Sigma’s CEO told investors casual labour hire workers are properly trained to handle stock. (Flickr: Daniel Cham)
Sigma Healthcare’s chief executive Mark Hooper has told investors that the company takes its obligations to properly handle stock processed through its distribution centres “very seriously” and management has never heard any reports from its workers about the alleged mishandling of prescription drugs.
- Sigma faced shareholder questions over claims that the company may have failed to properly handle over-the-counter and prescription drugs
- The company’s CEO Mark Hooper says Sigma takes it obligations as a pharmaceutical distributor ‘very seriously’ and workers have not concerns with management
- At Wednesday’s AGM, the company also faced an investor backlash about executive pay, with more than 18 per cent of votes cast against the remuneration report
On Wednesday, investors delivered a significant vote against the company’s remuneration report at its shareholder meeting, and Sigma also faced shareholder questions over claims that the company may have failed to properly handle over-the-counter and prescription drugs that get processed through its distribution centres.
The worker claims, which were first raised by ABC News and are now under investigation by state health departments in Western Australia and Victoria, include that prescription medicines used to treat bacterial infections, depression, high blood pressure and diabetes were left out in 30-to-40-degree heat for hours over the summer months at some sites.
Workers also claim that prescribed medications that require refrigeration such as Humira, a medication used to treat conditions such as rheumatoid arthritis and Crohn’s disease, were left out for hours on the open warehouse floor at one Sigma site.
Sigma services over 4,000 pharmacies nationwide with more than 15,000 product lines daily.
The group also operates Australia’s largest pharmacy-led network, with its brands including Amcal, Chemist King, Discount Drug Stores, Guardian and PharmaSave.
CEO defends job cuts
About 70 per cent of Sigma’s staff are shareholders, and some who are fearful of speaking out about issues raised about stock handling and storage had proxy voters and union representatives ask questions on their behalf at Wednesday’s meeting.
One of the key issues raised on Wednesday was about whether the company’s move towards more casual labour hire was causing issues with stock handling.
Sigma had been servicing Chemist Warehouse for years but in July 2018 lost the contract to a competitor, resulting in a loss of business volume, which sparked a company restructure and 300 job losses.
About one-third of the 300 redundancies have so far been implemented, mainly via the closure of smaller distribution centres such as the Belmont site in Western Australia, which had been used to service Chemist Warehouse. The company has since opened a new distribution centre in Canning Vale, which is now mainly serviced with casual labour hire workers.
Mr Hooper said the decision to close distribution centres and make experienced workers redundant was not an easy one, but necessary given the volume of business that had been lost as a result of Chemist Warehouse’s decision to move its business to another competitor.
“The unfortunate practical reality when you lose $1.8 billion of business is we have to take some action to maintain the overall viability of the business,” he said.
“And we have not taken those decisions [to close centres and make workers redundant] lightly, or without reference to it and support for the people who are impacted.”
He also defended the use of casual labour hire, saying these workers have to undergo police checks and are given the same training as its permanent staff.
“We take our obligations in terms of the pharmaceutical distribution piece very seriously,” he told the AGM in Melbourne.
“In the last six to 12 months we have probably increased our use of agency team members. But that was just a reflection of the fact that we knew we were going to lose the Chemist Warehouse volume.
“I think morally we had a dilemma about bringing on full-time team members when we knew we were going to make them redundant in six to 12 months.”
‘We are not uncompassionate’, says chairman
Chairman Brian Jamieson, who will be stepping down from the role within the next year, added: “we are not uncompassionate people let me assure you of that”.
But there had to be redundancies in order for Sigma to have a sustainable business, he said.
“It is my hope and desire for the programs that we are putting in place that our business will grow and we will rehire people, or hire further people into the business,” he said.
Mr Jamieson also said the company had a whistleblower process and that had never been used, nor had he heard any concerns from staff about fear of reporting issues they may have witnessed, including around stock handling.
“At the board level we ask at all times that if there are issues in the business we want to know about them. We’ve not heard anything about it,” he said.
“It’s something that we will have further discussion about. But I’ve not heard it before.
“And the fact remains nothing has come to our attention via the processes that we have through our managers or other avenues for people to speak their mind.”
The company also faced investor backlash about executive pay, with more than 18 per cent of votes cast against the remuneration report.
Sigma told investors it remains on track to deliver on its earnings guidance and cost-cutting targets, as it faced questions from investors about the loss of the Chemist Warehouse contract and its rejection of a $730 million takeover bid by rival Australian Pharmaceutical Industries (API) in March.
The loss of the Chemist Warehouse contract and decision to reject the API offer have heavily impacted the company’s share price, although at the close of trade on Wednesday the company was trading 2.8 per cent higher at 54 cents.
The company said it remains on track to deliver its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) guidance of $55 million to $60 million for the 2020 financial year.
New audits of Sigma sites underway
The WA Department of Health has said it is investigating the claims about stock mishandling detailed by workers to ABC News, and the Victorian Department of Health and Human Services will also look into the issues raised, and undertake a site inspection at Sigma’s Rowville distribution centre within the next week.
Previous state regulator audits of Sigma sites around the country have not revealed any problems.
Antibiotics were also among the drugs workers claimed were left out in the heat (iStockPhoto)
“The Department of Health will be reviewing the circumstances of the allegations made, conduct a full investigation and consider whether there have been breaches of the legislation or a lack of adherence to licence conditions,” a spokeswoman said.
“Any actions taken will depend on the results of these investigations and the exact nature of the breaches, if any.”
She added that a person convicted of an offence against the Medicines and Poisons Legislation in Western Australia may face a penalty of between $15,000 and $45,000, depending on the offence and whether this relates to controlled substances.
For controlled substances this can also include imprisonment for up to three years, she said.
Licence and permit holders may also face suspension, cancellation or amendment of their licence or permit, and that additional or amended conditions could be imposed on any licence or permit.
“At this time, it is not appropriate for the Department of Health to make any comment on either the details of any investigation or the likely outcome,” she said.
Drug producers also investigating claims
Drug manufacturer AbbVie, which produces the Humira pen, said it will be investigating the claims, but advised HUMIRA patients to “continue to take their medicine as prescribed by their doctor and, if concerned, consult their healthcare professional”.
“AbbVie is unaware of any cases of HUMIRA (adalimumab) being stored inappropriately by wholesalers and would be concerned if this was the case,” a spokeswoman said.
“AbbVie takes allegations such as this seriously and we are following up with relevant parties regarding this matter.”
She said the company “closely monitors the quality of our medicines and has not detected any indications that there has been a change in relation to the handling of HUMIRA”.
Safe handling and distribution of medicines by wholesalers is governed by federal and state and legislation and wholesalers must comply with the Australian Code of Good Wholesaling Practice.
“These wholesalers are bound by contractual obligations and regulatory controls and are also audited by state health authorities to ensure that they meet the required standards for handling medicines,” she said.