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Increased regulatory activity threatens businesses in 2021: Here’s what you need to know

As we prepare for a post-pandemic world, the lingering effects of COVID-19 will continue to impact the product safety and regulatory landscape throughout 2021 and beyond, according to the new Sedgwick Brand Protection 2021 State of the Nation Recall Index. In fact, existing data trends show that companies across all product categories can expect to face increased regulatory enforcement and litigation in the next 12 to 18 months.

The Sedgwick Brand Protection Index, previously known as the Stericycle Expert Solutions Recall Index, presents the latest recall data, trends and changes in the regulatory environment for the food, drug, medical device, consumer product and auto industries. It summarizes our latest findings and predictions to help businesses prepare for many of the challenges they are likely to face.

Surge in enforcement activities threatens pharmaceutical industry

Earlier in 2020, we predicted recalls in the industry to remain on par with previous years despite the pandemic. In fact, there were 344 drug recalls in 2020, a 2.4% increase in total recalls compared to 2019. We expect this momentum to continue throughout 2021 as the Food and Drug Administration (FDA) continues to focus on Current Good Manufacturing Practice (cGMP) quality issues, implications and developments related to impurities such as N-Nitrosodimethylamine (NDMA), and the safety of COVID-19 products. Additionally, the FDA’s return to long-standing priorities will almost certainly lead to a surge in enforcement activities, especially recalls in 2021.

Regulatory inspections to accelerate in medical device industry

There were 1,078 medical device recalls in 2020. By comparison, there were 884 recalls in 2019. Unsurprisingly, software issues were the top reason for recalls for the 18th time in 19 consecutive quarters. While we saw the pandemic limit regulatory inspections throughout 2020, expect FDA inspectors to be back on track by mid to late 2021. When that happens, we will see Emergency Use Authorizations (EUAs) come to an end, accelerated enforcement activities related to COVID-19 fraud and an evolving framework for AI-based software in medical devices. We will probably see more detailed virtual inspections become a regular part of the regulatory oversight process.

Consumer product industry to see major changes in regulatory landscape

Despite the ongoing pandemic, there was a 7% year-over-year increase in consumer product recalls from 2019 to 2020. This means there was an average of five consumer product recalls every week in 2020. As we look ahead to 2021, we see the new Biden administration shaping the Consumer Product Safety Commission (CPSC). If a Democratic majority is secured within the agency, we will likely see increased enforcement efforts, stricter safety standards, and a shift from voluntary guidance to mandatory standards. The CPSC’s priority list includes faulty furniture, battery-related risks and product safety issues tied to e-commerce, among other things.

Food industry to face new safety rules, increased oversight and more lawsuits

FDA food recalls continued their downward trend, which we’ve experienced since the end of the Obama administration and the beginning of the Trump administration in 2016. Meanwhile, The U.S. Department of Agriculture (USDA) recalls finished the year at a record low. Food companies, distributors and restaurantsmaintained their operations but faced supply chain disruptions, product shortages, labor issues, litigation woes and shifts in consumer shopping habits and buying preferences throughout the pandemic. These factors increase the chances for regulatory compliance or product quality to slip and for mistakes to be made. As a result, there will likely be a spike in recalls in the post-pandemic era. In the meantime, expect to see class-action lawsuits remain a top risk for food companies, and for the FDA to crack down on undeclared allergens as they remain the leading cause of food recalls.

Entire automotive industry to face increased scrutiny

Automotive recalls impacted more than 50.3 million units in 2020, just shy of the 50.7 million recalled units in 2019 and significantly higher than the 30 million recalled units in 2018. But beyond these numbers, 2021 is likely to be another challenging year for the industry as criticism of regulatory practices at the National Highway and Traffic Safety Administration (NHTSA) grows. New safety risks are likely to arise as the administration pushes towards Electric Vehicles and the increasing popularity of smart auto technology. As a result, we expect to see increased scrutiny, regulation, and litigation – especially as NHTSA and other regulators learn more about the risks associated with automobiles that are more software-reliant.

From business interruptions to regulatory and legislative changes, shifting consumer demand and supply chain management, two things are clear: Risks are escalating and the pace of change in the regulatory environment is accelerating. Now more than ever, companies across the manufacturing spectrum need to re-evaluate their operations, improve their record-keeping and plan for possible recalls and litigation.

Get more recall data, trends and predictions, along with additional insights and commentary from some of our strategic partners in the 2021 State of the Nation Recall Index available for download here.

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