Drug firms remain in US FDA cross hairs
The increase in inspections on Indian companies and why previously compliant facilities are falling foul are questions that worry investors
The US Food and Drug Administration’s (FDA’s) scrutiny of the Indian pharmaceutical industry found two more firms wanting. Aarti Drugs Ltd and Ipca Laboratories Ltd got import alerts or a ban on imports of specified drugs into the US from non-compliant facilities. A long road to resolution lies ahead for them. For investors, the uncertainty can be painful.
The increase in inspections on Indian companies and why previously compliant facilities are falling foul are questions that worry investors. Incidentally, FDA officials were in India and faced similar questions. They have written a few blog posts on their return, addressing some of these questions.
An increase in inspections is mainly because of rising exports and to ensure that drugs sold in the US meet the same quality standards as those produced elsewhere, including in the US. India’s exports to the US market have risen from $1.25 billion in FY10 to $3.45 billion in FY14, according to government data.
While higher sales is one reason, innovator companies making drugs in the US have also been demanding a level-playing field with generic companies, in compliance and inspections. Indian companies have also said that while norms have not changed, the regulator has become more particular about full compliance.
But what should reassure investors is that the US FDA has said it will reward facilities of a high standard of compliance. This could be in the form of a lower frequency of inspections, for instance.
Also, bans being seen now are the result of inspections done some years ago. FDA data for FY14 (year ended September) shows a decline in inspections. That is a positive, though it’s too soon to call it a trend. If Indian companies get their act together, however, there should anyway be no reason to fear a visit from FDA.
The writer doesn’t own shares in the above-mentioned companies.
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