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Friday, April 09, 2010
Made in Palm Beach County: Riviera Beach drugmaker takes on overseas competitors

RIVIERA BEACH — As drug manufacturers flee the United States for India and China, entrepreneur Fred Sancilio hopes to prove that America remains a profitable place to make pills.

His firm, Riviera Beach-based Sancilio & Co., churns out a variety of drugs and supplements, including prescription medicines for other companies, children's vitamins and fish oil pills, under Sancilio's Ocean Blue brand.

"The pharma industry, just like the automobile industry and the apparel industry, has been going offshore," Sancilio said. "Over the last five years, it has really accelerated."

But Sancilio, a 60-year-old veteran of the pharmaceutical industry, is bucking that trend. He's hiring workers, recruiting scientists from abroad and investing in his manufacturing plant. Last year, he landed $700,000 in loans from Jupiter and Palm Beach Gardens, and he expects sales to soar to $6 million this year from $1 million last year.

"Can I make a product in South Florida that can compete with products made in Asia? The answer is yes," Sancilio said.

For Sancilio, bringing drug plants back to the U.S. is a passion. Moving drug manufacturing overseas sucks good jobs out of the U.S. economy and poses safety risks, he argues.

A decade ago, South Florida boasted a vibrant drug-manufacturing industry. Generic drug makers Ivax and Andrx operated large plants in Miami-Dade and Broward counties. In recent years, though, that industry has shrunk.

"We're forgetting how to make stuff. And we're killing our jobs," Sancilio said.

Then there's the matter of safety. As drug plants have shifted from the United States (where the U.S. Food and Drug Administration kept a close eye on their operations) to Asia, Sancilio predicts a disaster.

During his tours of drug plants in China, Sancilio has seen warehouses with nothing but open spaces, whereas U.S. plants would have windows. And he has seen illiterate workers mixing medicines.

"It's scary," Sancilio said. "The FDA has been overwhelmed with a need to inspect remote facilities in India and China. I have no doubt that there'll be a huge disaster. We're fooling around with lives."

The FDA says the volume of imports it regulates has doubled in the past five years and continues to rise. The agency has been adding inspectors in China, India and elsewhere.

Even so, drug industry experts say the FDA simply hasn't been able to keep up with the explosion in offshore drug plants. Russell Allen, head of the biotechnology trade group BioFlorida, said Sancilio's expansion here indicates that the pharmaceuticals industry is rethinking its move offshore.

"Quality control has become a greater and greater concern," Allen said. "I think there's a potential turnaround in that trend."

Sancilio calls his made-in-America label a selling point. He ships fish oil Omega 3 pills from Riviera Beach to China and Singapore, where some consumers prefer American products to Asian pills.

"There is an insatiable appetite for American-made Omega 3," Sancilio said.

Even so, costs remain a challenge for a Florida company competing with rivals in India and China — so Sancilio has gotten creative.

Machines and clean rooms used in American and European drug plants cost far more than those in China and India, so Sancilio figured out how to make equipment for less.

For instance, his Riviera Beach plant includes a prefabricated clean room made in China and assembled here.

"If I'm starting with machines that are 10 times more expensive, I can't compete because my depreciation is 10 times as high," Sancilio said.

But, he added, rising rents and salaries in China and India have narrowed the cost gap.

Sancilio now has 44 employees, and he's eyeing further growth. He has been talking to Pahokee officials about building a fish oil plant on land donated by the city.

For Sancilio, the Riviera Beach-based company is a second act. In 1979, Sancilio founded aaiPharma of Wilmington, N.C. The company made a variety of drugs, including the painkillers Darvocet and Roxicodone, and its sales topped $200 million in 2002 and 2003.

Sancilio retired in 2002 as the company was thriving, and its success made him rich. He and his ex-wife had a net worth of $23 million in 2006, according to a divorce filing.

But after Sancilio's retirement, publicly traded aaiPharma collapsed amid allegations of bogus accounting that exaggerated sales.

AaiPharma filed bankruptcy in 2005 and a top executive pleaded guilty to securities fraud.

That history bothered Palm Beach Gardens Councilwoman Jody Barnett. She voted last year against a $350,000 loan to Sancilio.

"It was basically a start-up company, and I didn't think we should be speculating with taxpayers' money," Barnett said.

"It was a concern to me that the public investors in his last venture had lost their money."

But Sancilio said aaiPharma's problems came after he retired from the company he founded.

"I felt very good about how I left it," he said.

"I feel responsibility for hiring the people who eventually screwed it up, but I didn't have control."


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Sancilio & Co.,

Where: 3874 Fiscal Court, Riviera Beach

What they do: Maker of prescription medicines, children's vitamins and fish oil pills

Number of employees: 44
 
 
By Jeff Ostrowski Palm Beach Post Staff Writer
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