October 11, 2011
Chinese company sues Pfizer
On Monday (Oct 10), Zhejiang Ronyao Chemical Company, which alleges it spent millions of dollars to produce Roxarsone also known as 3-Nitro, sued Pfizer for damages in Trenton's federal court.
The suit asserts claims for breach of contract and implied contract, promissory estoppel, breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing.
The plaintiff is asking for compensatory damages - including lost profits that its attorney estimates at more than US$20 million over the life of the contract.
The Food & Drug Administration first approved 3-Nitro in 1944. It is mainly used in chicken feed to control intestinal parasites, fatten up the birds faster and make the meat look pink. It is also fed to turkeys and pigs.
It is one of many medicated feed additives for farm animals marketed by Alpharma Inc. of Bedminster, which became part of Pfizer on Feb. 28, when Pfizer acquired its parent company, King Pharmaceuticals.
Inorganic arsenic is a known carcinogen, but 3-Nitro contains less toxic organic arsenic that was thought to pass through the chickens without accumulating in them.
However, in response to scientific studies showing that organic arsenic can convert to the inorganic form, the FDA launched a study in late 2009 that was completed earlier this year. The livers of 100 chickens that had been treated with 3-Nitro for six weeks were tested and found to contain inorganic arsenic. By comparison, the untreated control group had no measurable inorganic residues.
The findings led the FDA to announce on June 8 that Alpharma was suspending US sales of 3-Nitro, although it would wait 30 days to allow time for customers to find a replacement.
Arsenic occurs naturally in the environment, in water, air, soil and food, and the FDA press release said the level found in the chickens was "very low" and continuing to eat chicken treated with 3-Nitro for the extra 30 days "does not pose a health risk." The FDA also stated that Alpharma was working with it "to examine all relevant scientific data regarding the use of 3-Nitro in animals."
Alpharma, in its own announcement of the suspension, noted that the amount of arsenic detected in the chickens was equivalent to what is found in an eight-ounce glass of drinking water and said that there was no "imminent health risk" from eating chicken according to the FDA. It also stated that it was acting out of prudence and would notify regulatory authorities in other countries where 3-Nitro is used about the suspension.
Zhejiang Ronyao's local counsel, Timothy Duffy, of Coughlin Duffy in Morristown, says the company learned of the suspension after the fact over the Internet, and since then, Pfizer has halted 3-Nitro sales not just in the US but in Canada, the Philippines and Malaysia. The additive is not used in the EU, which has designated arsenic as an "undesirable substance" in animal feed, along with lead, mercury, fluorine and other substances.
Zhejiang Ronyao, located in Huangyan, China, alleges that it has been making another product known as 4-Nitro for Alpharma since 1998 and was approached in 2003 or 2004 about also producing 3-Nitro.
It claims Alpharma indicated it was seeking a long-term commitment and worked closely with it during the lengthy and expensive process of designing, building and supplying its plant and getting the necessary approvals to manufacture 3-Nitro, which allegedly took years and cost it millions of dollars.
As a result, Zhejiang Ronyao says it became the only entity in the world with FDA approval to make 3-Nitro. It began filling purchase orders under the terms of a five-year master purchase agreement drafted by Alpharma and sent to it in January, that also covered 4-Nitro, says the complaint. The agreement was never executed but Alpharma and then Pfizer abided by it and never repudiated it, Zhejiang Ronyao alleges.
Its complaint emphasizes the FDA's position on the absence of an imminent health risk, the voluntary nature of the suspension and Pfizer's failure to provide it with advance notice or consult with it on the decision.
Pfizer spokesman Christopher Loder declines comment on the suit, Zhejiang Ronyao Chemical Co., Ltd. v. Pfizer, Inc., 11-cv-5744, which is assigned to District Judge Peter Sheridan and Magistrate Judge Douglas Arpert.
H.R. 1487, the Poison-Free Poultry Act of 2007, introduced in Congress on April 12, by Rep. Steve Israel, D-NY, would ban the use of Roxarsone.