Almost half of FDA notices escalate to import alerts

Nearly 40 per cent of the 50 warning letters issued by the US Food and Drug Administration (FDA) to Indian pharmaceutical companies in the past seven years have been converted into import alerts.

A study by credit rating agency ICRA also finds that a third of the FDA warnings between 2008 and 2015 were resolved, the majority by large drug companies.

Big Indian drug companies that received FDA warnings or import alerts in 2015 include Sun Pharma, Dr Reddy's, Cadila and IPCA Laboratories.

"Warning letters and import alerts for India-based manufacturing facilities have increased significantly over the past couple of years following the FDA’s greater focus on compliance,” the ICRA report says. It adds regulatory action is emerging as a key risk for the sector.

Analysts feel with drug companies facing increased competition, these developments are likely to add to their margin pressure.

“The credit profile of the affected entities is unlikely to be impacted in view of their strong balance sheets and liquidity," ICRA says.  However, it feels adherence to the FDA’s directives and timely site transfers are vital to mitigating risk.

Pharmaceutical companies are now required to review their research and manufacturing procedures and conduct risk assessment of products that are already in the market.

Based on the severity of the deviations, the FDA has directed some companies to have third-party audits conducted on their remediation processes. Companies have been seeking site transfer and are pursuing filings from multiple locations for future abbreviated new drug applications (ANDAs).

ICRA feels these measures will affect the earnings of some drug companies.

The majority of the FDA’s warnings have been resolved within 15 months. Of the nine warnings resolved so far, seven were to large companies. The escalation of warnings into import alerts is higher for smaller companies.

BITTER PILL TO SWALLOW

• Sun Pharma, Dr Reddy’s, Cadila and IPCA Lab among big Indian firms that received FDA warnings or import alerts in 2015
   
• Escalation of warnings into import alerts is higher for smaller companies
   
• ICRA study says a third of the FDA warnings between 2008 and 2015 were resolved
  

 

Says regulatory action is emerging as a key risk for the sector
 

However, credit profile of affected entities unlikely to be impacted because of their strong balance sheets
 

Says adherence to the FDA’s directives and timely site transfers vital to mitigating risk
 

FDA has directed some companies to have third-party audits on their remediation processes