Stryker’s Quality Control Effort to Cost Millions

As Stryker’s hip implant franchise took a $15 million to $20 million hit last quarter due to a recall and temporary production stoppage of its implantable hip cups, the company is spending millions of dollars instituting a corporatewide quality control program to resolve two FDA warning letters.

“We are investing a significant amount here,” Stryker CEO Steven MacMillan said during the firm’s first quarter earnings call. “It’s clearly tens of millions of dollars in investment this year.”

In March, the company said it expected its hip franchise to suffer from the recall of the Trident PSL and Hemispherical Acetabular cups manufactured at the firm’s Cork, Ireland, plant. Sales for Stryker’s hip business fell 1 percent during the first quarter of 2008, when adjusted for currency fluctuations, compared with the same period last year.

Stryker’s quality initiative was spurred by warning letters citing two of the firm’s hip manufacturing facilities — one for its site in Cork and the other for its plant in Mahwah, N.J. After receiving the second letter, Stryker said it would link 25 percent of executive bonuses to compliance goals.

The compliance plan centralizes the firm’s quality control systems, implementing harmonized standards and greater consistency for all its manufacturing sites, which have had varying quality systems approaches. “This is clearly what FDA expects,” MacMillan said.