ANOTHER US FDA WARNING - VICTIMS OR INDEED GUILTY?
By Ruma Dubey
Today, since morning, Dr.Reddy’s Labs has been the top loser with the stock losing 15% in intra day trades. And the same ghost has come back to haunt – US FDA. It’s almost like, “Say boooo!” and the entire pharma sector stocks shiver and cover in fright.
Dr.Reddy’s is one of the best run companies of India. In fact it is one of the finest examples of a thorough bred Indian company, which is an example of a best run company is today under the FDA scanner. When companies like these start getting warning letters, you cannot help but wonder if there is indeed some truth in the whispers murmured in the hallowed corridors of pharma companies – the US FDA is out to get them!
And then again, you cannot help but rethink – or is it that what we perceive to be one of the best, is actually slipping while we concentrated only on the financial numbers? For a company like Dr.Reddy’s to get a warning letter? This warning letter pertains to its API manufacturing facilities at Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as Oncology Formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The company has stated that this action follows the earlier inspection of these sites by agency in November 2014, January 2015 and February 2015, respectively.
Those in the pharma sector are as shocked as we in the stock market. A warning letter is no small fry – what it conveys is that despite being asked to take corrective actions during the discrepancies noticed during the earlier inspection, the company’s steps have not been good enough. For the company, it has 15 days to prepare a justifiable reply as to why it could not take steps which were convincing enough. And if during the next fortnight, the FDA is not convinced, the immediate action would be a freeze on all new approvals for drug files from these plants. This means a huge loss of revenue and many a times, if the problem is too deep, an export ban could also be levied.
But before we start procrastinating, it is probably more pertinent to note what these observations and warning letters are all about. A look into the US FDA website shows some revealing data. The top 15 pharmaceutical deficiencies in FDA's 483 reports for 2014 shows that it is more about the working or rather best business practices followed than serious quality issues. FDA said it issued 645 Form 483s—forms indicating areas of noncompliance at a facility—to pharmaceutical companies in 2014. The maximum, 145 complaints were about procedures not being written down as stipulated and in complete detail. The second on the list, 109 Form 483s were sent because lab controls did not include the establishment of scientifically sound and appropriate [specifications] [standards] [sampling plans] [test procedures] designed to assure that [components] [drug product containers] [closures] [in-process materials] [labeling] [drug products] conform to appropriate standards of identity, strength, quality and purity. Absence of Written Procedures, Written procedures not established/followed were some of the big complaints.
Serious errors include procedures for sterile drug products, inadequate cleaning / sanitizing / maintenance, no established control procedures to monitor and validate performance, written production and process control procedures are not followed and where batch production and control records are inadequate.
It would be actually an indulgence in self-pity to say that Indian companies are being victimized. The reason why we have so many US FDA observations and warning letters is probably because the frequency of FDA observations have gone up, the management is not involved in procedural/written processes as FDA needs, the standards applicable of Indian plants are same as that in US for which Indian companies are ill-prepared. Then there is also the issue of work place culture – there is no denying the fact what we think as hygienic and clean is not an acceptable standard for developed countries.
Thus Indian companies need to evolve and this increased spate of FDA observations is a sign of change happening. Companies will now be forced to comply with US standards and that’s a good thing for us, as a consumer. From the market point of view, it painful in the short run but gets better in the long run.
Basically, the Indian pharma sector is going through pains of change, adapting to FDA’s frequent inspections and new US standards. So let us stop calling ourselves the victim and instead learn to adapt.