to new product development. A machine supplier quali- fied his response by saying that ”cost per machine did not increase because of increased production." It is possible that these companies did not actually see any additional costs caused by the tamper-resistant legisla- tion. If we assume that everyone did understand the question accurately, 62.5% of the supplier companies did not incur any 50 cost increases, and 27.5% did, and will pass the cost to their customers. Another problem occurred with this question; a few com- panies indicated no cost increases from the regulation, but said they will pass the costs on to their customers. Does this mean they are going to take advantage of the situation and increase their prices? (See Table 16) TABLE 16 WILL SUPPLIER COMPANIES PASS INCREASED COSTS ON TO THEIR CUSTOMERS? No Did Not Incur Response Additional Costs Yes No Machine 1 9 l Suppliers Material/Device 3 12 9 Suppliers Suppliers of Both Machines 0 4 l and Components TOTAL 4 25 11 O PRODUCT PRICE CHECKS As a secondary study to check the responses received from the survey, three Lansing area wholesalers we asked to give cost information on products affected by the tamper- resistant packaging regulation. The current selling price of selected O-TBC products were checked and compared to their prices before the regulation. Although we are not suggesting that all manufacturers have raised their prices since this regulation, we do know that all of the products checked (12) did increase in price. The wholesale prices rose between 13 cents and 57 cents per package in the past few months, in- creases of seven to 36 percent. Comments from retailers in- dicate that they have noticed a general trend toward more expensive products, especially those with the most obvious package changes. Another method of checking retail price changes was to purchase three different O-TLC drug products at area drug- stores and supermarkets. This was done immediately follow- ing publication of the rule: after each effective date of the regulation, the same products were purchased at the same stores and these prices were compared to the originals (Tables 17 and 18). These particular products showed price increases of 4.9% to 28.8% between December 1982 and July 51 52 .ucmumHnoquomEmu couochcoo mxmsHm no: mnemouocu .oomxomm uoumHHn cH oEco nosooum Any .ucoumHnoquanmu oouochcoo m>m3Hm mos chamouocu .c0uumo coHcom :H 0360 noncoum Amy oucmmoe ucmumHmou o oHanHm>¢ uoz IuomEmu cuHB moHamqmo oH no.Ho so.Ho loo moHsoooo oHoo ommmmoe accumHmou IuomEmu :uHs muoHnmu om wN.> ho.Nm oHnoHHm>< uoz mm.Hm cozaocHEmu004 ommmmoe ucmumHmou mmommoe ucmumeou Iuanmu :uHs IquEmu :uHs muoHnmu om oo.o o~.Ho -.Ho -.Hm loo cuuuooc ommouocH ucoouom mm\mH\o mm\wH\m Nm\wH\NH uosooum Hmuoe muHmm muHmm monm wwamUMDm meddzmmmbm 5H mam<fi 53 .ucmumHnoquomEmu couochcoo m>csz mos oHOwouonu .oomxomm noumHHn cH oEmo uoscoum Ho. .ucmumHmoquanmu couochcoo m>o3Hm no: mucuouocu .c0uumo conom cH oEmo u0500um Hm. wo.mH moHstoo 9H mN.Nm mm.Hm m¢.Hm a¢.Hm Any moHsmaeu cHou muonmoe ucoumHmou ommmmoe ucmumHmou Iuanmu nuHs IquEmu :qu muoHnou «N wo.o~ o>.Hm o>.Hm mo.Ho om.Hm cocoochsooooa .mmommos ucmumHmou mummmoE ucmumHmou ommmmos ucmumHmou IquEmu :qu IuomEmu :uH3 IDOQEmu nuHs muoHnmu om wo.h om.Hm om.Ho o~.Ho oN.Ho lo. :HuHom4 omoouocH mo\o~\h mm\NN\m mm\mN\N Nm\m\NH bosoohm ucoouom ooHum ooHum ooHum ooHum H38. mmmle to determine which costs are associated with which material or ®vice. (SEE mm) (1) (2) (3) LIST ALL MATRIALS FRCN PRODUCT ARDVE LIST BERG US. FOR (DST PER EACH PRCDUCI‘ PACKAGE < (total $.035/pkg) > G) \J 0\ U1 0» U) h) F‘ O 84 7. What new equipment/machinery did or will you purchase in order to produce complying packages? Please CHECK equipment type purchased, indicate how many were bought, the cost for each machine, and the cost you expect them to add per package. EnJIPMENT mm (DST (DST PER w w M w A) None purchased B) Band applicators C) Shrink tunnels D) Shrink wrappers E) Cartoner 1?) Adhesive attachments for cartoners G) Cappers H) 'I‘Lbe formers I) Blister/nibble formers J) Pouch formers K) Tape applicators L) Irduction sealers M) Other(please specify) 8. Hastherebeenordoyouexpectadiangeinlinespeedsduetoyour required package changes? (PLEASE CHECK Am CCMPIEI'E ) No change Yes: Line speeds decreased by percent. Yes: Line speeds increased by percent. 9. What labor changes were or will be necessary due to this tamper-resistant regulation? (PLEASE CHER) No change Decrease-Mal cost $ Amortized over pkgs, Increase-Total cost $ Amortized over pkgs. 85 10. Did or will you experience additional costs for graphics/artwork inorder to produce complying tamper-resistant packages? (M) YES m a) IF YES: Please indicate which product required the graphics change and the cost per package. E COST PER PACKAGE QOUlubUNH 0 O 11. What was the main factor in determining which tamper-resistant system(s) your company chose? (CHECK (NE) Most effective option Lowest cost option Most readily available materials/system (time) Most compatable with existing packaging Most cmpatable with existing machinery system Other (specify) 12. If you have changed your advertising because of this regulation, please indicate how much you expect this to cost you for the first year.(CHECK (NE AND W) No diange Decrease-Total Cost $ Amortized over Jkgs. Increase-metal Cost $ Amortized over pkgs . 86 13. The new regulation requires that all affected products sold at the retail level on or after February 6, 1984, be in tamper-resistant containers. If your wrpany still has non-tanper—resistant containers on the retail shelves at that time, what do you plan to do with the non-complying product? (can ONE am INDICATE mm IDSSES) a) Expect most non-complying packages to be sold by that time. b) Plan to recall and repackage product in Tamper-resistant packages. c) Plan to recall and discard product d) Plan to have retailers dispose of product and give them credit for lost product . e) Other plans for non-calplying packages (please specify) EXPECTED LOSSES: Cost of Repackaging $ Number of packages re-filled Transportation costs ' 3 Product loss in dollars $ Number of packages lost Other expected losses 14. How did or how do you expect this regulation to affect your catpany's sales volume for this first year beginning mu: the issue date(Nov. 5, 1982) of the tamper-resistant regulation? (CHER (NE All) COPIEI'E) No change Decrease-dollar value $ umber of packages Increase-Dollar value $ Number of packages 87 15. Do you expect your additional costs caused by this regulation to affect the retail price of the product? YES; increased cost per package 5 DD; cost per package we m’ll absorb $ 16. Please note any additional costs or changes due to this tamper-resistant regulation which we may have over looked. 17. W8 PLEASE: Thank You for your cooperation and help in this study. PLEASE REIURN BY JLNE 3, 1983. APPENDIX I SURVEY -SUPPLIER COMPANIES 88 DIRETIONS: IF POSSIBLE, PLEASE HAVE 11115 FORM mm BY A m OF YUJR C(NPANY WHO IS W13 FIR MFR-RESISTANT PACKAGES. Please check the appropriate response or cmplete with short answers . If any multiple choice question muld be more accurately ampleted with a short answer, please feel free to do so. Remember, your answers will be kept strictly confidential. Please return this questionnaire, whether cmpleted or not, by June 3, 1983. SECTION 1: GENERAL INFORMATION 1. 2. 3. 4. Your area of responsibility: (CHECK (NE) Packaging Quality Control Sales/Marketing Production/Manufacturing Purchasing Project Engineering Corporate Management R&D Regulatory Affairs Other (please specify) Nature of Catpany: (CHECK WE) mchinery Supplier Drug Manufacturer Materials supplier Food Manufacturer Closure Supplier Cmtainer Supplier Other (please specify) Is your company: (CHECK ONE) Local National Regional International Annual sales for your divisions involved in tamper-resistant packaging (last fiscal year). Urknown $100 million to $250 million $0 to $5 million $250 million to $500 million $5 million to $10 million $500 million to $750 million $10 million to $50 million $750 million to $1 billion $50 million to $100 million $1 billion and up 89 5. What materials or devices do you supply that are now being used to make tamper-resi stant packages? (PLEASE CHER) A. none,(if you supply equiplent go to question #6) B. film wrappers I. Bottle seals C. Blister or strip packs J. Tape seals D. Bubble packs K. Breakable caps E. Shrink seals or bands L. _Sealed tubes F. Sealed cartons M. _Aerosol containers G. Adhesive N. _Other(p1ease specify) '11. Foil, paper or plastic pouches 6. mat machines do you supply that are now being used to produce tamper-resistant packages? A) None B) Band applicators C) Shrink tunnels D) Shrink wrappers E) Cartoners F) Adhesive attachments for cartcners G) Cappers H) Tube formers I) Bli ster/beble formers J) Pouch formers K) Tape applicators L) Irduction sealers M) Other (please specify) 90 7. Did or will you increase production capacity to meet the demand for your tamper-resistant materials, devices, or forming/application equipment? (PLEASE Ci-IECK) YES M) A) If yes: Did you increase capacity by purchasing new machinery/equipment? (PLEASE LIST EQJIPMENI‘, mm PURCHAS- Ah‘D COST) Check here if none has purchased mm (DST MCI-ENE HJRCHASE) M \IO\U'|uwal-' O O 8. What labor diangesvereorwillbenecessaryatyourcmpanydietothis tamper-resistant regulation? (PLEASE CHECK) No change Decrease in labor tburs-Tctal Savings 5 Increase in labor tours-mortal Cost $ 9. that Changes have you had or do you expect to have in Advertising costs? (From November 5, 1982 to November 6, 1983) CHECK (NE AN) COMPIEIE No change Decrease—Total Cost $ Increase-Total Cost $ 91 10. How did or how do you expect this regulation to affect your company's sales volume? (CHECK (NE AND MLEI'E) No charge in sales volume expected Decreased volume: Dollar value $ Increased volume: Dollar value $ 11. Do you expect your additional costs caused by this regulation to be passed on to your cistmers? We did not incur additional costs due to this regulation. YES we will pass costs to our aistoters N) we will absorb additional cost 12. Please note any additional costs or changes due to this tamper-resistant regulation which we may have over looked. 13. WS PLEASE: Thank You for your cooperation and help in this study. PLEASE RETURN BY JUNE 3, 1983. APPENDIX J DATA - PHARMACEUTICAL COMPANIES 92 APPENDIX J DATA - PHARMACEUTICAL comm SECTION 1: GENERAL INFORMATION 1. Your area or responsibility: (CHECK ONE) 13 Packaging 0 Quality Control 0 Sales/Marketing 1 Production/Ivlamfacturing 1 Purchasing 0 Project Engineering 0 Corporate Management 1 RED 0 Regulatory Affairs 1 Other (please specify) - Ehgineering/ Package Dev. 2. Nature of Company: (CHECK ONE) 0 Machinery Supplier 15 Drug l-Iarmfac turer 1 Materials Supplier 0 Food Marmfacturer 0 Closure Supplier 1 Container Supplier 1 Other (Please specify) - Medical device manufacturer 3. Is your company: (CHECK ONE) 0 Local 1 National Regional 13 International 4. Annual sales for your last fiscal year: (for your division involved in tamper-resistant packaging: please indicate if the dollar value you check below is for more than your division only) ___]_.___ Unknown _L $100 million to $250 million __0__ $0 to $5 million _5__ $250 million to $500 million __Q___ $5 million to $10 million _0__ $500 million to $750 million 1 $10 million to $50 million 1 $750 million to $1 billion 0 $50 million to $100 million $1 billion and up *20 usable surveys were returned. Many surveys were not carpletely filled out. 93 5. Which of your products (generic type) were affected by the tamper- resistant regulation? (PLEASE LIST) IUI'E: Of the 20 usable surveys, 12 companies completely answered this question. PRODUCITYPE bWNH 10. ll. 12. Cough syrup; cold tablets Rectal ointment and suppository; nasal solutions; nasal spray Vitamin drops; vitamin tablets Dry products: capsules, tablets, powders; liquid products; creams and cintments; suppositories Pbutl'msh; cough and cold liquid products; tablets and capsules; lozenges Hay fever inhibitor; motion sickness inhibitor; diarrhea reliever Cough/Cold tablets, capsules and liquids; analgesics; diet products Aspirin (3 products); over-the-counter liquids (6 products); over-the-counter (labelled as foods -- 20 products) Antacids - liquids and tablets; vitamins; laxatives - capsules and bulk powder; various other tablet products Over-the-counter antacid liquid; O—T-C tablets; much irritant drops; ear wax control drops Liquid cough preparations; O-T-C Solid forms - capsules and tablets in bottles and blisters laxative - tablets , powder, liquid; cough preparation - liquid; cold medicine - capsules and tablets Did or will each product in Question 5 require a change in Packaging in order to cmply with the new regulation? (PLEASE CHECK) 7 YES(Got06A) 7 ID(Goto6B) Please list below the products from Question 5 that will not require a package change AND describe their packages. (i.e. the package must already comply with the regulation. . PRODUCT CURRE‘J'I‘ PACKAGE 1. Rectal suppository Strip pack with distinguishable text 2. Vitamin tablets Tack Seal over lip Vitamin drops Wet band on cap 3. Cold tablets and capsules Blister or bottle with innerseal Cold liquid Bottle and Child-Resistant closure Analgesics Bottle and C-R closure with innerseal Diet products Blister 94 6A. (Continued) PRODUCT 4. Antacid liquid Antacid tablet Antacid tablet Bottles of tablets and capsules Blister packs of capsules and tablets Tablets Cold medicine tablets and capsules CURRENT PACKACE Foil induction seal and cap Foil pouch, strip packaging Bottle with pressure-sensitive innerseal Seal under cap Blister packs Blisters Blisters 95 6B. STEP 1: Please read the following list of tamer-resistant materials and devices. 1. Film wrappers 8. Bottle seals 2. Blister or strip packs 9. Tape seals 3. Bubble packs 10. Breakable seals 4. Shrink seals or bands 11. Sealed tubes 5. Sealed cartons 12. Aerosol containers 6. Adhesive 13. Other (Please specify) 7. Foil, paper or plastic pouches SIEP 2: In Column 1 below, please list all products from Qiestion 5 that did or will recpnr' e package changes in order to comply with the regulation. SIEP 3: In Colum 2 below, list by mnber, all materials and devices from the above list being used for each particular product in order to make them tamper-resistant. STEP 4: In Colum 3, list howmuch it cost per package to add the above materials to each product. Please try to list such that we are able to determme’ which costs are associated with which material or dev1c' e. . IW/DEVICES (DST PER PRODUCT (BY W PACKAGE 1. Cough syrup #4 $ .04 - .05 Cold tablets #4 $ .04 - .05 2. Rectal ointment #4, #11 $ .04, $.01 Nasal solutions #4 .02 Nasal spray #4 .05 3. Cold capsules, tablets, powders #2, #4, #8 $ -- Liquid products #4 .. Creams ointments #5, #11 -- Suppositories #7 -- 4. Fbuthwash #4 $ .015 Cough and cold liquid products #4 .01 Tablets and capsules #8 .005 lozenges #13 (graphics only) < . 0001 5. Hay fever inhib' itor #8 $ .004 thion sickness inhibitor #8 .004 Diarrhea reliever #4 . 006 6. Cough/cold liquids #4 $ .03 ' 7. Aspirin (3 products) #8 $ .02 O-T-C liquids #8 #9 .02, .01 O-T-C (labelled as foods) #1: #2, #4, #7, #11 -- 96 6B. (Continued) PRODUCT 8. Antacids — liquids and tablets Vitamns’ laxatives - capsules and bulk Various other tablet products 9. O-T-C antacid liquid O—T-C antacid tablets bbuth irritant drops Ear wax control drops 10. Liquid cough preparations ll. laxative tablets Laxative powder Laxative liquid Cough preparations - liquid MATERIALS/ DEVICES (BY NIMBER) #1 . #4 #4 #4 #4 #13 (graphiCS) #13 (graphics) #5 . #13 (graph-RS) #5. #13 (graphiCS) #5 . #10 COSTPER PACKAGE $ .03, .02 .03 97 7. What new equipment/machinery did or will you purchase in order to produce complying packages? Please CHECK equipment type purchased, indicate how many were bought, the cost for each machine, and the cost you expect them to add per package. EQUIPMENT NIMBER (DSTPER PURCHASE!) PURCHASED CDSTEACH PACKAGE A) _3 None purchased B) _5 Band applicators l. 2 -- -- 2. 5 3 @ $120,000 -- 2 @ $ 35,000 -- 3. 1 $ 75,000 -- 4. 2 40,000 -- 5. 4 200,000 $ .06 - .07 (lst year) C) _6_ Shrink turmels l. 1 $ 3,000 $ .002 2. 2 —- -- 3. 4 3,000 -- 4. 1 5,000 .0 5. 2 2,000 -- 6. 4 5,000 .002 D) _1 Shrink wrappers 2 $ 60,000 -- E) __(_)_ Cartoners F) _2_ Adhesive attacl'nents for cartoners l. 1 $ 50,000 $ .005 2. 3 35,000 (7 year depreciation over ‘ 30 million packages/year) G) _2 Cappers H) _Q Tube formers I) _Q Blister/bubble formers J) _O_ Pouch formers K) _1_ Tape Applicators 1 $ 22,000 -- L) _2_ Irmiuction Sealers l. 3 $ 19,000 -- 2. 1 18,000 —- M) _2_ Other (Please specify) 1. labelers 14 $ 15,000 -- 2. labelers 6 25,000 -- 98 Hastherebeenordoyoueaqaectachangeinlinespeedsduetoyom required package changes? (PLEASE CHECK AND WHERE) 6 No clenge 6 YES: Line speeds decreased by percent . l. 507. 2. 257. 3. 107. 4. 107. (or 57. of the packages which must comply) 5. 157. 6. 57. 1 YES: Line speeds increased by 107. percent What labor changes were or will be necessary due to this tamper-resistant regulation? (PLEASE CHECK AND WEE) 5 No change 1 Decrease - Total cost $ 60,000 Amortized over 3,500,000 packages 7 Increase - Total cost $ Amortized over packages 1. $ 80,000 1,500,000 2. iridium unknown 3. unknown unknown 4. 200,000 60,000,000 5. 16,000 250,000 6. 60,000 30,000.000 7. unkrm unknown 10. 99 Did or will you experience additional costs for graphics/artwork in order to produce complying tamper-resistant packages? (CHECK) l4YES om If YES: Please indicate which product required tl'e graphics change and the cost per package. PRODUCT (DST PER PAQ0,000 - 50 percent -$ 5,000 -$10 , COO-$15 , 000 -$30 , 000 -$20 , 000 105 10. How did or how do you expect this regulation to effect your company's sales volune? (CHECK ONE AND (INPIEI'E) 14 No change in sales volume expected 0 Decreased volume: Dollar value $ 25 Increased volume: Dollar value $ -$1,000,000 -$3,000,000 -$ 185,000 -$ 250,000 -$ 500,000 -$4,000,000 to $5,000,000 -$ 100,000 -$ 100,000 -$l,000,000 -$5,000,000 to $10,000,000 -$5,000,000 -$3,000,000 11. Do you expect your additional costs caused by this regulation to be passed on to your custaners? 25 We did not incur additional costs due to this regulation. 11 YES we will pass costs to our customers 10 we will absorb additional cost 12. Please not any additional costs or changes due to this tamper- resistant regulation which we my have overlooked. HYPE: Not answered 13. WIS PLEASE IUI'E: No further comments BIBLIOGRAPHY 106 BIBLIOGRAPHY Board of Commissioners, Cook County, Illinois. "An Ordinance of the County of Cook Requiring That All Over-the-Counter, Non—prescription Drugs and Medicines be Enclosed in Sealed Containers Prior to Being Sold Within Cook County." Pro- posed ordinance, October 4, 1982, Bernard Carcy, Commissioner. Bureau of Alcohol, Tobacco and Firearms. ”"Subject S-Strip Stamps and Alternative Devices". Code of Federal Regu- lations, 21 CFR 19.661. Consumer Product Safety Commission. "Poison Prevention Packaging Act of 1970 Regulations." Code of Federal Regulations, 16 CFR 1700. "Drug Packaging will Cost." The Detroit Free Press, 28 October 1982, Sec.1, p.19A. Food and Drug Administration. "Tamper-Resistant Packaging Requirements; Certain Over-the-Counter Human Drugs and Cosmetic Products; Contact Lens Solutions and Tablets; Final Rules." Federal Register, 47 FR 50442, November 5, 1982. Food and Drug Administration. ”Subpart C - Requirements for Specific Classes of Drugs." Code of Federal Regulations, 21 CFR 200.50. Food and Drug Administration. "Misbranded Drugs and Devices." The Federal Food, Drug and Cosmetic Act, Chapter V, Section 502, Amended January 1980. Food and Drug Administration. "Tamper-Resistant Packaging Requirements for Certain Over-the-Counter Human Drug and Cosmetic Products; Final Rule." Federal Register, 48 FR 16660, April 19, 1983. Leonard, Edmund A. An Introduction to the Economics of Packaging. New York: McGraw-Hill, 1971. Medlock. Stephanie. "Inside the Consumers Mind: A Look at Anti-Tampering Devices." Focus Group: Headline Medlock. January 5, 1983. ”FDA Tamper Rules Don't Protect Packagers from Liability Suits." Package Engineering, December 1982, p. 18. 107 Parten, Mildred. Surveys, Polls and Samples: Practical Procedures. New York: Harper & Brothers, 1950. Barnhart, Edward R., Publisher. 1983 Physician's Desk Reference for Nonprescription Drugs, 4th Ed. The Medical Economics Company, Oradill, New Jersey. Stupay, Arther. "Tylenol Legacy: Surging Sales for Safe Seals." Time, November 1, 1982, p. 64. U.S. Department of Health, Education and Welfare, Public Health Service/Food and Dru Administration. "Grade A Pasteurized Milk Ordinance (1978 Recommendations)." p. 31.