Expect regulatory scrutiny and product recalls to soar after COVID pandemic

As the post-COVID-19 world begins to reopen, we’re starting to find our way back to normalcy. But regardless of how quickly the entire country returns to "business as usual", risks to brand reputations are likely to increase as regulators resume work postponed during the pandemic, according to the latest edition of our 2021 brand protection recall index report.

The new report offers the latest recall data, trends and predictions businesses need to know to navigate the complex regulatory environment in the food, drug, medical device, consumer product and automotive industries. It also features insight from strategic partners at leading law firms and insurance companies to help industries better prepare for the risks they face.

Increased oversight for the consumer product industry

The Consumer Product Safety Commission (CPSC) announced just 47 recalls in the first quarter of 2021, making it the lowest quarterly total since Q1 2019. But as we look ahead, the CPSC’s story will likely be less about recall numbers and more about the agency’s newfound gloves-off approach to oversight and enforcement. With the new Biden Administration and a continued push by advocacy groups and policymakers for the CPSC to take bolder steps, we will undoubtedly see the agency employ a more aggressive and vocal approach to regulation.

Pharmaceutical industry to see heightened regulatory scrutiny, litigation and reputational risks

Despite the U.S. Food and Drug Administration’s (FDA) work to resume inspection and regulatory enforcement activity and continued concerns related to COVD-19 products, recall events fell 25% compared to Q4 2020. Similarly, units impacted also declined 58.5%, representing the lowest number since Q3 of 2018. But rhetoric from Biden Administration regulators and calls for stricter enforcement from influential consumer advocacy groups indicate this downward trend will end soon. As 2021 progresses, drug companies can expect the FDA to focus on contamination-based recalls, mislabeling, inadequate specifications and the growth and increasing influence of independent labs.

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

FDA recall activity slipped from 92 events in the fourth quarter of 2020 to 88 recalls in the first quarter of 2021. If this level of activity were to continue without significant increases over the next three quarters, annual recall totals will drop below 400 events for the first time in at least 10 years. However, as we emerge from the pandemic, the food and beverage industry is already seeing new food safety rules, increased oversight and enforcement and more lawsuits arising from alleged food safety issues. Companies can expect to see heightened FDA scrutiny of suspected contaminants, plant-based alternatives, and undeclared allergens at the top of the FDA’s priority list in coming months.

Technology-driven innovations pose major safety concerns for the automotive industry

In Q1 2021, air bag recalls impacted the most units at 65.2% of all recalled units. Looking closer at this category, we saw 20 recalls accounting for 8.8 million units in the first quarter alone. In comparison, 2020 as a whole logged 46 recalls impacting 19.3 million units. Beyond these numbers, it’s likely to be another challenging year for the industry. As automakers continue to take steps to reduce their carbon footprint and focus on sustainability goals, safety concerns related to electric vehicles (EVs) and new technology are at the forefront. It’s important to keep a close eye on auto-related recalls as the year advances, including hybrid propulsion systems, forward collision avoidance, electronic stability control, communication systems, lane departure features and vehicle speed control. Many of these features are a reminder of the innovation and technological advances progressing toward EVs and onward to autonomous vehicles.

The medical device industry is on the brink of a regulatory crackdown

Medical device recalls decreased for the third straight quarter to 212 events in Q1 2021, resulting in a seven-quarter low. Despite the decline in events, impacted units increased 2.5% to 60.8 million, the highest since Q1 of 2020. But experts warn a regulatory crackdown is on the way. In March of this year, for example, the FDA published 16 warning letters sent to medical device companies. Then in April, the agency released 5 more, signaling a renewed effort to demonstrate the Biden Administration’s seriousness in protecting U.S. patients and their families. The accelerating pace of innovation, a fast-growing industry and social media activity are all driving more FDA attention toward medical device companies.

Manufacturers in all industries are operating in one of the most turbulent and uncertain times in recent history. But while consumers may be eager for a return to normal, the 2019 “business-as-usual” posture for regulators and lawmakers is a thing of the past. Activists, regulators and the Biden Administration are poised for action. The FDA and CPSC are under intense pressure, as lawmakers and consumer advocates alike have been accusing both agencies of being lax in their regulation of food, drugs and consumer products.

Companies across all industries should closely reevaluate their manufacturing processes, prepare in advance for spot inspections, and review all records of safety procedures, product testing and regulatory compliance. Today, accurate and proper record keeping must take place long before inspectors arrive, as too many unprepared companies have discovered when what seemed to be minor irregularities have led to public enforcement action.

Get more recall data, trends and predictions, along with additional insights and commentary from some of our strategic partners in the latest edition of Sedgwick’s brand protection recall index report – available for download here.

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