Businesses Should Expect More Product Recalls, Regulations After Covid: Sedgwick

While the effects of the COVID-19 pandemic have kept inspections and product recall incidents at low levels, businesses should expect a an upsurge in recalls as the world begins to re-open. They should also prepare for the prospect of new regulations ahead.

According to the first edition of the Sedgwick U.S. product recall index, food and beverage, consumer products, and medical device industries are among those that can expect to see a surge in recalls.

“The COVID-19 pandemic has forced manufacturers to operate in one of the most turbulent and uncertain times in recent history,” said Chris Harvey, senior vice president at Sedgwick. “While consumers are eager for a return to normal, regulators and lawmakers see this as an opportunity to enact major changes that will have ripple effects across multiple industries.”

Sedgwick expects that a surge in recalls will not be the only effect coming out of the pandemic. It expects rapid technological development and lingering supply issues will also be major factors.

“The regulatory environment has forever changed,” said Harvey. “Businesses must prepare their recall management, crisis and communications plans now before it’s too late.”

According to the firm’s index, 2021 promises these recall and regulatory trends:

Safety concerns related to electric vehicles and their new technology will remain at the forefront. Expect a series of component-related recalls to come in 2021, and for reputational risks and regulatory scrutiny to increase as the National Highway Traffic Safety Administration (NHTSA) faces pressure from lawmakers. As the industry evolves, automotive recall effectiveness will become more challenging.

Expect consumer product recalls to maintain their typical pace in the near term. However, as the U.S. Consumer Product Safety Commission (CPSC) adopts a new approach to oversight and seeks to reinvent itself to better protect consumers; stricter regulatory enforcement, increased legal risks and scrutiny are on the horizon.

The food and beverage industry will see new food safety rules, increased oversight, enforcement activities and more lawsuits as it emerges from the COVID-19 pandemic. Expect a return to traditional oversight activity and new priorities on from the Food and Drug Administration inspections including protecting infants, children and expanded oversight related to contaminants.

The medical device industry is on the brink of a regulatory crackdown. The scope of safety investigations will continue to broaden, accelerating innovation will reshape the regulatory framework, and lawyers will aggressively test the waters on the level of immunity the Public Readiness and Emergency Preparedness Act (PREP Act) offers to manufacturers.

Contamination risks have always been a long-standing risk for pharmaceutical companies. As the industry evolves, expect heightened regulatory scrutiny, litigation and reputational fallout as a result. Meanwhile, independent labs and safety advocates are eager to pursue products that may be placing consumers at risk, and their influence is growing.

First Quarter Data

The recall index, which is produced by Sedgwick’s brand protection department that aggregates and tracks recall data, also contains a look back at the recall data for the first quarter:

• Automotive recall activity remained steady compared to quarter four, 2020, but units impacted increased by 82.5%.
• Consumer product recalls decreased 28.8% (compared to quarter four 2020), the lowest number of quarterly events since the first quarter of 2019.
• U.S. Food and Drug Administration (FDA) food recall activity represented a 4.3% decrease in events (compared to quarter four 2020), but a 31.9% increase in units impacted quarter-over-quarter.
• United States Department of Agriculture (USDA) recall events increased by 25% in the first quarter of 2021 compared to quarterly averages in 2020.
• Medical device recalls fell 9.8% (compared to quarter four 2020) resulting in a seven-quarter low. Software issues were the top reason for recalls for the 19th time in the last 20 quarters.
• Pharmaceutical recalls dropped 25% (compared to quarter four 2020) to just 63 events in the first quarter, despite the FDA’s work to resume inspection and regulatory enforcement activity in late 2020 and early 2021.

Source: Sedgwick U.S. product recall index report.

Topics Legislation COVID-19