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BW Businessworld

Uncle Sam’s Strong Medicine

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Early last year, there was a critical shortage of cancer drug Doxil in the US. The regulator, the US Food and Drug Administration (USFDA), decided to increase the availability of the medicine by allowing a temporary import of a generic equivalent from India’s Sun Pharma. The injection, manufactured in the company’s Gujarat unit, was initially exported as a short-term replacement, though on 2 February 2013, USFDA regularised these supplies.

The story of USFDA’s dependence on Sun was, however, overshadowed by the beating the company’s domestic peer, Wockhardt, took from the US regulator in May. The USFDA banned export of all medicines from one of Wockhardt’s Aurangabad plants on concerns of current good manufacturing practices (GMP) not being followed. The company’s chairman, Habil Khorakiwala, while hoping to resolve the problem, hinted that in a worst case scenario, it stands to lose $100 million in revenues from its US business.

Around the same time, the regulator found problems with an Indian manufacturing unit of US-based Hospira, which it had acquired from Chennai-based Orchid Chemicals two years ago. Just weeks before this, Daiichi Sankyo-controlled Ranbaxy settled a long-pending case with USFDA by paying a $500-million fine. In the midst of these developments, another leading Indian player, Glenmark, voluntarily withdrew some of its medicine lots from the US in the wake of consumer complaints.

Name And Shame
The developments on the US front are worrisome not just from a revenue loss (as in the case of Ranbaxy) point of view as they also carry the potential risk of reputational damage — for not just a particular company but the Indian pharma industry as a whole.

For Ranbaxy, besides the $500 million fine, and the $300 million that it had to share with Teva to ensure the smooth launch of the Lipitor generic, the estimated loss of business from the US market is another $200 million. In the case of Ahmedabad-based Claris, its troubles with USFDA between November 2010 and August 2012 resulted in it having to renege on a drug supply deal with the world’s largest drug maker Pfizer.

For some, the dent to reputation outweighs the revenue loss. A case in point being the import ban imposed by the USFDA on one unit of Hyderabad-based Aurobindo Pharma. The said unit, No. 6, produced cephalosporin worth Rs 180 crore a year when the ban came in February 2011. The ban was eventually lifted in March 2013. “It is not possible to quantify the damage as Aurobindo had five other USFDA-approved cephalosporin units,” notes Ranjit Kapadia, a senior industry analyst and vice-president at Centrum Broking.

Similar is the case with Sun Pharma. Its US subsidiary, Caraco Pharmaceuticals, got into trouble with the USFDA in 2008 and production at three of its facilities was banned thereafter. By the time the ban was lifted in August 2012, Sun had suffered both financially as well as in terms of reputation.

The consequences of the current spate of USFDA actions against Indian drug majors is, therefore, not always easy to estimate. “Unless companies reveal their exact numbers, it is difficult to put a figure on the losses due to FDA actions. Companies can switch products to other units or use their other facilities for supply during the ban. In India, even listed companies do not reveal the exact revenue lost (except tentative short-term impacts during quarterly reviews), and they are also not obliged to do so,” says Kapadia.

But, all said and done, the negative sentiment generated by the regulatory actions was so strong that the Ministry of Commerce and Industry had to issue a press release on 3 June providing statistical evidence to the effect that the Indian pharma industry continues to enjoy a strong presence in the US — and that reports of USFDA penalising Indian companies were only an aberration.

Ground Reality
Official records show that Indian pharmaceutical companies had, as on 30 December 2012, over 3,000 approvals to produce pharmaceutical raw materials for export to the US. Filed by 233 different Indian companies, these documents for regulatory approval, called Drug Master Filings (DMF), amounted to almost 40 per cent of the total DMFs filed with the USFDA from across the world. Again, of the 476 generic drug approvals given by the USFDA during 2012, nearly 38 per cent, or 178 market authorisations, went to Indian firms. As on 30 December 2012, over 2,275 generic medicines manufactured by 31 different companies have been approved by the USFDA. The number of USFDA-approved manufacturing units in India is 323, which is over 50 per cent of the 550 approvals given by the agency.

That USFDA continues to trust Indian medicines — as in the case of the Doxil generic — is beyond doubt. It is also a fact that the regulator of the world’s largest pharmaceutical market, worth over $50 billion, is increasingly turning aggressive, resulting in warning letters being shot off to the likes of Wockhardt, Hospira, Lupin, Aurobindo, Dr Reddy’s Laboratories, Ranbaxy and Granules India, among others.

The saving grace is that these measures are not targeted at Indian manufacturing units; rather, they cover medicine suppliers across the world.

A recent study carried out by the Pharmaceutical Export Promotion Council (Pharmexcil) indicates that the US regulator carried out 320 inspections at sites of 115 pharmaceutical companies in India over the past five years ending March 2013. While the agency made suggestions for improvement in close to 70 per cent of these cases, it gave a clean chit to the rest. In USFDA parlance, in 70 per cent of the cases, the investigation reports were classified as VAI (voluntary action indicated) and the rest as NAI (no action indicated). Incidentaly, there wasn’t a single inspection report that said OAI (official action indicated), the presence of which would have indicated significant objectionable conditions or practices.

Most of the manufacturing sites where USFDA inspectors had no complaints belong to leading domestic drug companies such as Sun Pharma, Dr Reddy’s, Lupin, Hetero, Sashun and Aurobindo. So, despite being the country with the largest number of USFDA-approved manufacturing facilities, outside the US, India does not figure at the top of USFDA’s import alert list.

Sun Pharma, which has five USFDA-approved manufacturing facilities in India, says there are no India-specific issues that the regulator’s inspectors have pointed out. “There are always some suggestions or comments from an auditor, which help us in continually improving our systems,” a Sun spokesperson explains. “It is quite obvious that if a person from outside evaluates any facility, he or she may have some suggestion due to a difference in opinion, or an alternative way of doing an activity. We always welcome such suggestions and try and incorporate them into our systems for better compliance,” she says.

USFDA spokesperson Christopher Kelly echoes the view. In an email response to BW, Kelly stated that “the problems encountered by our (USFDA) investigators in India, whether they are based there or traveling from our (US) districts, are similar to those seen around the world in manufacturing”.

“Issues associated with quality systems implementation, with data integrity and validation of various processes used in manufacturing or testing are regularly found across the different product areas in all countries of the world,” says Kelly.

The FDA is strict on adulteration with contaminants like microbiological agents (for example, salmonella and listeria), or products identified with unapproved chemicals or pesticides, or the presence of filth (for example, foreign bodies and insect parts). “India is really no different to other countries when it comes to problems; in that there are some companies or facilities that are really compliant and state-of-the-art and others where there are problems and challenges. We see the same things here as we do elsewhere,” adds Kelly.

When the USFDA does take action, very rarely do its warning letters end up in big penalties and criminal action (as happened in the case of Ranbaxy), notes Paul Smith, quality and compliance productivity specialist at Agilant Technologies. In a presentation on FDA warning letters, Smith says only one in six Establishment Inspection Reports (EIR) becomes a warning letter. Most observations in such reports are on procedural lapses, non-compliance with standard operating procedures or deficiencies in documentation and calibration of laboratory instruments as prescribed by US standards.

USFDA’s Kelly clarifies: “Only if the problems identified are significant or have potentially public health consequences does the agency take measured and appropriate enforcement actions to ensure safe and quality products.”

The setting up of a permanent office in India by USFDA in 2008, with a presence in Delhi and Mumbai, only intensified the quality checks. Located at the US embassy in Delhi and at the consulate in Mumbai, these centres resulted in better flow of information to the US-based staff and resulted in quicker decisions. “The India office serves as a portal through which a variety of information flows back and forth,” Kelly explains. The Delhi office has a country director and a deputy director supported by five experts. In Mumbai, there are five consumer safety officers or inspectors. These numbers are set to increase, with seven additional drug inspectors.

“In March 2013, the government of India approved this increase. FDA is now in the process of recruiting and training the additional staff and hopes to have them relocate to India in 2014,” says Kelly.

Raising Standards
To meet stiff USFDA norms, most Indian pharma companies have a team of regulatory and compliance experts who constantly monitor data and output. Sun Pharma, for instance, claims to have an independent Corporate Compliance Department to audit various facilities of the company to ensure that all plants are in compliance with the required standards.

“The generics business is a different ball game and you have to be on your toes 24x7 to keep up with stringent quality norms, especially while exporting to the US,” says Glen Saldanha, managing director and CEO of Glenmark Pharmaceuticals.

Notwithstanding the recent setbacks, Indian pharma companies are upbeat about their US business. “The Indian pharma industry has learned to differentiate, leverage research and intellectual property and, more importantly, execute flawlessly, be it manufacturing, the supply chain or marketing. We are now the third largest manufacturer of drugs globally by volume and if I was to go by some market reports, over the next decade, we are likely to emerge within the top 10 globally”, says Kamal K. Sharma, managing director, Lupin. The Mumbai-headquartered company’s US business grew 36 per cent to $693 million in 2012-13. This, after Lupin entered the US market only seven years ago. Interestingly, the growth has come despite it being slapped with a warning letter by the USFDA for issues at its Mandideep manufacturing site in May 2009. The company managed to address all issues within seven months and got a clearance for the facility by January the following year.

Patients To Benefit
Apart from making pharma companies more quality conscious, the USFDA’s aggressive presence in India also stands to benefit the domestic consumer in two ways. First, since units approved by it produce drugs for the Indian market as well, they will inspire greater confidence about their quality. Second, as USFDA’s India office engages with its counterparts in the Ministry of Health (the Drugs Controller General of India, DCGI, and the Food Safety and Standards Authority of India), the latter acquire an awareness of the higher levels of compliance required internationally.

Recently, the USFDA has been working closely with the DCGI in the area of good clinical practices and sharing information about how USFDA inspects clinical trial sites. This learning can only help India as it is in the process of developing its own procedures and processes to regulate clinical trials.

With the burgeoning generics market, USFDA warnings to Indian drug makers are bound to increase. But these will have a positive impact in the long- and short-term on the quality of the drugs made by Indian companies. And, of course, better quality drugs can only be good news for consumers the world over.


(This story was published in BW | Businessworld Issue Dated 01-07-2013)]]>