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USFDA brings mixed results for Indian pharma -
USFDA brings mixed results for Indian pharma
Guest Author | Published: 28 Apr, 2017  | Source :

The Indian pharmaceutical industry has long been the bane of its US counterpart for offering cheap generic alternatives to established brands and frequently clashing with the US Food and Drug Administration (USFDA) over the quality of local manufacturing units.

The US constitutes almost 40% of major Indian pharma companies’ revenues. It’s doubtful if Indian pharma firms would be where they are today or have the growth potential they do without this all-important market.

Already under intense scrutiny from the USFDA, it looks like the sector faces more challenges from an increasingly protectionist US trade regime.

While routine inspections are part of the USFDA’s due diligence, the agency has increased checks on Indian firms over the last two years, including Wockhardt Ltd., Sun Pharmaceuticals Industries Ltd. and Dr. Reddy’s Laboratories Ltd., for their alleged substandard drug manufacturing practices. Sun Pharma and Dr. Reddy’s earn almost half of their revenue from the US.

Indian pharmaceutical companies export roughly USD 7-8 billion worth of generic products to the US, and exports and sales of active pharmaceutical ingredients (APIs) and formulations to the US have been hit by the USFDA’s crackdowns.

As the world’s third largest pharmaceuticals market in terms of volume, India is sensitive to any pressure on this front: it only takes one mention of the USFDA to send share prices into a tailspin.

In the latest Indian stock market news, Sun Pharma announced it is responding to the USFDA’s observations from a recent inspection of its Dadra facility. The reported violations include incomplete lab records and failure to properly investigate drug batches that didn’t meet specifications. Sun Pharma’s plant in Halol, Gujarat, is still under USFDA sanction, which prevents the firm from launching new products from that facility.

Divis Laboratories Ltd. has also received a warning letter regarding the company’s Vizag plant and has said it will address the deficiencies. Shares of both Sun Pharma and Divis were down after the news was made public.

There are also fears that unsatisfactory inspections will lead to more delays in new drug approvals. However, some Indian companies are coming out as winners: the USFDA recently approved a generic version of progesterone, launched for US consumers by Dr Reddy’s. As well, it approved Glenmark Pharmaceuticals Ltd.’s application for dabigatran, which last year racked up USD 900 million in sales and is used to prevent blood clots. This is the fourth Glenmark drug to receive approval this year. Last year it launched 15 new products in the US.

Despite USFDA investigations leading to share price volatility, analysts are still positive on pharma. They see it as a historical pay off and believe it’s in the industry’s best interests to resolve outstanding regulatory challenges by the end of the year.

Aside from the risk of perpetually coming under the USFDA scanner, the Indian pharmaceutical sector faces other struggles.

In the medium term, the new US administration seems intent on imposing a value-added tax on imports that would raise drug prices, effectively eliminating any advantage Indian pharma has in offering cheap generics.

On top of all this, manufacturers now have to contend with a strong rupee that could shave 5% to 6% off their earnings. Higher research and development costs may also eat into revenues.

For more financial and latest legal news in India, visit BloombergQuint.


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