cover story Pharma

Intensive

Scare

The US regulators increased

scrutiny of Indian drug exporters
is giving the pharmaceutical
industry the jitters. By e. kumar sharma

raj verma

n a cold Sunday afternoon in January, Peter E.

Baker is in Toansa village, Punjab. He is at the
gates of the showcase
plant of Ranbaxy, Indias
leading pharmaceutical
company, some 160 km
from Chandigarh airport. This plant makes
the active ingredients that go into tablets. The
security guard seems unaware not only about
who Baker is, but also about the organisation
he represents the US Food and Drug
Administration (FDA). He contacts the plant
supervisor.
Drug industry executives know Baker
only too well. A senior executive at a
Mumbai-based pharma major says of Baker,
a veteran investigator with the FDA: Not
only does he catch you when you least expect
him to, but his style of functioning is unique.
He will look at the most unexpected places in
the plant... If he finds anything wrong, he will
doubt everything, and youve had it.

March 16 2014 Business today 51

For interview and more, see

cover story Pharma

Stories doing the rounds in

pharma circles tell of dustbins being
checked at one company, and urinals
in another. The executive adds: We
look into every minute detail now,
but still just hope and pray that nothing ever goes wrong. He spoke to
Business Today strictly on the condition that neither he nor his company
would be named.
As for Baker, data from FDAzilla,
a website that provides intelligence
on the US drug regulators inspections, suggests that his
share in inspections is growing
in India. In 2012, he was involved in only six of the 251
FDA inspections in India, but 21
of the 169 inspections in 2013.
And there is good reason to
worry when he comes knocking. He has been a factor in
many warning letters that
Indian drug makers notably
Ranbaxy and Wockhardt
have got from the FDA.
A pharma company CEO,
who does not want to be
named, says: After I learnt
that the Mohali facility of
Ranbaxy did not have water
heaters in the bathrooms, I

businesstoday.in/pharma-usfda

on Wockhardts factory.

We have received approvals from the Indian

government to add seven drug investigators. This
will increase our presence to 19 American
staff based in-country

PIB

report on the Indian pharmaceutical

industry: Regulatory headwinds
Source of Risk
remain one of the key risks to the
Experts expect vigilance to increase.
Indian pharmaceutical sector, espeShamnad Basheer, a former professor
cially in light of the increasing scruof intellectual property law at the
tiny by the FDA to ensure quality and
compliance. While the volume of
West Bengal National University of
warning letters issued by FDA has
Juridical Sciences, says: India has
increased 10x over the last four
definitely moved up in the priority list
years, there has been a higher impact
of inspections. He says companies
on Indian companies recently from
that are unable to cope with this may
the increasing activities of the US
have to shut shop. He adds: Big comregulator (import alerts, warning letters, Form 483s). Form
483 is an FDA document that
notifies a company of objectionable conditions. The company needs to respond in writing stating its corrective action
plan, and then, of course, implement the plan.
The authors of the JP
Morgan report note that the
implications are huge. In our
view, the risk associated with
the changing regulations and
increasing inspection by the
FDA would be a key variable to
track, given the exposure of the
most Indian pharma
companies to the US markets
(revenue contribution of
25-55 per cent for large
domestic companies). A
warning letter or import alert
Margaret A. Hamburg / FDA Commissioner
on any facility not only
impacts the revenue stream
from the unit, but also affects
the drug makers ability to
make timely ANDA filing from
the facility. The ANDA, or
Abbreviated New Drug
Application, is filed for generic
drug approval for an existing
licensed or approved drug in the US.
checked all our bathrooms in the
panies will spend more money and
The report further notes that higher
plant, and to my surprise, we did not
resources in ensuring compliance,
FDA scrutiny is likely to result in
have them either. The thought that it
and will pass on the higher costs to
enhanced focus and investment on
could become a point for closure... I
consumers. However, their competicompliance (and regulatory costs
immediately had them installed.
tive edge in the market will reduce.
too).
Another pharma company head
In September last year, Neha
The reports authors say they do
personally took his team of experts to
Manpuria, Pinakin Parekh and Sean
not see a risk to long-term valuations
check urinals and drains in the plant
Wu, analysts at JP Morgan Asia
Pacific Equity Research, noted in a
of the sector, as the US would remain
after reading the FDAs observations

a key market for the Indian

generic drug makers. India
supplies around 40 per cent
of the generic drugs
and over-the-counter products sold in the US.

Why the US Matters

It is no more just a quality audit of a facility, says a

promoter of a mid-sized company. I remember distinctly
from our earlier inspections
that we never had to drive
down our product development people for the inspection.... They started gradually getting into how the
product was developed,
which is more of an R&D
l
ha
ac
m
Hi
ta Sahib,
ys plant in PaonA
ax
forte and not something
nb
Ra
d:
he
tc
g wa
e FD

Estimates vary, but the point is

that the US is important for
Indian drug companies. Going
by Pharmexcil (Pharmaceutical
Export Promotion Council of
Bein
n by th
India, a government body) data, Pradesh, is under observatio
the 40 per cent figure is by volume
since, Indias share in the $63-billion US generics market in
2012 was 3.07 per cent by
ing
ng and grow
value. Even so, the FDA
mpanies is lo
co
a
m
ar
ph
Indian
notes that India is the secA warnings to
The list of FD
ond largest provider of fincility
Warning Fa
ned/Reason
ar
ished dose products to the
w

Company
te
Da
US, with almost 10 per cent
Sahib

s and Paonta
a
w
e
D

08
20
of that market. India has the
pt
Se
Ranbaxy
second largest number of
andideep
May 2009 M
FDA-approved plants for in
Lupin
angalore
gredients and formulations
Sept 2010 B
a
di
In
Sutures
370 plants, to be precise
hmedabad
Nov 2010 A
it
s
ce
n
ie
Sc
e
outside of the US.
antibiotics un
d
a
Claris Lif
b
ra
e
d
y
H
May 2011
So its not surprising, rePharma
Aurobindo
oriya
ally, that Indian drug compaJune 2011 M
hcare
lt
ea
H
a
nies are under increasing scruil
Cad
Hyderabad
Sept 2011
tiny by the US regulator. FDA
s
ab
L
ag
Yag-M
ngalore
Commissioner Margaret A.
alities not
Feb 2012 Ba
stration form

td
L
c
andatory regi
m
Hamburg told Business Today in

Winta
it
un
ra
doda
Feb 2012 Va
an email interview (businessto
fulfilled
Pan Drugs
lled
alities not fulfi
day.in/usfda-hamburg) during
stration form
gi

re
ry
to
da
an
her recent visit to India: We will
April 2012 M
a
Sai Pharm
increase our presence in India. In
iperumbudur
ay 2013 Sr
hcare M
lt
ea
March 2013, we received approvH
ra
Hospi
als from the Indian government to
Mumbai
India
kleshwar and
June 2013 An
add seven drug investigators. This
s
ce
n
ie
RPG Life Sc
aluj
will increase our presence to 19
July 2013 W
s violation

dt
ar
h
k
acturing norm
American staff based in-country,
Woc
lyani manuf
Ka

13
20
July
including 10 dedicated specifically
Kabi
Fresenius
to drugs.
Oncology
derabad
Besides becoming more freAug 2013 Hy
icals
em
h
C
h
h unit
Pos
quent, inspections are also more
achal Prades
g 2013 Him
Au
s
xport
often unannounced. The days when
Promed E
ohali
s, Bangalore
Sept 2013 M
companies got three months adila Specialitie

y
d company Ag
x
ire
ba
qu
ac
an
R
of
2
.
vance notice are history. Adding to
cility No
Sept 2013 Fa
olab
Indian drug makers anxiety is the
Strides Arc
nature and scope of the inspections.

tiny
Close Scru

d JP
Source: FDA an
52 Business today March 16 2014

Morgan
March 16 2014 Business today 53

cover story Pharma

Most Watched Nations

How India compares with other countries in FDA inspections
250
canada

India

china

Number of inspections

200

France
Germany
India
Japan

150

United kingdom
source: FDAzilla.com

100

50

2000

2004

2008

2012

year
acteristics that are important from
the patients perspective, identifying
the material attributes and manufacturing parameters to achieve those

G.N. singh / Drug Controller General of India

It is high time India caught up with global

technological developments and practices
54 Business today March 16 2014

a . p r ab h a k a r r ao

the manufacturing plant people

would be well versed with. He says
this trend may be because events at
Ranbaxy led inspectors to think that
perhaps development itself was
flawed, and to doubt whether
what was written in the product
development report was actually
done.
Additionally, he says, there
are new guidelines on testing for
extractables and leachables
(minute amounts of chemicals
originating from containers,
medical devices or process equipment, which could end up as
contaminants in the medical
product). He also says they are
now getting into concepts such
as Quality by Design ( Q b D ),
which involves identifying char-

characteristics, and then designing

manufacturing controls and developing methods to make improvements.
Unlike quality by accident taking
corrective action after a failure occurs
QbD helps manufacturers focus on
developing process understanding
and action to avoid failures.
The FDA explains this and more
at length. In her statement before a
US Congress subcommittee on energy
policy, healthcare and entitlements,
Janet Woodcock, Director of the
FDAs Center for Drug Evaluation
Research, notes that the drug regulators inspection and compliance focus
has changed in recent years. She
notes: We have enhanced our inspectorate capability and increased
familiarity with the quality systems
model. Some of these inspections
have found operations with antiquated or obsolete facility or process
elements, and operations with high
defect rates.... These operations are
receiving higher focus, while manufacturing operations that have been
upgraded and are more dependable
have been de-emphasised.
Woodcock does not specifically
refer to India when she says: Use of
foreign-sourced materials creates
vulnerabilities in the US drug supply.... For example, most of the US
heparin supply comes from non-US
sources. When contaminated
heparin, sourced from China, was
found in the United States, FDA had
to urgently devise several tests to detect the contaminant and screen out
contaminated product, because
heparin is a critical drug for US patients, and there was no adequate
alternative source. Heparin is an
anticoagulant.
Shailesh Ayyangar, Managing
Director of drug maker Sanofi India,
Vice President South Asia, Sanofi,
and President of the Organisation of
Pharmaceutical Producers of India
(OPPI), a group of largely multinational drug companies, says: Lets
face it. We are not in a sellers market. We are in a buyers market, and
the buyer lets say, for arguments

cover story Pharma

sake, the US has the

right to decide what
quality standards it
wants from the second
largest exporter of generics to the US. It is
therefore in our interest to ask the right
questions, get the consultants to help us
with systems and
processes. He notes
that many companies
are getting nervous
today because a lot of
questions are being
asked, and adds that
regulators face flak in
their own countries if
they approve products
that turn out substandard.

to take industry into

confidence, says
Hamied.
While Ranbaxy
and Wockhardt are
facing challenges in
Warning letters issued
getting issues resolved,
to india-based facilities
others seem to be
achieving greater success in addressing US
2009
concerns. For instance, Indoco
Remedies said in a
statement to the
Bombay Stock
2010
Exchange on January
17: The Goa Plant II
(Sterile) was first inspected in October
2005, re-inspected in
2011
February 2011 and
the last inspection was
conducted in August
Working with
2013 by FDA. On the
the FDA
last
day of inspection,
2012
While standards tend
the 483 was issued....
to evolve continuIn our response on
ously, the rapid pace
September 16 to the
of change is causing
483, we have given a
the industry some
list of the corrective ac2013
worry. In a recent
tions taken.... With the
newspaper interview,
last compliance report
industry veteran and
sent on November 25,
Cipla Ltd Chairman
2013, all the issues
Y.K. Hamied said
stand resolved, and the
2014
about the US: If you
Company is awaiting
change the goalposts
establishment inspecSource: FDA and
every few months
tion report, which norJP Morgan estimates
without informing
mally takes five to six
me, how will I know?
months. Indocos
He says he is happy
Managing Director,
that FDAs Hamburg indicated to
Aditi Kare Panandikar, says:
Business Today in her first interview
Challenges for some could be inin India that her staff would work
creasing also because the regulatory
with Indian companies to help them
expectations are also going up.
self-correct. I am happy if she wants
All of this, as one might expect,

Warning
Tally

2
1
4
5
1
8

adds to development costs. A backof-the-envelope calculation shows

that our cost of compliance has
nearly doubled in the last five years,
says a senior executive who tracks
compliance in a pharmaceutical
company. Others see a smaller hit.
The cGMP cost of compliance and
maintenance is typically 35 per cent
higher than the usual manufacturing
and maintenance cost, says Venkat
Jasti, Chairman and CEO of Suven Life
Sciences. cGMP stands for current
good manufacturing practice, and
refers to regulations enforced by the
FDA to ensure proper design, monitoring, and control of manufacturing
processes and facilities. The executive
says many major companies are already compliant with cGMP requirements, and smaller ones will have to
do likewise now.

A Dose of
Self-improvement
Bob Rhoades, Vice President at
Quintiles, a consultancy that helps
companies with third-party audits,
staffing, and effective IT in quality
systems, told Business Today in an
email response: Increasing enforcement activities by the FDA are clearly
having an impact in India and beyond.... Regulatory compliance is
definitely more of an issue today than
three years ago and will continue to
be so.... To protect market share and
reputation, timely achievement of
baseline compliance is vital.... In this
environment of heightened regulatory scrutiny, we believe traditional
compliance alone where quality
assurance and compliance are backroom cost centres is insufficient.
Over the past few years, most
leading Indian companies, such as

At 370, India has the second largest number

of FDA-approved plants outside the US
56 Business today March 16 2014

cover story Pharma

Glenmark and Dr Reddys

Laboratories, have been increasing their engagement with external auditors, some of whom are
either former FDA officials or
drawn from the pharmaceutical
industry. At present, besides
Quintiles, Lachman Consultants is
among the most sought after.
Leading drug makers have
also been focusing on
strengthening internal audits by
reviewing and expanding the
checklist of items covered. For
example, Panandikar
of Indoco, which recently
underwent a FDA inspection, says
her company has focused on
strengthening its regulatory affairs
team (currently 35 people) over
the past year. The team tracks
regulatory developments
worldwide and regularly updates

our plants in India, and we

have also been sending people from here to international
facilities so they can learn
about systems approved by
the FDA, he says. Sanofi
India has two solid dosage
form plants (which make tablets) in Gujarat and Goa, and
a FDA -approved one in
Gujarat that makes active
pharmaceutical ingredients,
and a vaccine plant in
Hyderabad. He says: They
all comply with international
standards, and we have various regulatory approvals. We
constantly endeavour to upgrade the systems.
Kewal Handa, former
managing director of Pfizer
India, who now runs healthcare advisory firm Salus
Lifecare, says: Instead of reacting in a panic, companies
should proactively take to
Kewal Handa / Promoter Director, Salus Lifecare
improving their quality culture, and one good way
would be to have some of
these consulting firms conduct mock FDA-like audits
and use the findings to improve quality systems.
Mock audits are not
cheap a two-month audit
could cost as much as `50
lakh, perhaps more. They
the management. Indoco has built a
could add to a companys cost of
help identify continuous improveregulatory affairs network that keeps
compliance by a couple of crore rument opportunities within their qualpeople at the corporate level in
pees a year, but Handa says its worth
ity systems.
constant dialogue with people at all
it. He adds that companies should
Ayyangar of Sanofi says multinaits plant locations.
share the action taken in such audits
tional drug companies with FDAapproved plants in India have raised
Rhoades of Quintiles says his
at the next FDA inspection.
Rhoades says that while quality
awareness by investing in training
company is often called in after a
problems or enforcement actions may
programmes. We are getting interdrug maker receives a warning letter.
drive a company to begin its journey
national experts in regulatory procHowever, he adds, in other cases,
up the compliance maturity curve,
esses and quality assurance to visit
companies bring us in proactively to

One good way to improve quality would be

to have some of the consulting firms conduct
mock FDA-like audits, use the findings
to improve quality systems, and share
the action taken with the FDA

Industry sources say compliance with global

standards typically means 35% higher
manufacturing and maintenance costs
58 Business today March 16 2014

cover story Pharma

Lost Value

the best time to take

action is before such
Some examples
of the effect FD
share prices of
problems surface.
A warnings on th
listed drug coof
e
mpanies
Timely and proactive
Company
efforts to drive
Warning % De

cline in stock af
sustainable compliance
ter warning
Date

minimise the risk of
months
one
quality problems, he
Three
Ranbaxy
Six
Sep 2008
adds. He notes that in
- 33 - 47
- 63
Aurobindo Ph
more than 35 years of
arma May 20
11
1
0 - 29 - 5
experience in advising
Cadila Healt
8
hcare Jun
on quality and
2011
- 3
- 9 - 22
RPG Life Scie
compliance issues, he
nces
Jun 2013
- 3
has found that India is
- 11
Wockhardt
20
by no means alone in
Jul 2013
- 52 -51
facing compliance
-55
Fresenius
Jul 2013
Oncology Kabi
challenges.
- 16 -1

Concerns
Beyond the
FDA

Ranbaxy
Strides Arcol
ab

Sep 2013
Sep 2013

-15
-6

-9
-1

*Stock performan
The FDA is not the
ce as of Feb 18,
2014, as six month
Source: FDA, BT
s are not over ye
Research
only concern of
t
Indian drug makers. So is the investigation by the US International Trade Commission (USITC)
to the US and act to counter them.
Shah says there is pressure to get
into allegations of Indias unfair trade
India downgraded from watch list
practices. The USITC is scheduled to
submit a report to the US government
to priority foreign country. He adds:
in late 2014. There is no immediate
If a country is put in this category,
threat, says D.G. Shah, Secretary
like Ukraine at the moment, imports
General of the Indian Pharmaceutical
from it into the US will attract duties.
He recently returned from WashAlliance (IPA), an association of domestic drug companies. But if the reington, DC, where the IPA presented

US markets account for

25% to 55% of the revenues of
large domestic companies
port takes a dim view of India, it
could be used to impose trade sanctions. Besides pharmaceuticals, the
IT sector could also be affected by it.
Running parallel are arguments
by some in US industry favouring action against India under a provision
that enables the US Trade
Representative identify trade barriers

60 Business today March 16 2014

the Indian case before the USITC. Last

year, Shah presented a testimony
before a US Congress committee in
response to allegations by Pfizer Inc
in March 2013 that India repeatedly
defied trade rules and discriminated
in favour of domestic generic drug
manufacturers, among other things.
Shah says India is compliant with

TRIPS (the World

Trade Organizations
Agreement on TradeRelated Aspects of
Intellectual Property
Rights), and US industry
is unfairly comparing
Indias intellectual
property rights regime
with its own.

Indian Regulator
Also Concerned

The Indian regulator, the

Drug Controller General of
India (DGCI), also wants to
review provisions on qual-8
ity. Its head, G.N. Singh,
says it is looking to step up
on good manufacturing
-24*
practices. He says Schedule
-60*
M of the Indian Drugs and
Cosmetics Act, for instance,
needs to be revisited. He is
referring to the part of the
law that specifies the requirements for factory premises
and materials, equipment, and minimum recommended areas for basic
installation for some types of drugs.
He says that during the last drug
consultative committee meeting, held
late last year and attended by the different drug regulators in the country,
he emphasised that it was high time
India caught up with global technological developments and practices,
and had science-based practices and
dynamic processes. He says: As part
of this, there is a plan to review and
strengthen Schedule M and harmonise it on the lines of the World
Health Organizations Good
Manufacturing Practices.
In the meantime, Indian drug
makers will be taking note of Peter
Bakers observations at the Toansa
plant, and checking for flies in the
sample preparation room and broken
storage cabinets. ~

@EKumarSharma