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Shifting Pharma Supply Chain Strategy From Global To Local

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Alongside large-scale disruptions of many critical industrial operations, Covid-19 global pandemic took the wind out of the sail of pharma supply chain, as well, at the very onset of lockdowns. This happened in many countries around the world, including the largest global pharma market – the United States, and also in ‘the pharmacy of the world’ – India.

That there were such disruptions in India, both in procurement and logistics, during the national lockdown, was widely reported in the media. Besides product non-availability, cost of goods also went up significantly in several cases.

From this perspective, I shall deliberate in this article, how different countries are contemplating to respond to any similar crisis in the future, primarily to safeguard patients’ health interest, despite some opposition, though. To drive home the points, I shall cite examples from India and the United States, as specified above.

Supply Chain vulnerability of the ‘largest pharma market of the world’:

There are several examples to vindicate such vulnerability, both for the US and also India. From the US perspective, the country’s supply of generic and branded medicines are, reportedly, heavily rely on emerging markets, like India and China.

This point has now ‘come under close scrutiny of the American policy makers, as COVID-19 sends shockwaves through the industry. According to the US Food and Drug Administration, China and India represent 31 percent of the plants that are registered with the US to supply Active Pharmaceutical Ingredients (API), as of August 2019. The details are as hereunder:

Place

United States

European Union

India

China

Rest of the world

Canada

%

28

26

18

13

13

2

It is worth noting, the number of facilities in China supplying APIs has, reportedly, more than doubled since 2010 – to 13 percent of all those serving the US market.

Examples from India:

The outbreak of Coronavirus had just not shut factories in China - impacting supplies and leading to fears of a shortage of drugs and medicines. It happened in India, too. Several critical supply chain issues were reported during this period. For example,  a major Indian drug manufacturing hub - Baddi,reportedly, was either shut down or operated with reduced capacity, since COVID-19 pandemic related national lockdown.

Its impact also got captured by the twitter handle of the former USFDA Commissioner – Scott Gottlieb. He twitted, “Drug supply chain at risk as Asia’s largest pharmaceutical manufacturing hub in Baddi (an industrial town in southwestern Solan district of Himachal Pradesh, India) is declared a #COVID19 containment zone – forcing many pharma units to slow or stop operations.”

Supply Chain vulnerability of the ‘pharmacy of the world’:

Supply Chain vulnerability related to the domestic issues in India, can possibly be sorted out by the country’s decision-making authorities. However, the country’s vulnerability arising out of the reasons originating in the other countries, needs a greater priority focus of the nation.

As is widely known – India caters to about 20 percent of the world’s generic drug supply. However, according to Bloomberg, 70 percent of the country’s imports of APIs come from China, ‘totaling US$ 2.4 billion of India’s US$ 3.56 billion in import spending for those products each year.

Consequently, ‘pharma companies in the country are dependent on China for two-thirds of the chemical components needed to make them.’ Exposures of such nature are now coming on to the center table – mostly triggered by Covid-19 pandemic, both in India, as well as in the United States.

India is reevaluating its import dependence from China:

To illustrate this point, let me begin with some related recent developments. While reevaluating the import dependence, India has taken both immediate and medium to long term measures – at the policy level.

The immediate reaction of India to Covid-19 outbreak, was to shift focus on local with restricted export of common medicines, such as paracetamol and 25 other pharmaceutical ingredients and drugs made from China. Curiously, prior to the national lockdown, on March 17, 2020 by a written reply the Government had informed the Indian Parliament about the import of APIs /drugs and the extent of the country’s dependence on China for the same.

Be that as it may, to protect the local interest, the above ban was followed by another export ban of the age-old malarial drug - hydroxychloroquine, ‘touted by President Trump as a possible weapon in the fight against Covid-19,’ but has been in short supply, globally. Interestingly, India produces around 47 percent of the U.S. supply of hydroxychloroquine. Thus, understandably, Indian Government had to partially lift this ban after the U.S. President Donald Trump sought supplies for the United States.

For medium longer-term measures, while announcing a ₹20 lakh crore stimulus package, Prime Minister Narendra Modi articulated that Covid-19 pandemic had taught India to ramp up domestic production and create supply chains to meet internal demands. Earlier, for safeguarding ‘national healthcare security’, the Government had allocated US$ 1.2 billion for the pharma industry to be self-reliant, by reducing its import dependence, especially for APIs. The government also wants to finance the construction of three bulk drugs with an investment of ₹300 Crores.

The United States is reevaluating import dependence from one region:

The Fierce Pharma article of June 03, 2020 also reported a shifting focus of supply chain from global to local, as the United States seeks to ‘onshore’ drug production, with the fallout of Covid-19 pandemic looming large on its drug supply chain.

U.S. legislators have argued that ‘U.S. reliance on drugs made or sourced outside the country has created a security issue that could be addressed by erecting parallel supply chains stateside and eliminating reliance on potential bad actors abroad.’ Accordingly, they have put forward ‘a raft of legislation’ that would seek to “onshore” drug manufacturing at the expense of major producers abroad.

Its biggest obstacle could be the pharma industry and its lobbyists:

Nevertheless, the same article also underscores that the biggest obstacle to that plan could be the pharmaceutical industry and its lobbyists on Capitol Hill. This is because, PhRMA - the industry’s biggest lobbying group, has pushed back against Congressional support for a supply chain shake-up. It said, “Policymakers must take a long-term, more holistic look at global pharmaceutical manufacturing supply chains before jumping to rash proposals that may cause significant disruptions to the U.S. supply of medicines.”

Will it happen in India?

My article, published in this blog on February 03, 2020, also focused on this issue. There I had emphasized, about five years back - the Government of India had also announced on February 25, 2015 – terming ‘2015 – Year of Active Pharmaceutical Ingredients’ (API). This came after ascertaining that over-dependence on imports of bulk drugs or API, especially from China, is detrimental to India’s health interest. This decision was also in sync with the freshly announced, and well-publicized government objective regarding ‘Make in India’, I wrote.

Two years down the line from the above date, on July 15, 2017, eHEALTH publication also deliberated on this issue in an article – ‘Why over dependence on APIs imported from China is harmful for India?’ However, not much change has been witnessed till date, in this regard. The same vow is now being taken afresh. Nonetheless, let me hasten to add, Covid-19 has changed the life of all – in several respects. Thus, no one can possibly vouch with a high degree of certainty what can happen hereafter, as we move on.

Conclusion:

As the ‘Lockdown. 05’ or ‘Unlock down. 01’ begins in India – the ‘pharmacy of the world, as on June 02, 2020 morning, the recorded Coronavirus cases in the country reached 247,040 with 6,946 deaths. India is now racing ahead with its number Covid-19 cases, surpassing Italy and Spain, occupying the global fifth rank, in this regard. Whereas, the top ranked pharma market in the world – the United States, where Covid-19 struck hard before India, recorded 1,988,545 cases with 112,096 deaths, on the same day.

Thus, the need to have a fresh look at the strategic design of pharma supply chain is being felt in both these countries. The requirement for becoming less global and more local is attracting a priority focus of Governments in both countries. With an increasing State-push for safeguarding the health security of the country, the need to reshape pharma supply chain – call it transient or otherwise, is now more palpable than ever before.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

 

Key Drivers And Long-Term Impact of Pharma M&A in India

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Corporate M&A is increasingly considered an integral part of the organization’s growth strategy for value creation, by a large number of pharma companies, across the world. In tandem, it throws open many other doors of opportunities, such as reduction of business risks and massive corporate restructuring.

In the post globalization era, mostly the large to medium sized Indian players are imbibing this strategy to gain a competitive edge, in the highly crowded generic drug market, not just in India, but also in various other parts of the world. At the same time, it is equally true that there are many other pharma biggies who have moved into the top 10 of the domestic league table in India, following mainly the organic growth path, and are still staying that way.

For example, the league table ranking (MAT October 2017) of the Indian domestic pharma market, published by AIOCD Pharmasofttech AWACS Pvt. Ltd, reflects a similar scenario. It shows, not many local Indian drug players seem to be too aggressive in Merger and Acquisition (M&A) within the country. In fact, among companies featuring in the TOP 10, only around half seems to have not gone for any major domestic M&A. The remaining half pursued a predominantly organic route, for a quantum growth in the Indian market.

In this article, I shall try to fathom, both the critical drivers and the long-term impact of pharma M&A initiatives – both inbound and outbound, with their either origin or destination being in India.

Are the key drivers different?

India is overwhelmingly a branded generic market. So are its key players. Thus, most pharma M&As in India are related to generic drugs.

Thus, unlike research-based global pharma players, where one of the most critical drivers for M&A, is related to new drug innovation to maintain sustained growth of the organization, the drivers for the same in India is somewhat different. Neither are these exactly the same for exports and the domestic market, with occasional overlaps in a few cases, though.

Export markets:

To expand and grow the pharma business in the export markets is obviously the main overall objectives. To attain this, the acquiring companies generally take into consideration some common critical factors, among others. Each of which is carefully assessed while going through the valuation process and arriving at the final deal price for the company to be acquired. A few examples of which are as follows:

  • The span and quality of market access and the future scope for value addition
  • Opportunities for value creation with available generic products, active ANDAs and DMFs
  • A competitive portfolio, especially covering specialty products, novel drug delivery systems and even off-patent biologic drugs
  • Market competitors’ profile
  • Product sourcing alternatives and other available assets

Domestic market:

Similarly, in the domestic market too, there could be several critical drivers. The following, may be cited just as an illustration. There could well be some overlaps here, as well, with those of export markets:

  • Moving up the pharma value chain, e.g., from bulk drug producer to formulation producer with marketing, intending to climb further up
  • A new range and type of the generic product portfolio
  • Expansion of therapeutic and geographic reach
  • Expansion of consumers and customers base
  • Greater reach, depth, efficiency and productivity of the distribution channel
  • Acquiring critical manufacturing and other related tangible and intangible assets

A glimpse at the 2016-17 M&A trend in India:

An E&Y paper titled, “Transactions 2017” says, India continues to enjoy a prominent position in the global generic pharma space, due to many preferred advantages available within the country, such as a large number of USFDA approved sites coupled with low Capex and operating costs. As a result, the pharmaceuticals sector witnessed 51 pharma deals in the year 2016, with an aggregate disclosed deal value of USD4.6 billion.

However, according to Grant Thornton Advisory Pvt. Ltd, there have been around 27 M&A deals in pharma and healthcare sector by Q3 2017, valued at USD719 million. This appears to be way below 54 deals, valued at USD4.7 billion in calendar year 2016.

Cross-border activity dominated the sector:

Highlighting that cross-border activity dominated the sector, the E&Y paper said, “outbound and domestic transactions drove most of the deal activity, with 21 deals each. In terms of the disclosed deal value, outbound and inbound activity stood at USD2.1 billion each. Domestic deal-making was concentrated in smaller value bands with an aggregate deal value of USD342 million, of which USD272 million (4 deals) worth of deals were restructuring deals.”

Inbound and a domestic M&A occupied the center stage:

It is interesting to note that despite initial hiccups, inbound overseas interest in sterile injectable continued, along with a range of different generic formulations. The notable among which, as captured in the above paper, are as follows:

  • China-based Shanghai Fosun Pharmaceutical (Group) Company Limited announced the acquisition of an 86 percent stake in Gland Pharma Limited for up to USD1.26 billion.
  • US-based Baxter International Inc. entered into an agreement to acquire Claris Injectable Limited, a wholly owned subsidiary of Claris Lifesciences Limited, for USD625 million.
  • In November 2017, India’s Torrent Pharmaceuticals acquired more than 120 brands from Unichem Laboratories in India and Nepal, and its manufacturing plant at Sikkim for USD558 million.

Outbound M&A:

Facing continuous pricing and other pressures in the largest pharma market in the world – United States, Indian pharma players sharpened their focus on Europe and other under-penetrated markets, with a wider range of product portfolio. Following are a few examples of recent outbound M&As for the year, done predominantly to serve the above purpose, besides a couple of others with smaller deal values:

  • Intas Pharma, through its wholly owned subsidiary inked an agreement to acquire Actavis UK Limited and Actavis Ireland Limited from Teva Pharmaceutical for an enterprise value of USD767 million.
  • Dr. Reddy’s Laboratories entered into an agreement with Teva Pharmaceutical and an affiliate of Allergan plc to acquire a portfolio of eight ANDAs in the US for USD350 million.
  • Sun Pharma stepped into the Japanese prescription drug market by acquiring 14 brands from Novartis for USD293 million.
  • Lupin also strengthened its position in Japan by acquiring 21 products from Shionogi & Company Limited for USD150 million. In 2017, Lupin also acquired US-based Symbiomix Therapeutics – a privately held company focused on bringing innovative therapies to market for gynecologic infections. The acquisition value stands at USD 150 million.
  • Two other relatively large outbound acquisitions in 2017 were Piramal Enterprises’ acquisition of anti-spasticity and pain management drug portfolio of Mallinckrodt for USD171 million and Aurobindo Pharma’s Generis Farmaceutica USD142.5 million.

Long term business impact of M&A on the merged entity:

So far so good. Nevertheless, a key point to ponder, what is the long-term impact of M&A on the merged entities in India. It may impact several critical areas, such as financial ratios, reputation on drug quality standards or even its impact on employee morale. Sun Pharma’s acquisition of Ranbaxy in 2015 may be an example in this regard. Not too many credible studies are available for Indian pharma companies in this regard, it could be an interesting area for further research, though.

A research paper titled “Post-Merger Performance of Acquiring Firms: A Case Study on Indian Pharmaceutical Industry”, published by the International Journal of Research in Management & Business Studies (IJRMBS), in its July-September 2015 issue, captured an interesting point. It found, that M&As have a significant impact on the merged company performance as compared to the pre-merger period, but the impact is evident more in the immediate year after the merger.

The paper concluded, although the profitability had improved in the merged company as indicated in the financial ratios, like PBIT, Cash Profit margin and Net profit margin, but the improvement in the performance is observed only up to 1 year of the merger. As far as operating performance is concerned the short term positive impact can be observed, but again it lasts up to 1 year only. The overall study results, therefore, indicate the positive impact of merger on the operating and financial performance only in the short run (+1 year).

Is it a mixed bag?

Nevertheless, there are also other studies in this regard, which concluded the favorable impact of M&As on corporate performance. However, those studies adopted certain other parameters of measuring the financial and operational improvements in the merged companies. Some more research findings in this area – ferreted out from literature review and are available in the same issue of IJRMBS), revealing a mixed bag. Let me quote some these findings, starting from the earlier years, as follows:

Kruze, Park and Suzuki (2003): With a sample of 56 mergers of manufacturing companies from the period 1969 to 1997 concluded that the long term operating performance of control firms was positive but insignificant and high correlation existed between pre and post-merger performance.

Beena (2004): Analyzed the pre and post-merger performance of firms belonging to pharma manufacturing industries with samples of 115 acquiring firms between the period 1995 and 2000. For the purpose of analysis four sets of financial ratios were considered and it was tested using t –test. The study showed no improvement in the performance, as compared to the pre-merger period for the sample companies. 

Vanitha. S and Selvam. M (2007): With a sample of 58, to study the impact of merger on the performance in the Indian manufacturing sector from 2000 to 2002, the study concluded, overall financial performance is insignificant for 13 variables.

Pramod Mantravadi and Vidyadhar Reddy (2008): Investigated a sample of 118 cases of mergers in their study. They found, more impact of merger was noticed on the profitability of banking and finance industry, pharmaceutical, textile and electric equipment sector, whereas the significant decline was seen in chemical and Agri-Products sector.

More Indian studies are expected in this interesting area to understand the possible long-term impact of pharma M&A in India.

Conclusion:

Be that as it may, inbound and outbound consolidation and expansion of the Indian pharma industry through M&A will continue. However, this likely to happen at a varying pace, depending upon both the opportunities and constraints for business growth. This will include both in the export and the domestic markets.

Increasingly complex business environment, intense drug pricing pressure in the US, dwindling much differentiated product pipeline, impending patent expiry of blockbuster drugs, will drive the inbound M&A. Whereas, the domestic players would like to spread their wings in search of greater market access, across the world. This process is likely to include a different type of product-mix, including specialty and biologic products, creating some barrier to market entry for many other generic players.

Going forward, the critical drivers for pharma M&A in India, both inbound and outbound, are unlikely to undergo any radical change. Interestingly, available research studies regarding its long-term impact on the companies involved in this process are not yet conclusive. However, many researchers on the subject still believe, especially the financial impact of M&As on the merged entities in India last no more than short to medium term.

By: Tapan J. Ray  

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Managing Pharma Investors’ Expectations When The Chips Are Down

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Triggered by several critical factors, over a relatively short period of time, a downward spiral is visible with most Indian Pharma stocks, with a significant erosion in market capitalization of many large players in the country.

A set of important factors has been fueling this current downturn since around the last four years. These include, issues related to serious regulatory non-compliance with US-FDA and other foreign drug regulators, pricing pressure both in the domestic and the overseas markets, including the United States, delayed approval of several new generic drugs in the number-one pharma market of the world, for various reasons. Initial rollout period of GST expected to commence on July 1, 2017, may also prompt some major readjustments in the distribution setting of many pharma organizations. This has been further compounded with the wholesalers’ and retailers’ demand for compensation for any losses on input credit arising out of this critical reform.

As eroding market cap generally leads to commensurately lower market valuation of a company, it adversely impacts company’s many business growth related activities, which encompasses attracting low cost – high value investments, and M&A related activities, besides many others. Consequently, this negative swing has alarmed many investors, making them more demanding on company performance – uninterrupted, almost at any cost, as it were.

Not much headroom for necessary course correction:

Unrelenting expectations of this nature from the investors, inclusive of activist shareholders, to continue driving the business growth engine up the steep slope of ever increasing return on investment, is not expected to die down, anytime soon.

They may not be willing to leave enough headroom for the respective pharma management teams to realign their growth path with the changing and challenging needs of time, if it adversely impacts business even in the short-term. Nonetheless, if it is not allowed, the tailspin is likely to continue, as has been happening since, at least, the last couple of years, pushing the business at a dangerous level of sustainability.

Such demand of the investors and shareholders, irrespective of the gravity of the situation where their respective companies are in, may not be too uncommon, even in the global arena. However, many experts are now raising a key question in this area. In this article, I shall try to look at this issue, not just from the investors’ perspective, but also from what the concerned pharma players can and should do in this area, sooner the better.

A pertinent question needs to be addressed:

This important and relevant question is: what is the accountability of the investors, if their pressure for performance when the company is at a crossroad of this nature, causes a long-term irreparable damage to the business?

The very issue has been discussed immaculately in an article titled, “The Error at The Heart of Corporate Leadership”, published in the May-June 2017 issue of the Harvard Business Review.

The paper reiterates that attributing ownership of the corporation to its investors involves a challenging problem of accountability. This is because, ‘shareholders or private investors have no legal duty to protect or serve the companies whose shares they own and are shielded by the doctrine of limited liability from legal responsibility for those companies’ debts and misdeeds.’ Moreover, they are both physically and psychologically distant from the activities of the companies they invest in, and may generally buy and sell these shares without restrictions.

Nevertheless, such strong and ever increasing demands put the top pharma managers under increasing pressure to deliver faster and more predictable returns, regardless of the headwind that the business is facing. The issue becomes more complex when temporary-holders of large blocks of shares intervene to reconstitute a company’s board, change its management, or restructure its finances to drive up the share price, only to sell out and move on to another target, without ever having to answer for their intervention’s impact on the company or other parties, the article highlights.

Export business – the pain points:

“Pharma stocks take a beating on renewed US FDA scrutiny” – flashed the headline of a recent media report of June 12, 2017. As I see it, in the export business, especially in the top pharma market in the world, there appears to be a strong possibility of further worsening the business environment, especially for the Indian drug exporters.

Wave after wave of US-FDA import bans involving many India made drug formulations and Active Pharmaceutical Ingredients (API), since over last four years, have significantly affected the short-term export sales of the domestic pharma exporters. Alongside, these have seriously dented the image of the Indian pharma players, collectively, which encompasses the critical area of regulatory compliance – to offer well-documented safe and effective drugs, as required by the regulator, for the patients in the United States.

The situation gets messier with media headlines, such as, one from Bloomberg’s on January 24, 2017, conveying to the world community – “Document Shredding at Night Raises FDA Eyebrows During India Visit.”

Besides current drug pricing pressure, President Donald Trump’s election pledge for local manufacturing of products consumed in the United States, for more job creation in the country, sends another possible storm signal in this area. This is serious too, as Indian generic drug producers cater to around 40 percent of the total generic drug consumption in America.

Overcoming the odds in export business:

While taking corrective and effective measures for a sustainable long-term business performance, doing the same things more intensely that precipitated the current crisis, would be counterproductive.

Improving the situation, would also call for a strong preparedness for launching new generic products at a regular interval. However, in tandem, there is a crying need for the concerned pharma companies to take a pause, and conclude, a well-structured and expert-guided corporate introspection and brainstorming process, on priority. This will help them to arrive at a set of actionable strategic plans to effectively address each of the pain points, in a meticulous and time-bound manner.

Investors must necessarily be taken on board by opening appropriate communication channels, accordingly. This is to enable them to understand and accept the reasons for a short-term pain for a sustainable long-term gain. The tangible results of corrective measures should subsequently unfold to all concerned, with minor course corrections on-the-run, wherever necessary.

Domestic business – the pain points:

This is again another complex issue, which is often manifested through pressure on drug prices. The blame for such a situation, though originates from somewhere else, generally falls on the Government and the drug price regulator, for obvious reasons. It has a palpable boomerang effect, that is brought out by various research studies, and captured in consumers and the expert opinion, such as one that was published by the Washington Post on June 14, 2017 with the title, “The pharmaceutical industry puts profits above people.”

In the United States, where the drug pricing pressure is widely believed to have primarily originated from the escalating cost containment pressure of the Government and the key health care providers – triggered by a dangerous drug-pricing trend. Whereas in India, in addition to the latter that is related to non-schedule branded generic drugs, it is mostly related high out of pocket expenses on drugs, attempts to dodge various drug price regulations, and ignoring several ethical marketing practices related issues. The net outcome of all this is growing trust deficit on the pharma industry, in general.

Let me illustrate this point with a very contemporary example.  On May 18, 2017, Reuters reported, “India’s drug pricing regulator has demanded explanations from 65 domestic and global drug makers for selling new forms of essential diabetes and antibiotic drugs without its approval.” Interestingly, these companies reportedly include many big names, such as, Abbott Laboratories, Sanofi, Novartis and Indian firms such as Sun Pharmaceutical Industries and Lupin.

According to a circular of the National Pharmaceutical Pricing Authority (NPPA) of May 17, 2017, the above companies have allegedly launched formulations by altering an essential drug formulation with strength/dosage other than as specified in the Drug Price Control Order (DPCO) 2013 or combination with another drug not under price control, without even applying for price approval from NPPA as required. NPPA also doesn’t seem to be sure, whether such Fixed Dose Combinations (FDC) are rational or irrational and have the approval of the Central Drug Standard Control Organization (CDSCO).

If so, it’s indeed a sad development and a sorry state of affair, especially for those companies, which do some chest-thumping on ethics and compliance, often browbeating many Indian players, especially on USFDA related issues, besides pharma marketing practices.

As on date, Union Ministry of Health has banned several hundreds of such FDCs – on the ground of being irrational, launched without proper regulatory approval, lacking in therapeutic efficacy and safety profile, which may even cause harm to patients. March 11, 2016 notification of CDSCO banned 296 irrational FDCs.

However, many pharma players have succeeded in obtaining stay orders against almost all such regulatory bans from various High Courts. Nevertheless, the good news is, from July 2017, the Supreme Court is expected to hear all these cases, collectively. There could be another possible downturn in the market, if the Government wins the case.

Overcoming the odds in domestic business:

In these specific areas, there doesn’t seem to be any other option left to satisfy the long-term interest of the investors, other than addressing the ethics, values and compliance issues of the company on the ground, head on. It doesn’t really matter, what is displayed on the subject in their respective websites. Thus, in this area too, there is a crying need for a well-structured and expert-guided corporate introspection and brainstorming process to disrupt the status quo from its very root.

The above process would help the pharma players to arrive at a set of actionable strategic plans to effectively address the ethics and compliance issues in all the pain points – regulatory, marketing or financial, in a meticulous and time-bound manner. Alongside, all the stakeholders, including the investors, to be taken on board through customized content and the engagement platforms, to put the companies back into the long-term growth trajectory.

In conclusion:

Investors are very important, but if they aren’t an integral part of the corporate management team, should not try to overwhelm the business management process, especially for any short term financial gain. Attributing such authority to investors, involves a challenging problem of accountability for action, as they can get in or out of their investments at any time they choose to do so.

However, it’s also one of the key responsibilities of the management to listen to them, seriously. Take them on board by appropriately explaining to them in every critical situation, the broad strategic direction that the company would follow in pursuit of excellence. Thereafter, demonstrable outcome of all management action against the top operational goals, should be placed before them at a periodic interval, on an ongoing basis.

This process, if carried out with absolute transparency, integrity and seriousness, could help the Indian pharma players getting enough breathing space from the investors, for making the right operational interventions, before it’s too late.

Earlier this year, stepping down of former CEO of GSK – Andrew Witty, was reported to be due to pressure from investors for below par sales and profit in the past three years, besides a few other reasons. Another recent report of June 15, 2017 on “rebel investors looking to remake the board of Mylan” would possibly reinforce this point, further.

Outside the pharma industry, such a situation is not uncommon now, even in India. Besides, what happened recently in Tata Sons,  the June 14, 2017 media headline highlighting “Infosys flags ‘activist shareholder’ as risk factor”, vindicates the same point, yet again.

Thus, managing pharma investors’ expectations through a process of continuous engagement with them, effectively, especially when the chips are down, as it is today, is so critical for the long-term success and sustainability of pharma business.  Maintaining the status quo any further, would possibly make a high-flying pharma player to experience the strong gravitational pull, uncontrolled, with its its serious but avoidable consequences.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Does India Produce ‘World Class’ Medicines, For All?

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India has already achieved a staggering number In terms of quantity or volume of generic medicines that it produces not just for India, but for many developed, developing and poorer countries, across the world. For this reason, India is popularly known as ‘The Pharmacy of The World’. No one questions this number at all, rather looks at India with a sense of admiration in this regard.

Nevertheless, for driving this volume growth trend further north, in a consistent and sustainable way, Indian pharma sector must ensure that its huge volume growth engine remains firmly placed on a solid bedrock of ‘world class’ drug quality, always. Any compromise in this crucial area, could strike a critical blow to this ‘tower of national pride’.

Ongoing several embarrassing incidents related to the drug manufacturing quality standards in India, are increasingly fueling the apprehension, whether or not India produces ‘World Class’ medicines for all patients across the world, independent of any other criteria, financial or otherwise. The debate has now taken an interesting turn, especially after near confirmation of this apprehension by the top drug regulator of India.

In this article, I shall discuss this important issue that hugely impacts all of us, giving my own perspective to it. Let me begin with one of the most recent incidents on the subject, involving the numero-uno of Indian pharmaceutical industry.

An overseas new product launch got prematurely aborted?

On September 25, 2015, by a Press Release, Sun Pharma Advanced Research Company Ltd. (SPARC) announced a major set back for the company. The set back may not be so much in terms of the company’s estimated revenue loss, but more on public perception across the world, about the manufacturing quality standards followed even by the top most pharma company of India.

SPARC made a public announcement through media that on March 2015 it had received a final approval from the Food and Drug Administration of the United States (USFDA) for the anti-epileptic drug – Elepsia XR (Levetiracetam extended-release tablets 1000 mg and 1500 mg). However, in the Complete Response letter (CRL) to the company’s New Drug Application (NDA) for the product, the USFDA has revoked its earlier approval, citing that the compliance status of the manufacturing facility was not acceptable on the date of approval. Elepsia XR is to be manufactured at Sun Pharmaceutical Industries Ltd (SPIL)’s Halol facility in Gujarat, the announcement said.

Sun Pharma had reportedly indicated in June 2015 that the Company had been working “very aggressively” to find partners for the product. It had “some advanced discussions” and aimed to launch the drug by the second half of fiscal 2016.

The international media lapped it up and reported this development with eye-catching headlines, one such was:

“India’s Sun Pharma research arm sees FDA nod for Elepsia XR yanked by FDA on manufacturing.”

Not a one-off isolated incident:

This matter can no way be treated as a one-off and an isolated incident, as it fits in well with a series of similar events, spanning over the last few years.

Looking at these disturbing adverse reports from the foreign drug regulators on the drug manufacturing quality standards in India, together with recent comments of the Indian drug regulator on the subject, serious health safety concerns on overall drug quality in the country, are being expressed now. The concern includes the local patients in India, as well.

Can the core issue be wished away?

Up until today, USFDA has altogether warned 39 manufacturing sites of 27 Indian pharma companies for breach of data integrity and not following specified manufacturing quality standards. The agency has also expressed that it treats these as potentially dangerous medicines for the consumption of patients in the US.

In 2015 alone, USFDA has reportedly detected such serious ‘short comings’ with 6 Indian drug makers, till September. A report from Financial Times (FT) states that the above numbers do not include the testing facilities facing sanctions from the European Medicines Agency (EMA) in the GVK Biosciences related cases or from the World Health Organizations (WHO).

What is most worrying, none can possibly still fathom, if these alleged ‘reprehensible’ manufacturing practices are restricted to just a few players or are all pervasive across the Indian drug industry.

When the foreign regulators, such as USFDA and Medicines and Healthcare Products Regulatory Agency (MHRA) of the United Kingdom (UK) continue raising the red flags on the manufacturing standards of the top pharma players of India, including the numero uno, a chilling sensation flows through the spine, as it were. The moot question that comes up: Are all the drugs manufactured in India safe for the local patients, offering desirable efficacy?

Keeping these in perspective, would it be prudent to wish away the drug quality related critical issues, raising a conspiracy theory against the US or EU or suspend discussions on any Foreign Trade Agreement (FTA)? I don’t reckon so, and would touch upon this point in course of my discussion below.

The murmur among the US doctors:

According to an article from Reuters of March 18, 2014, titled “Unease grows among US doctors over Indian drug quality”, some US doctors are also expressing concerns about the quality of generic drugs supplied by Indian manufacturers, following a flurry of recalls and ‘import bans’ by the USFDA.

This concern has been prompted by the fact that India supplies about 40 percent of generic and over-the-counter drugs used in the United States, making it the second-biggest supplier after Canada.

Not much complaint from the Indian doctors:

This is intriguing. Despite so much of furore of the regulatory agencies in the US and EU on the Indian drug quality standards, not much concern on the same has been expressed by the medical practitioners in India, just yet.

It appears, by and large, Indian doctors believe that branded generics are generally of good quality, and the quality of generics without a brand name is not as reliable, always.

This logic is beyond my comprehension. How come just fixing a brand name on a generic formulation makes it more acceptable in terms of quality, when both branded generics and generics without a brand name, have obtained the same regulatory approval from the same drug regulators in India and following the same regulatory process?

As you will see below, the situation has changed further now, especially after the admission of the DCGI about non-compliance of global manufacturing quality standards by majority of the formulation manufacturers in India, as reported by the media. The only silver lining to it is that whatever is being currently manufactured in India, presumably meets the regulators approval in conformance to the Drugs and Cosmetics Act of the country, without any credible data to the contrary.

Does India produce drugs of ‘World Class’ quality for all?

The key question that is being raised today: Does India produce ‘world class’ drugs and for all? This is mainly because, manufacturers of ‘world class’ drug quality always aim at competing for quality on the best global standards to remain competitive in the international markets, in all parameters. This should hold good even for the domestic Indian market, for all drugs, consumed by all the local patients, irrespective of their financial status.

A lurking fear keeps lingering, primarily apprehending that Indian drug manufacturing quality related issues are not confined only to the importers in the developed world, such as, the United States, European Union or Canada. There is no reason to vouch for either, that such gross violations are not taking place with the medicines consumed by the patients in India or in the poorer nations of Africa and other similar markets.

A recent international study on Indian drug quality:

The following study further aggravates the angst.

The September 2014 ‘Working Paper 20469’ of ‘The National Bureau of Economic Research (NBER)’ Cambridge, USA, titled “Poor Quality Drugs and Global Trade: A Pilot Study’, epitomizes the following:

  • Experts claim that some Indian drug manufacturers cut corners and make substandard drugs for markets with non-existent, under-developed or emerging regulatory oversight, notably Africa.

The study assessed the quality of 1470 antibiotic and tuberculosis drug samples that claim to be made in India and were sold in Africa, India, and five mid-income non-African countries and found:

      – 10.9 percent of these products fail a basic assessment of active pharmaceutical                  ingredients (API) 

       - The majority of the failures are substandard (7 percent) as they contain some correct          API but the amount of API is under-dosed.

        – The distribution of these substandard products is not random, they are more likely             to be found as unregistered products in Africa than in India or non-African                           countries.

Claiming that the findings are robust, the NBER study points towards one likely explanation that Indian pharmaceutical firms and/or their export intermediaries do indeed differentiate drug quality according to the destination of consumption.

Incomprehensible?

The above facts are alarming, especially when these flow from a survey report of a credible international institution. This is incomprehensible too, as all these are medicines, and are meant to be for relief or cure of ailments that the patients are suffering from, irrespective of whether they are from the developed, developing or poorer countries.

If it is still happening today, why are those manufacturers allowed by the Indian drug regulators to discriminate between the patients of the developed countries and the developing world, including India, to meet the same health care needs? This is absolutely cruel by any standard, undoubtedly.

‘As you sow, so shall you reap’:

Just as the above well-known proverb says that the actions or deeds repay in kind, reasonably frequent ‘import bans’ by the foreign drug regulators on drug quality norms, has probably prompted booming generic drug exports of Indian pharma now slowing down to US$15.3 billion in 2014-15, from US $14.84 billion in 2013-14.

Along side, these avoidable incidents have significantly dented India’s image as the ‘pharmacy of the world’, manufacturing affordable and high quality generic formulations for the patients across the world.

Indian drug regulator too now thinking afresh? 

Yet another relevant question comes up. What happens, if during treatment of serious ailments such drugs fail to act for inferior quality? How would one possibly know in India, whether a death has occurred due to unresponsive poor quality of drugs or on account of severity of the ailments? How helpless are the patients in such a situation?

This sad feeling gets even stronger, when well after a prolonged defense of the high quality of drugs manufactured in India, no less than the Drug Controller General of India (DCGI), airs his second thought on the same issue. This is vindicated by recent media reports on this subject.

On September 30, 2015, a media report stated that being virtually flustered by the USFDA and the drug regulators in the European Union, the Drug Controller General of India (DCGI) would place a proposal before the Ministry of Health, within the next six months, for an amendment to the existing pharmaceutical manufacturing laws under Drugs and Cosmetics Act, 1940, and Drugs and Cosmetics Rules, 1945, in order to ‘bring them on par with international standards’.

The DCGI now believes that this remedial measure would raise drug manufacturing standards in India in line with the global cGMP standards, recommended by the World Health Organization (WHO).

Currently, out of around 8,000 drug manufacturers in India, only 10 to15 percent are following the WHO guidelines, the report stated quoting the DCGI.

The new revelation further strengthens the apprehension about quality of drugs that Indian patients are consuming in the country with a strong hope for relief from the diseases that they suffer from.

The DCGI apparently admitted it, when he was quoted saying in the above report, “India has become a pharmacy of the world. So, we cannot live in isolation and will have to meet their expectations. Our system is in the process of improving.”

DCGI statement follows an important Government decision:

It is worth noting that the above comment of the DCGI comes close on the heels of an important Government decision in this regard.

On August 12, 2015, The Press Trust of India (PTI) reported that to facilitate domestic manufacture of quality medical products, the Cabinet Committee on Economic Affairs (CCEA) on that day approved a proposal of strengthening and upgrading the drug regulatory system both at the Central and state level. The committee approved a budget of of INR17.5 billion (US$270 million) on this account.

The up gradation and strengthening of the system will also include setting up of new laboratories and training academy for regulatory and drug testing officials, the report added.

Yet Another significant development:

On October 5, 2015, in yet another significant development in this direction, the Medicines and Healthcare products Regulatory Agency (MHRA) of the United Kingdom (UK), by a ‘Press Release’, announced signing of a Memorandum of Understanding (MOU) with the Central Drugs Standard Control Organization (CDSCO) of India.

This agreement will increase collaboration between India and UK in the area of medicines and medical devices with the aim of further improving public safety in both the countries. It is worth noting, around 25 percent of generic drugs consumed in the UK are made in India. Hence, the concern of MHRA over the safety of those medicines is understandable.

I wrote in this Blog on USFDA ‘Import Bans’ in my article of November 11, 2013, titled ‘USFDA ‘Import Bans’: The Malady Calls For Strong Bitter Pills.’

Conclusion:

A valid question that is being asked by many in India today, why the issues like, alleged cGMP non-compliance, data fudging and falsification of other documents, especially with USFDA, have multiplied suddenly over the last few years. Why not as many of such issues were raised by the USFDA before around 3 to 4 years?

This is primarily because, of late the inspectors from the USFDA have significantly increased their efforts to ensure the drug manufacturing facilities from where both generic Active Pharmaceutical Ingredients (API) and formulations are exported to the US, strictly follow the drug manufacturing standards, as stipulated by the USFDA. The fact that India supplies about 40 percent of generic and over-the-counter drugs currently used in the United States, has prompted this requirement to safeguard health safety of the American patients.

Such stringent USFDA audits commenced in 2012, when US Congress passed the FDA Safety and Innovation Act. This legislation, among others, requires the USFDA auditing all foreign facilities that make drugs for export to the US, as frequently as it does for the domestic drug manufacturing plants. Thereafter, we have seen a spurt in the USFDA inspections of the pharma manufacturing facilities in India, where from drugs are exported to the US. Hence, there does not seem to be any other credible ‘conspiracy theory’ on this issue.

As reported in ‘The New York Times’ of February 14, 2014, the same DCGI almost brushing aside the gravity of the situation arising out of repeated ‘import bans’, commented at that time, “If I have to follow US standards in inspecting facilities supplying to the Indian market, we will have to shut almost all of those.”

The top drug regulator seems to have changed his mind since then, and presumably is thinking differently now, as the Indian media very recently quoted the DCGI saying “India has become a pharmacy of the world. So, we cannot live in isolation and will have to meet their expectations. Our system is in the process of improving.”

This is a good omen, especially for the patients in India. If and when it gets translated into reality, with Kudos to the DCGI, we all would feel very proud saying, “The Pharmacy of the World now produces the World-Class drugs, for all” …God willing!

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

“Make in India…Sell Anywhere in The World”: An Indian Pharma Perspective

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In his Independent Day speech from the ramparts of the Red Fort on August 15, 2014, Indian Prime Minister Modi gave a clarion call to all investors of the world, “Come, make in India”, “Come, manufacture in India”, “Sell in any country of the world, but manufacture here”.

The Prime Minister did not stop there. In his inimitable style, following it through on September 25, 2014 he gave an official status to ‘Make in India’ slogan and launched a global campaign.

“My definition of FDI for the people of India is First Develop India. This is also a responsibility for the people of India,” he further clarified.

An Indian perspective:

If I juxtapose this vision of the Prime Minister in the Indian pharmaceutical industry perspective, one finds that many small, medium and large size local domestic manufacturers are currently manufacturing drugs not just for the domestic market, but are also exporting in large quantities to various countries of the world, including, North America, South America and Europe.

The United States (US) is one of the most critical markets for majority of the Indian drug exporters. This transaction was taking place without any major regulatory hitches since quite some time. Unfortunately, over the last few years, mostly the Federal Drug Administration of the US (USFDA) and the United Kingdom (UK)’s Medicines and Healthcare Products Regulatory Agency (MHRA) have started raising serious doubts on the quality of medicines manufactured in India, making a significant impact on the drug exports of the country.

Most of these quality issues are related to ‘Data Integrity’ in the dug manufacturing and its documentation processes.

The impact:

According to industry data, in 2013-14, Indian drug exports registered the slowest growth in nearly the last 15 years. In this fiscal year, pharma exports of the country with a turnover of US$ 14.84 billion grew at a meager 1.2 percent. Pharmexcil attributed its reason to USFDA related regulatory issues and increasing global competition.

US accounts for about 25 percent of India’s pharma exports and its Federal Drug Administration (USFDA) has been expressing, since quite a while, serious concerns on ‘Data Integrity’ at the agency’s  previously approved production facilities of a large number of Indian pharma players.

The issue is causing not just a serious concern to USFDA and some other overseas drug regulatory agencies, but also posing a huge threat to future growth potential of Indian drug exports.

It is worth noting that Indian government had set an objective, in its strategy document, to register a turnover of US$ 25 billion for pharma exports in 2014-15. In all probability, it would fall far short of this target at the end of this fiscal, predominantly for related reasons.

Why is so much of ‘fuss’ on ‘Data Integrity’?

Broadly speaking, ‘Data Integrity’ in pharmaceutical manufacturing ensures that finished products meet pre-established specifications, such as, for purity, potency, stability and sterility. If data integrity is breached in any manner or in absence of credible data, the product becomes of dubious quality in the eyes of drug regulators.

Manufacturing related ‘Data Integrity’ is usually breached, when data from a database is deliberately or otherwise modified or destroyed or even cooked.

Over the last several years, ‘Data Integrity’ related issues in India are attracting enormous attention of both the USFDA and the MHRA, UK. As a result, concerned pharma manufacturing facilities are receiving Import Alerts/Warning Letters from the respective overseas drug regulators, refusing entry of those medicines mostly in the United States and some in the UK.

Recent warning letters:

Just over a year – from May 2013 to July 2014, around a dozen ‘Warning Letters’ have been sent to the Indian drug manufacturers by the USFDA on ‘Data Integrity’ related issue, as follows:

Recent ‘Warning Letter’ issued to: Date of issue
1. Marck Biosciences Ltd. 08. 07. 2014
2. Apotex Pharmachem India Pvt Ltd. 17. 06. 2014
3. Sun Pharmaceutical Industries 07. 05. 2014
4. Canton Laboratories Private Limited 27. 02. 2014
5. USV Limited 06. 02. 2014
6. Wockhardt Limited 25. 11. 2013
7. Agila Specialties Private Limited 09. 09. 2013
8. Posh Chemicals Private Limited 02. 08. 2013
9. Aarti Drugs Limited 30. 07. 2013
10. Wockhardt Limited 18. 07. 2013
11. Fresenius Kabi Oncology Ltd 01. 07. 2013
12. RPG Life Sciences Limited 28. 05. 2013

(Source: RAPS, 19 August 2014)

Another report states that USFDA has, so far, banned at least 36 manufacturing plants in India from selling products in the US.

Importance of US for Indian generic players:

Generic drugs currently contribute over 80 percent of prescriptions written in the US. Around 40 percent of prescriptions and Over The Counter (OTC) drugs that are sold there, come from India. Almost all of these are cheaper generic versions of patent expired drugs. Hence, India’s commercial stake in this area is indeed mind-boggling.

The ‘Data Integrity’ issue is not restricted to just US or UK:

A report quoting researchers led by Roger Bate, an American Enterprise Institute scholar and funded by the The Legatum Institute and the Humanities Research Council of Canada, concluded that many Indian pharma companies follow double manufacturing standards, as they are sending poor quality drugs to Africa compared to the same pills sold in other countries. This study was based on tests of 1,470 samples produced by 17 Indian drug manufacturers.

Besides India, the researchers took drug samples from pharmacies in Africa and middle-income countries, including China, Russia and Brazil.

According to this paper, the researchers found that 17.5 percent of samples of the tuberculosis therapy rifampicin sold in Africa tested substandard, which means the drug has less than 80 percent of the active ingredient than what it should otherwise. Against this number, in India, 7.8 percent of the medicine sampled was found substandard.

Moreover, Almost 9 percent of samples of the widely used antibiotic ciprofloxacin sold in Africa tested substandard, as compared to 3.3 percent in India.

Thorny issues around golden opportunities:

Much reported breach in manufacturing ‘Data Integrity’ detected at the manufacturing sites in India, are throwing fresh doubts on the efficacy and safety profile of generic/branded generic medicines, in general, produced in the country and more importantly, whether they are putting the patients’ health at risk.

A new analysis by the U.S. National Bureau of Economic Research pointed out some thorny issues related to ‘Data Integrity’ of drugs produced by the Indian pharmaceutical companies, which supply around 40 percent of the generic drugs sold in the United States, as stated above.

The researchers examined nearly 1,500 India-made drug samples, collected from 22 cities and found that “up to 10 percent of some medications contained insufficient levels of the key active ingredients or concentrations so low, in fact, that they would not be effective against the diseases they’re designed to treat.”

The report also highlighted that international regulators detected more than 1,600 errors in 15 drug applications submitted by Ranbaxy. The Bureau Officials commented that these pills were “potentially unsafe and illegal to sell.”

Frequent drug recalls by Indian pharma majors:

The above findings came in tandem with a series of drug recalls made recently by the Indian pharma companies in the US.

Some of the reported recent drug recalls in America, arising out of manufacturing related issues at the facilities of two well-known Indian pharma majors, which are going to merge soon, are as follows:

  • Sun Pharmaceuticals recalled nearly 400,000 bottles of the decongestant cetirizine (Zyrtec) and 251,882 of the antidepressant venlafaxine (Effexor) this May, because the pills failed to dissolve properly. The drugs were distributed by the drug maker’s US subsidiary Caraco Pharmaceutical Laboratories, but were manufactured in India.
  • In the same month – May, Ranbaxy recalled 30,000 packs of the allergy drugs loratadine and pseudo-ephedrine sulphate extended release tablets because of manufacturing defects in packaging.
  • In March, Sun Pharma recalled a batch of a generic diabetes drug bound for the US after an epilepsy drug was found in it. A patient discovered the error after noticing the wrong medication in the drug bottle.
  • Again in March, Ranbaxy recalled nearly 65,000 bottles of the statin drug atorvastatin calcium (Lipitor) after 20-milligram tablets were found in sealed bottles marked 10-milligrams. A pharmacist in the U.S. discovered the mix up.

Indian media reinforces the point:

Indian media (TNN) also reported that there is no quality control even for life-saving generic drugs and the government is apathetic on ensuring that the quality protocol of these drugs is properly observed.

This happens, as the report states, despite government’s efforts to push generic drugs, as they are more affordable. The report gave an example of a life-saving drug, Liposomal Amphotericin B, which is used to treat fungal infections in critically ill patients.

Are all these drugs safe enough for Indian Patients?

Though sounds awkward, it is a fact that India is a country where ‘export quality’ attracts a premium. Unintentionally though, with this attitude, we indirectly accept that Indian product quality for domestic consumption is not as good.

Unfortunately, in the recent years, increasing number of even ‘export quality’ drug manufacturing units in India are being seriously questioned, warned and banned by the overseas drug regulators, such as USFDA and MHRA, UK, just to ensure dug safety for the patients in their respective countries.

Taking all these into consideration, and noting increasing instances of blatant violations of cGMP standards and ‘Data Integrity’ requirements for ‘export quality’ drugs, one perhaps would shudder to think, what could possibly be the level of conformance to cGMP for the drugs manufactured solely for the consumption of local patients in India.

A cause of concern, as generic drugs are more cost effective to patients:

It has been widely recognized globally that the use of generic drugs significantly reduces out-of-pocket expenditure of the patients and also payers’ spending.

The findings of a study conducted by the Researchers from Brigham and Women’s Hospital (BWH), Harvard Medical School and CVS Health has just been published in the Annals of Internal Medicine on September 15, 2014. In this study the researchers investigated whether the use of generic versus brand name statins can play a role in medication adherence and whether or not this leads to improved health outcomes. The study concluded that patients taking generic statins were more likely to adhere to their medication and also had a significantly lower rate of cardiovascular events and death.

In this study, the mean co-payment for the generic statin was US$10, as against US$48 for brand-name statins. It is generally expected that the generic drugs would be of high quality, besides being affordable.

I deliberated on a related subject in one of my earlier blog posts of November 11, 2013 titled, “USFDA” Import Bans’: The Malady Calls For Strong Bitter Pills”.

Conclusion:

According to USFDA data, from 2013 onwards, about 20 drug manufacturing facilities across India attracted ‘Import Alerts’ as against seven from China, two each from Australian, Canadian and Japanese units and one each from South African and German facilities.

Unfortunately, despite intense local and global furore on this subject, Indian drug regulators at the Central Drugs Standard Control Organization (CDSCO), very strangely, do not seem to be much concerned on the ‘Data Integrity’ issue, at least, not just yet.

In my view, ‘Data Integrity’ issues are mostly not related to any technical or other knowledge deficiency. From the “Warning Letters” of the USFDA to respective Indian companies, it appears that these breaches are predominantly caused by falsification or doctoring of critical data. Thus, it basically boils down to a mindset issue, which possibly pans across the Indian pharma industry, irrespective of size of operations of a company.

Indian Prime Minister’s passionate appeal aimed at all investors, including from India, to “Make in India” and “Sell Anywhere in The World”, extends to pharma industry too, both local and global. The drug makers also seem to be aware of it, but the ghost keeps haunting unabated, signaling that the core mindset has remained unchanged despite periodic lip service and public utterances for corrective measures by a number of head honchos.

Any attempt to trivialize this situation, I reckon, could meet with grave consequences, jeopardizing the thriving pharma exports business of India, and in that process would betray the Prime Ministers grand vision for the country that he epitomized with, “Make in India” and “Sell Anywhere in The World”.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

USFDA ‘Import Bans’: The Malady Calls For Strong Bitter Pills

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It is a matter of pride that Indian pharmaceutical industry is the second largest exporter of drugs and pharmaceuticals globally, generating revenue of around US$ 13 billion in 2012 with a growth of 30 percent (Source: Pharmexcil).

Though sounds awkward, it is a reality that India is a country where ‘export quality’ attracts a premium. Unintentionally though, with this attitude, we indirectly accept that Indian product quality for domestic consumption is not as good.

‘Export quality’ being questioned seriously:

Unfortunately today, increasing number of even ‘export quality’ drug manufacturing units in India are being seriously questioned by the regulators of mainly United States (US) and the United Kingdom (UK) on the current Good Manufacturing Practices (cGMP) being followed by these companies. In many instances their inspections are culminating into ‘Import Bans’ by the respective countries to ensure dug safety for the patients.

Are drugs for domestic consumption safe?

Despite intense local and global furore on this subject, Indian drug regulators at the Central Drugs Standard Control Organization (CDSCO), very strangely, do not seem to be much concerned on this critical issue, at least, not just yet. Our drug regulators seem to act only when they are specifically directed by the Supreme Court of the country.

A recent major incident is yet another example to vindicate the point. In this case, according to media reports of November 2013, the Drug Controller General of India (DCGI) has ordered the Indian pharma major Sun Pharmaceuticals to suspend clinical research activities at its Mumbai based bio-analytical laboratory, after discovering that the company does not have the requisite approval from the central government for operating the laboratory. The DCGI has decided not to accept future applications and will not process existing new drug filings that Sun Pharma has made from the Mumbai laboratory until the company gets an approval.

Considering the blatant violations of cGMP standards that are increasingly coming to the fore related to ‘export quality’ of drugs in India, after inspections by the foreign drug regulators, one perhaps would shudder to think, what could possibly be the level of conformance to cGMP for the drugs manufactured in India solely for the local patients.

This question comes up as the record of scrutiny on adherence to cGMP by the Indian drug regulators is rather lackadaisical. The fact that no such warnings, as are being issued by the foreign regulators, came from their local counterpart, reinforces this doubt.

USFDA ‘Import Bans’:

Be that as it may, in this article let me deliberate on this particular drug regulatory issue as is being raised by the USFDA and others.

It is important to note that in 2013 till date, USFDA issued ‘Import Alerts/Bans’ against 20 manufacturing facilities of the Indian pharmaceutical exporters, sowing seeds of serious doubts about the overall drug manufacturing standards in India.

The sequence of events post USFDA inspection: 

Let us now very briefly deliberate on the different steps that are usually followed by the USFDA before the outcomes of the inspections culminate into ‘Import Alerts’ or bans.

After inspections, depending on the nature of findings, following steps are usually taken by the USFDA:

  • Issue of ‘Form 483’
  • The ‘Warning letter’
  • ‘Import Alert’

Revisiting the steps: 

Let me now quickly re-visit each of the above action steps of the USFDA.

‘Form 483’: 

At the conclusion of any USFDA inspection, if the inspecting team observes any conditions that in their judgment may constitute violations of the Food, Drug and Cosmetic (FD&C) and other related Acts, a Form 483 is issued to the concerned company, notifying the firm management of objectionable conditions found during inspection.

Companies are encouraged to respond to the Form 483 in writing with their corrective action plan and then implement those corrective measures expeditiously. USFDA considers all these information appropriately and then determines what further action, if any, is appropriate to protect public health in their country.

The ‘Warning Letter’:

The ‘Warning Letter’ is a document usually originating from the Form 483 observations and results from multiple lacking responses to Form 483 requiring quick attention and action. It may be noted that higher-level USFDA agency officials and not the investigator issue the ‘Warning Letters’.

‘Import Alert/ Ban’:

‘Import Alerts’ are issued whenever USFDA determines that it already has sufficient evidence to conclude that concerned products appear to be adulterated, misbranded, or unapproved. As a result, USFDA automatically detains these products at the border, costing the related companies a lot of money. The concerned company’s manufacturing unit remains on the import alert till it complies with USFDA cGMP.

What happens normally?

Most of the USFDA plant inspections are restricted to issue of Form 483 observations and the concerned company’s taking appropriate measures accordingly. However, at times, ‘Warning Letters’ are issued,  which are also mostly addressed by companies to the regulator’s satisfaction.

Import Bans are avoidable: 

Considering the above steps, it is worth noting that there is a significant window of opportunity available to any manufacturing facility to conform to the USFDA requirements by taking appropriate steps, as necessary, unless otherwise the practices are basically fraudulent in nature.

The concern:

Currently, there is a great concern in the country due to increasing frequency of ‘Import Alerts’.  As per USFDA data, in 2013 to date, about 20 drug manufacturing facilities across India attracted ‘Import Alerts’ as against seven from China, two each from Australian, Canadian and Japanese units and one each from South African and German facilities.

The matter assumes greater significance, as India is the second-largest supplier of pharmaceuticals to the United States. In 2012, pharmaceutical exports from India to the US reportedly rose 32 percent to US$ 4.2 billion. Today, India accounts for about 40 percent of generic and Over-The-Counter (OTC) drugs and 10 percent of finished dosages used in the US.

Ranbaxy cases: ‘Lying’ and ‘fraud’ allegations: 

In September 2013, after the latest USFDA action on the Mohali manufacturing facility of Ranbaxy, all three plants in India of the company that are dedicated to the US market have been barred from shipping drugs to the United States. The magnitude of this import ban reportedly impacts more than 40 percent of the company’s sales. However, Ranbaxy has a total of eight production facilities across India.

This ‘Import Alert’ was prompted by the inspection findings of the USFDA that the Mohali factory of Ranbaxy had not met with the cGMP.

Other two plants of Ranbaxy’s located at Dewas and Paonta Sahib faced the same import alerts in 2008, and are still barred from making drug shipments to the US.

The import ban on he Mohali manufacturing facility of Ranbaxy comes after the company pleaded guilty in May 2013 to the felony (criminal) charges in the US related to drug safety and agreed to pay a record US$ 500 million in fines.

In addition, the company also faced federal criminal charges that it sold batches of drugs that were improperly manufactured, stored and tested. Ranbaxy also admitted to lying to the USFDA about how it tested drugs at the above two Indian manufacturing facilities.

Heavy consequential damages with delayed launch of generic Diovan:

The ‘Import Alert’ of the USFDA against Mohali plant of Ranbaxy, has resulted in delayed introduction of a cheaper generic version of Diovan, the blockbuster antihypertensive drug of Novartis AG, after it went off patent.

It is worth noting that Ranbaxy had the exclusive right to sell a generic version of Diovan from September 21, 2012. 

Gain of Novartis:

This delay will help Novartis AG to generate an extra one-year’s sales for Diovan. This is expected to be around US$ 1 billion, only in the US. This development prompted Novartis in July this year to raise its profit and sales forecasts accordingly.

Wockhardt cases: Non-compliance of cGMP

Following Ranbaxy saga, USFDA inspection of Chikalthana plant of Wockhardt in Maharashtra detected major quality violations. Second time this year USFDA noted 16 violations of cGMP in the company’s facility. Earlier, in July 2013, the Agency issued a ‘Warning Letter’ and ‘Import Alert’ banning the products manufactured at the company’s Waluj pharmaceutical production facility.

Moreover, in September 2013, Medicines and Healthcare Products Regulatory Agency (MHRA) had pulled the GMP certificate of the company’s unit based in Nani Daman, after an inspection conducted by the UK regulator showed poor manufacturing standards. 

Again, in October 2013, the MHRA withdrew its cGMP certificate for the Chikalthana plant of Wockhardt. This move would ban import of drugs into the UK, manufactured in this particular plant of the company.

However, MHRA has now decided to issue a restricted certificate, meaning Wockhardt will be able to supply only “critical” products from these facilities. This was reportedly done, as the UK health regulator wants to avert shortage of certain drugs essential for maintaining public health. The impact of the withdrawal of cGMP certificate on existing business of the company can only be ascertained once Wockhardt receives further communications from the MHRA.

Earlier in July 2013, MHRA had reportedly also imposed an import alert on the company’s plant at Waluj in Maharashtra and issued a precautionary recall for sixteen medicines made in this unit.

RPG Life Sciences cases: allegedly ‘Adulterated’ products: 

In June 2013, USFDA reportedly issued a ‘Warning Letter’ to RPG Life Sciences for serious violation of cGMP in their manufacturing plants located at Ankleshwar and Navi Mumbai.

USFDA investigators had mentioned that “These violations cause your Active Pharmaceutical Ingredients (APIs) and drug products to be adulterated …the methods used in, or the facilities or controls used for, their manufacture, processing, packing, or holding do not conform to, or are not operated or administered in conformity with cGMP.”

Strides Arcolab case: Non Compliance of cGMP

In September 2013, Strides Arcolab announced that its sterile injectable drug unit – Agila Specialties (now with Mylan) had received a warning letter from the USFDA after its inspection by the regulator in June 2013. However, Strides Arcolab management said, “the company was committed to work collaboratively and expeditiously with the USFDA to resolve concerns cited in the warning letter in the shortest possible time.”

USV case: allegation of ‘data fudging’: 

Recently, USFDA reportedly accused Mumbai-based drug major USV of fudging the data.

After an inspection of USV’s Mumbai laboratory in June 2013, the US drug regulator said the company’s “drug product test method validation data is falsified”. The USFDA has also reprimanded USV for not training its staff in cGMP.

Probable consequences: 

USFDA import bans and a similar measure by the UKMHRA would lead to the following consequences:

  • Significant revenue losses by the companies involved, till the concerned regulators accept their remedial actions related to cGMP.
  • Increasing global apprehensions about the quality of Indian drugs.
  • Possibility of other foreign drug regulators tightening their belts to be absolutely sure about cGMP followed by the Indian drug manufacturers, making drug exports from India more difficult.
  • Huge opportunity cost for not being able to take advantage from ‘first to launch’ generic versions of off patent blockbuster drugs, such as from Diovan of Novartis AG.
  • Indian patients, including doctors and hospitals, may also become apprehensive about the general quality of drugs made by Indian Pharma Industry, as has already happened in a smaller dimension in the past.
  • Opposition groups of Indian Pharma may use this opportunity to further their vested interests and try to marginalize the Indian drug exporters. 
  • MNCs operating in India could indirectly campaign on such drug quality issues to reap a rich harvest out of the prevailing situation.
  • Unfounded ‘foreign conspiracy theory’ may start gaining ground, prompting the Indian companies moaning much, rather than taking tangible remedial measures on the ground to effectively come out of this self created mess.

Conclusion: 

Repeated cGMP violations made by the Indian drug exporters, as enunciated by the USFDA, have now become a malady, as it were. This can be corrected, only if the reality is accepted without attempting for justifications and then swallowing strong bitter pills, sooner.

Thereafter, the domestic pharma industry, which has globally demonstrated its proven capability of manufacturing quality medicines at affordable prices for a large number of patients around the world and for a long time, will require to tighten belts for strict conformance to cGMP norms, as prescribed by the regulators. This will require great tenacity and unrelenting mindset of the Indian Pharma to tide over the crisis.

Any attempt to trivialize the situation, as indicated above, could meet with grave consequences, jeopardizing the thriving pharma exports business of India.

That said, any fraud or negligence in the drug quality standards, for whatever reasons or wherever these may take place, should be considered as fraud on patients and the perpetrators must be brought to justice forthwith by the DCGI, with exemplary punitive measures.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Centralization of the system of issuing ‘Certificate of Pharmaceutical Product’ (CoPP) by the DCGI is a welcome step.

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The ‘Certificate of Pharmaceutical Product’(CoPP), which is valid for two years, is issued by the drug regulatory authorities to a particular pharmaceutical product. CoPP is accepted as a proof of international quality by Latin America, Africa, CIS and other developing countries.
Why is this decision?

The decision of the Drug Controller General of India (DCGI) to centralize the issue of CoPP stems from a request to this effect made by the World Health Organization (WHO).

It has been reported that WHO in April, 2009 informed the Ministry of Health of the Government of India that the organization takes objection in using WHO logo in the CoPP by the Indian exporters of pharmaceutical products as the WHO formats and guidelines are allegedly not properly adhered to by various local issuing authorities of CoPP, in India. The DCGI indicated that WHO specifically requested India that such an important documentation procedure should be controlled at the central drug regulatory authority level and hence is this decision.

Why is the criticism?

By the states:

However, the state drug authorities have expressed their unhappiness and even challenged the power of the DCGI to effect such changes. They feel that there will be revenue loss to the states for this procedural amendment. In addition, they argue that as the manufacturing license to the exporters are issued by the state drug authorities, the CoPP also is to be issued by the same authority, which they feel is an age old practice and works quite well.

By the exporters:

So far as the exporters are concerned, they feel that with the existing inadequate infrastructure available with the Central Drugs Standard Control Organization (CDSCO), effective implementation of the new system is not possible. This change, they apprehend, would result in unusual delay in issuing the certificate.

The latest status:

On October 13, 2009, the Madras High Court issued a stay order on a petition filed by the Tamil Nadu Drug Inspectors Association, against the directive of centralization of CoPP by the DCGI.

On October 15, 2009 the same Madras High Court acting on a petition of the Federation of South Indian Pharmaceutical Manufacturers Association issued an injunction, which will remain in force until further orders, staying the same order of the DCGI.

On October 20, 2009, Karnataka High Court issued yet another stay order, which will remain effective for a period of four weeks, suspending this new directive on CoPP.

This is the third stay order against the new centralized system of granting CoPP.

Conclusion:

Many stakeholders genuinely feel that this change will help strengthening the regulatory framework of the country and improving confidence level on the high quality standard of generic drugs manufactured in India within the world trading community with a positive impact on pharmaceutical exports. This will also enable the DCGI to provide up-to-date details on CoPP to the international regulators, as and when required. In the previous system, the DCGI feels, it used to be quite challenging to quickly compile such data to respond to any national and international request for the same. In the new system there will be one uniform format and the details of all CoPP with their expiry date will be available in the CDSCO website for greater transparency.

The infrastructural issue including the manpower need of the CDSCO to handle this new initiative is being addressed with adequate speed. Overall, this is indeed a laudable move to ensure uniform high quality standard for the pharmaceutical products made in India. Ministry of Health of the Government of India should be complimented for this important initiative.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.