New Delhi: The increasing number of regulatory actions from the US Food and Drug Administration (USFDA) is emerging as a key risk for Indian pharmaceutical companies as it may delay product approvals and are likely to add to margin pressures, says a report by rating agency ICRA.
From 2008-2015, USFDA has issued around 50 warning letters on Indian companies. Out of these, around 40% were converted into import alerts. Sun Pharmaceutical Industries Ltd, Dr.Reddy’s Laboratories Ltd, Cadila Healthcare Ltd and IPCA Laboratories Ltd were the major companies that faced USFDA heat in 2015.
Issuance of warning letters and import alerts for India-based manufacturing facilities have increased significantly over the past couple of years following USFDA’s increasing focus on compliance of good manufacturing practices, the report says. It adds that one-third of warning letters issued between 2008 and 2013 have been resolved with majority of them belonging to large companies.
“In an environment where companies are going through pricing pressure owing to increased competitive intensity, these developments are likely to add to margin pressures. Nonetheless, we believe that the credit profile of affected entities is unlikely to be impacted in view of their strong balance sheets and liquidity,” the ICRA report says.
As a result of USFDA’s stringent follow up on manufacturing standards, pharmaceutical companies are now mandated to review their research and development and manufacturing procedures, implement comprehensive action plans and even conduct risk assessment of products that are already in the market. Based on the severity of the deviations, the FDA has also directed some companies to get third-party evaluation of their remediation processes.
The report also suggests that 50% of the warnings letters have been resolved within a period of 12-15 months. The escalation of warning letters to import alerts is also higher for small and mid-size companies.