Follow the rules. That was the crux of the message conveyed by the US Food and Drug Administration (FDA) at a series of workshops organised by the Indian Pharmaceutical Alliance in November. In the same month, two Indian pharma companies lost close to 20% and 6% market cap, respectively. The stock price of Lupin Pharmaceuticals, the largest drug company by Indian sales, fell by 18% to Rs 860 ($13.3) in a day and has since trailed even lower to Rs 826 ($12.7). As for Glenmark, at rank five, its stock price dropped from Rs 590 ($9.1) to Rs 537 ($8.3).

The two giants join a club that has pretty much every large Indian drug manufacturer—a club of those reprimanded by the US FDA. And these two have landed with Form 483.

But while waning investor confidence is a sign, it’s not the entire story.

Source: Bloomberg Terminal average of analyst predictions for Pharma companies, who received 483 forms from FDA recently

There’s a method to the US FDA’s censure—three distinct forms. 1) A 483 form handed out by an FDA inspector who sees a violation of the defined protocol, 2) a warning letter sent formally by the FDA, and 3) a self-explanatory Import Alert. The first two halt the processing of the company’s new drug applications (ANDAs) and prohibit them from applying for any new ones, at least not until the company has rectified the mistakes. A process that takes a minimum of six months. The latter brings the plant to a standstill. The varying levels of punishment have one aim—push the company to follow the written rule of manufacturing drugs. No deviations, no shortcuts and no dishonesty.

The defaulter can face consequences for something as small as a hole in a lab assistant’s glove, the use of teeth and not scissors while opening a packet, or as large as fudging test data of each batch of drugs to ensure that there are no failed batches. And in turn, no loss of raw materials.

But complying with all this would mean that some drug manufacturers hire FDA-accredited consultants, who may charge up to $8,000 (Rs 5,15,617) a day for approximately two years to meet the standards.

An industry representative, with over three decades of experience in one of the major drug exporters, reveals that most drug manufacturers who have been served warning letters do not prioritise quality. “It is evident because they stick to two age-old rules of business— growing revenue and cutting costs,” he says. Quality, he added, became a subject of discussion when FDA inspections started hurting export revenue and their future access to high value regulated markets.

Now, Indian pharma has always wanted to speed up ANDA approvals by the FDA, while increasing exports on the side.

AUTHOR

Ruhi Kandhari

Ruhi writes on the impact of healthcare policies, trends in the healthcare sector and developments on the implementation of Electronic Health Records in India. She has an M. Sc. in Development Studies from the London School of Economics.

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