24 December 2019 09:58:21 IST

Indian pharma players in the crucible

Regulatory hurdles, including USFDA warnings, pose a risk to operations while encouraging better practices

Over the last couple of years, many players in India’s pharmaceutical industry have faced serious regulatory challenges. The increase in the number of observations and warning letters from the USFDA (US Food and Drug Administration) has become a key risk to these companies, resulting not only in delayed product approvals but also at times in lower realisations following cessation of manufacturing from certain facilities.

The observation letter issued by the USFDA last month on the Unit II facility of the Divi’s Laboratories at its Visakhapatnam plant has led to the share price falling to a two-year low. Similarly, Sun Pharmaceuticals Industries came under the regulatory scanner and its share price hit a 28-month low when the US drug regulator observed violations of good manufacturing practices at its Halol plant in Gujarat.

Formulations export

Given its lower manufacturing costs, availability of skilled workers and ability to align processes with the most international stringent regulations, such as those of the USFDA and MHRA (Medicines and Healthcare Products Regulatory Agency) of the UK, the Indian pharmaceutical industry ranks third in the world in volume and 14th in terms of value.

India is the largest global exporter of formulations in volume terms and 12th in export value, with a 14 per cent market share. The sector accounts for the second largest number of Abbreviated New Drug Applications (ANDAs) and the largest number of Drug Master Files (DMFs) applications in the US. These approvals are needed to export pharmaceutical formulations and APIs (Active Pharmaceutical Ingredients) to the US. India has about 40 per cent of all Abbreviated New Drug Application (ANDA) approvals from the USFDA.

The Indian API manufacturing industry is the third largest in the world, producing over 400 APIs (Active Pharmaceutical Ingredients). Globally, Indian companies hold more than 90 per cent of API approvals for ARV (anti retro-viral medicines for HIV), anti-tuberculosis and anti-malarial remedies. About 50 per cent of medicines procured by UNICEF for developing countries are from India. Over 40 per cent of generics prescribed in the US are procured from India.

What is USFDA?

Every country has its own regulatory authority, whose mandate it is to enforce rules and regulations and issue guidelines to regulate the drug development process, licensing, registration, manufacturing, marketing and labelling of pharmaceutical products.

The Food and Drug Administration is the federal agency of the US, and exercises authority for inspections in foreign countries from where products are sourced.

The manufacturing plants in India that export to the US must adhere strictly to the code of good manufacturing practices (GMPs) as per USFDA guidelines. USFDA officials often visit the facilities to check compliance with the relevant regulations. USFDA takes action against the manufacturer if it finds that rules have been violated.

There are some common reasons that prompt the USFDA to take regulatory action, including slippages with respect to adherence of cGMP (current Good Manufacturing Practices) guidelines during R&D, validation and manufacturing stages, as well as inadequate systems and controls to prevent alteration in laboratory test results and the associated documentation.

Based on the severity of the deviations, the FDA initiates the issuance of any of the following letters to the manufacturers. They are:

Form 483

Form 483 is issued when any conditions that may constitute significant violation(s) of the Food Drug and Cosmetic (FD&C) Act and related Acts, including inadequate compliance with cGMP, are observed. The top issues of concern are absence of written procedures, weak investigations of failures or discrepancies and inadequate corrective and preventive action.

Form 483, though, is not a final determination. It is considered along with a written report — Establishment Inspection Report (EIR) — including evidence and documentation collected on site; and the agency then determines further action. While a response to Form 483 is not compulsory, addressing each item with a good response can typically help the company steer clear of a warning letter. The response should reach the FDA within 15 days from the last day of inspection.

Warning letter

 

A warning letter is issued when the management does not address the regulator’s concerns within 15 days or when major deficiencies are identified.

Some strong reasons for the regulator to issue warning letters are — lack of data integrity, export of sub-standard, mislabelled or unapproved drugs to the US; forging, counterfeiting, simulating or misrepresentation of any data; alteration of whole or any part of data, certificate of analysis or record; and false statement or false submission to the FDA. A warning letter may not immediately lead to stoppage in exports.

 

Penalties, judicial action

After issuing a warning letter, if the company continues to disregard rules and regulations, the FDA can take enforcement action. The regulator is allowed to take one or more of administrative actions, such as import alerts or product detentions, revocation of product approvals, and recalls. If the FDA is not satisfied with remediation, it can call for an import ban.

Further, through the Department of Justice (DOJ), the regulator can enforce legal penalties, such as seizures, injunctions and criminal prosecutions.

According to the latest US FDA report, India received the highest number of warning letters issued to a single country. 

Greater scrutiny

India accounts for around 30 per cent (by volume) and about 10 per cent (value) in the $70-80 billion US generics market. Over the years, India has become a dominant player in the US generics space with a large number of plants and increased scale of operations, exporting key drugs and injectables from the country.

With the increase in the exports of generic drugs to US in recent years, the number of USFDA inspections of manufacturing plants has also risen. The number of Indian companies supplying to the US market have jumped nearly three times now, as against only a handful five years back. 

Second, many of Indian companies focus mainly on high-margin areas that require higher hygiene standards — for instance, injectables.

From 2008-2015, the USFDA issued around 50 warning letters to Indian companies. Of these, around 40 per cent were converted into import alerts. Only a third of warning letters issued between 2008 and 2013 have been resolved; a majority of these involved large companies.

While Indian pharma companies are going through a rough phase due to greater regulatory scrutiny, it is expected to lead to better R&D and manufacturing processes. As companies establish better checks and risk assessment procedures, it will stand them in good stead over the long term.