Why is Indian pharma failing to meet US standards?

What meets the eye is not always true, such is the case with Indian pharma companies receiving US FDA observations.

The US generics market is a major revenue supplier for domestic pharma players. The essential criterion to enter that coveted space is regulatory approval from the US Food and Drug Administration (FDA).

Any pharmaceutical company wanting to sell its drugs in the US needs to clear inspections conducted by the FDA. It is only after pharma companies receive approval for the drug, the manufacturing process, and the facility that will produce it, that they are actually allowed to market their products in the US.

However, the process for clearing the FDA's regulatory checks has turned out to be a major roadblock for drugmakers of late as they have consistently struggled to meet the US agency’s good manufacturing practices (GMP).

Nowadays, not a week goes by without a pharma company receiving some `observations’ from the regulatory body. The FDA issues observations if it finds unsatisfactory manufacturing processes during its inspection of the facility.

Getting mired in regulatory challenges delays drug launches, which impacts revenues. In such a scenario, a question that often surfaces is why are domestic pharma companies failing to meet regulatory standards even after being a major player in the US generics space for such a long time.

Let’s see.

Greater numbers

Analysts have attributed a variety of reasons for the increased scrutiny of domestic pharma. A major reason, as pointed out by Vineet Gala, founder of Xylem Investment Managers, is that the number of facilities being inspected has significantly increased in the past year, resulting in reports of more plants receiving observations.

This is because inspections were pushed by a year or two during Covid, because of which more plants were inspected in the past year compared to what we would usually see.

Greater complexity

Another factor that Gala believes to be the reason for the increased scrutiny is the kind of drugs being filed by domestic drug makers. "Several drug makers have filed for complex drugs that face little competition or are undergoing shortages in the US market. Given that these drugs are critical in nature, they garner a higher level of scrutiny compared to regular generics," Gala highlighted.

This explains why several major manufacturing facilities poised to produce these critical drugs have been caught in regulatory challenges. Cipla's manufacturing facility at Pithampur, which was due to manufacturing its key drug Advair, used in the treatment of respiratory diseases, received eight observations from the US FDA, including a few that were serious in nature.

Also Read: Contamination risk among 8 FDA observations on Cipla, stock takes a hit

Similarly, Sun Pharma’s Mohali unit was forced to halt production to fix issues pointed out by the regulatory body. The Mohali facility specialises in oral solid formulations and manufactures products like Pantoprazole ODT, a high-margin product as it’s the only generic of Pentasa available in the market.

Some analysts also felt that it was better for pharma companies to get done with the inspections, even if it takes longer due to rising scrutiny. Getting approval from the FDA within six months, even with observations, is a positive as it helps enter the market, they believe.

Take for instance Ipca Laboratories. Three of Ipca's manufacturing units, which were under an import ban since 2015, were inspected by the FDA recently, following which they were slapped with several observations. But analysts still feel that the company has a shot at getting the import bans lifted if it manages to rectify the issues highlighted by the FDA.

Also Read: The big picture: Are Ipca's regulatory woes actually a negative?

Even though, it might appear that domestic manufacturing standards have become sloppy in recent times if one were to go by the number of observations of the US FDA, a closer look may actually reveal the strides made by domestic pharma as it attempts to break into the complex drugs space, which attracts higher scrutiny.

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