SCHERING PROBES RELEASE OF PLACEBOS

BERLIN -- German pharmaceutical manufacturer Schering A.G. may face government fines and potential lawsuits after an undetermined number of placebo birth control pills wound up on the market in Brazil.

A government investigation is continuing into how the placebo contraceptive pills, which were used for testing a packaging machine, were removed from the company and wound up on the Brazilian market.

Authorities have not determined any wrongdoing on Schering's part but have criticized several points in its security measures.

The company became aware of the problem in late May, when an anonymous package containing placebos of Milcrovlar contraceptive pills was received by Schering do Brazil, the company's Brazilian subsidiary, according to a Schering spokeswoman in Germany. The package contained a note indicating that they had been dispensed in Sao Paulo. Schering at first feared it was the target of a blackmail attempt, but no demands were made, the spokeswoman said. Soon thereafter a second package was received and the company informed police.

Brazilian authorities ordered Schering to stop production of all pharmaceuticals the week of May 25, though the company won a court order lifting the ban on all products but Milcrovlar a week later. That same week, authorities ordered a freeze on sales of Milcrovlar contraceptives, which was expected to be lifted on Friday.

The company recalled 900,000 packages of its product from pharmacies, the spokeswoman said. The company ran advertisements alerting the public to the danger of the placebos and urging people to return the Milcrovlar pills.

A total of 600,000 placebo pills had been used to test the packaging machine, the spokeswoman said. While the majority of pills were destroyed, the company's investigation has found that an undetermined number of packages were not accounted for.

Schering will re-examine its security standards for production and testing in light of the situation, the spokeswoman said.

To date, seven women who took the pills are pregnant, according to the Brazilian Health Ministry. Brazilian authorities have threatened to fine the company 4.5 million deutsche marks ($2.5 million), though none have been levied.

Meanwhile, the company spokeswoman in Germany said five women are negotiating a settlement with Schering do Brazil. She could not provide details of the amounts the women are seeking.

"The company is a victim of criminal manipulation," said Dietmar Greseus, casualty insurance manager for Schering. Schering's Brazilian unit purchases liability insurance in the local market, he said.