New Delhi: From spotting “live moths” in raw materials to finding “bacteria-contaminated water” in the manufacturing process, to unearthing ‘shredded’ records of quality control, the US Food and Drug Administration (FDA) has found several reasons to slap Indian drug-makers with ‘warning letters’ — a record high number of them — in 2019.
The American healthcare regulator has issued 23 warning letters in the last 11 months (until 27 November) — three times that of last year — to the country’s top drug majors such as Lupin, Glenmark Pharmaceuticals, Torrent Pharmaceuticals, Aurobindo and Cadila.
The FDA has also increased its scrutiny of the Indian pharmaceutical sector. India accounted for nearly one-third of the total foreign inspections by FDA between October 2018 and June 2019, according to data collated by Jefferies India and published by Livemint.
The sector has been under the scanner for all the wrong reasons. In May, a book, The Bottle of Lies, by investigative journalist Katherine Eban had accused Indian pharmaceutical companies of committing major lapses while manufacturing medicines such as fudging data on quality control and toxic impurities, overlooking bird infestations at manufacturing plants.
She also labelled Indian drugs as being of ‘flea market quality’.
The intensified FDA scrutiny and the bad press, however, appear to have had little effect on the businesses of the Indian drugmakers. The sector continues to successfully gain FDA approval to sell generic drugs in the American market.
The pace of new drug application (ANDA) approvals — an abbreviated new drug application that is submitted to the FDA for the potential approval of a generic drug for sales in the US market — has risen.
Indian firms accounted for 43 per cent of the total approvals in 2019, according to the data by ICRA, a credit investment agency. The FDA handed out 476 ANDA approvals worldwide in the first half of 2019, of which, 207 were given to India (see chart).
This figure was 36 per cent in 2018 and 27 per cent in 2017.
The surge in ANDA approvals shows that warning letters are not impacting the business opportunities of Indian drug-makers in the US, experts say.
Warning letters are the ‘new normal’
Some industry experts said the warning letters are not really worrisome as there are over 500 manufacturing sites in India approved by the US FDA. They add that problems in some of them is not a big deal.
“The increase in the number of warning letters being issued to pharma companies is indeed an area of concern but this phenomenon is not just limited to India and is spread across the world,” said Kiran Mazumdar-Shaw, chairman, Biocon. “We have to accept this heightened scrutiny as the new normal and invest in upgrading quality systems through automation and various other digital interventions that can reduce human error.”
“Moreover, with the increase in the volume of ANDA product filings by Indian companies in the U.S, the frequency of regulatory audits has increased, leading to a concomitant rise in warning letters being issued by the regulator,” she added.
Industry experts echoed similar observations.
“The problem is twin sided — an increased scrutiny by US FDA along with lapses at Indian manufacturing sites. While India needs to pull up its socks in plugging the gaps and stopping the regulatory blunders, we must consider that US FDA has increased scrutiny not just in India but across the globe, even in the US,” said Suneel Chopra, legal and regulatory expert. Chopra was formerly the principal consultant at drug price regulator, National Pharmaceuticals Pricing Authority.
Despite increasing warning letters, drug firms are increasingly able to resolve concerns, industry insiders claim.
“Most of the warning letters are not even sent for quality lapses. They are sent for procedural lapses and not for selling bad medicine,” an official from the Mumbai-based Glenmark said. “If we were in such bad shape, the warning letters would have turned into import bans. They haven’t, which means we are able to resolve their concerns quickly.”
The FDA does impose import alerts, a ban that bars drug-makers from exporting drugs to the US, if the concerns it raises in the warning letters are not addressed.
Indian drug-makers, however, haven’t received any ‘import alerts’ this year, which is the harshest form of punishment that can adversely affect the revenue of drug-makers.
For instance, in 2014-15, the fortunes of Ranbaxy (now Sun Pharma) plummeted after the US regulator banned imports from all of its manufacturing plants into the US.
‘US FDA turning into a more stringent regulator’
With pressure building on US President Donald Trump to reduce the cost of medicines in the country, he has begun looking at opportunities in other countries.
The US FDA, in turn, has been pressured to ensure that only quality generics from cheap markets like India and China are imported into the country.
“To maintain the quality of imports, US FDA is acting aggressively,” said Chopra.
“We have seen that the U.S. FDA as a regulator has become much more stringent and it has upped the bar for quality and compliance,” Shaw from Biocon agreed.
Other drug-makers echoed similar observations. The FDA, in fact, now sends more inspectors for longer stays at manufacturing sites, an executive said.
For instance, the FDA issued Form 483 To Aurobindo Pharma that ran into 37 pages for the surprise inspection that went on for 10 days.
“US FDA sends two to seven inspectors for audits and surprise inspections against the earlier (usual) number of two to three inspectors,” said an official from the Mumbai-based Macleods Pharmaceuticals.
“The inspectors check everything ranging from dustbins, trash bins to computer drives and toilets. The inspections were always very strict but now, they are unusually aggressive.”
“The inspections earlier lasted for less than three days; these days, they can extend to 10 days as well,” the official added. “The observation letters are heavier and run into 30 to 37 pages against the earlier three to 10-page letters.”
The industry, however, does not see it as a “witch hunt” but as part of a “global phenomenon”.
“This is a global phenomenon and the expectation levels being set by the U.S. FDA is uniformly high worldwide,” Shaw said. “It is not only Indian companies that are facing the brunt of the forensic scrutiny; many U.S. firms are also at the receiving end of Form 483s and warning letters… So, I don’t believe that a higher number of warning letters is an India-centric phenomenon.”
Business as usual
Indian drug-makers have responded to the new environment.
Some like Lupin and Cadila have introduced changes such as automating the entire production cycle, training employees to tackle audits and inspections, empowering employees to point out lapses, reject batches with minor deviations or developing proprietary tools for risk mitigation.
Data, however, shows that the warning letters have done little to impact the businesses of the country’s pharmaceutical sector.
According to a McKinsey report, India’s pharmaceutical sector is estimated to grow to $55 billion by 2020. It was $12.6 billion in 2009. The report adds that even in a pessimistic growth scenario, in the event of regulatory controls and economic slowdown, the sector may grow to be $35 billion.
According to the ICRA, Indian drug-makers’ revenue from the US grew by 19.8 per cent in 2019, led by new product launches, limited competition and moderation in pricing pressure. “For India, Europe also continues to demonstrate good growth at 9.8 per cent,” said Gaurav Jain, vice president and co-head, ICRA.
The ICRA has also predicted double digit growth for the sector. It has forecast that the Indian pharmaceutical industry will grow at 11-13 per cent in 2019-2020 financial year, “on the back of healthy demand from the domestic market given increasing spend on healthcare along with improving access. This along with moderation in pricing pressure for US market, new launches and market share gains for existing products and consolidation benefits will drive growth in FY2020”.
Jain, however, warns that the warning letters will affect the brand image of a company.
“The US FDA has highlighted the deficiencies in manufacturing processes and Indian firms must fix the gaps to continue grasping the business opportunities in the market,” he said. “While warning letters do not materially impact the existing revenues base of the company but only stall new product approvals, they definitely impact the brand image and new business.”
He also said profits from the US market may fall in the coming years. “In the last few years, we have seen a pricing pressure in the American market. It is, however, achieving some sanity now,” Jain said. “The players have optimised the portfolio and now there are fewer players in each category. However, the profitability in the US market is not what it used to be two to three years ago.”
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