Replacing Obamacare by new law in US risk to business: Dr Reddy's

It also listed Trump administration's opposition to free trade agreements

Homegrown pharma major Dr Reddy's believes that replacing 'Obamacare' by another law in the US will pose risk to its business that can have adverse material effect on financial performance.

The Trump administration in the US plans to repeal and replace The Patient Protection and Affordable Care Act(PPACA), nicknamed Obamacare.

"Any changes in the PPACA, the Medicaid Part D program or other laws relating to drug pricing, coverage through Medicaid or Medicare, or other facets of the US healthcare market could have a material adverse effect on our results of operations, financial condition or business," Dr Reddy's said in a filing to US Securities and Exchange Commission (SEC).

The Hyderabad-based firm also said there has been an increasing trend of manufacturing site audits by the USFDA and regulators in other developed countries and it could not guarantee that its efforts would prevent adverse outcomes, including warning letters or import bans.

In March 2017, the US House of Representatives passed the 'American Health Care Act' to replace the PPACA.

Such legislation is pending in the US Senate, and is anticipated to be significantly revised or substituted with new legislation before a final law is passed.

Dr Reddy's also listed Trump administration's opposition to free trade agreements and ongoing efforts to achieve that goal as another risk factor.

The US has withdrawn from the Trans-Pacific Partnership (TPP) free trade agreement after Trump took over as president.

"Any such changes in free trade agreements could, among other things, interfere with free trade in goods, impose additional customs duties or tariffs, increase the costs and difficulties of international transactions and potentially disturb the international flow of goods, and thus may have a material adverse effect on our financial performance," the company said.

On the audits of manufacturing sites it said : "More recently, a number of Indian generic pharmaceutical companies were issued import alerts and warning letters by the USFDA."

"While our quality practices and quality management systems are conducted in a manner designed to satisfy these types of audits, we cannot guarantee that our efforts will prevent adverse outcomes such as audit observations, corrective action requests, warning letters or import bans," it added.

A significant proportion of the company's manufacturing base of active pharmaceutical ingredients and formulations plants servicing the US and other global generic markets is based out of India.

In November 2015, the company was issued a warning letter by the USFDA over manufacturing norms violations at two API production facilities and one injectable oncology formulations unit in India. It had an adverse impact on new product approvals from these sites.

After taking corrective actions, the USFDA conducted re- inspection of the facilities in March and April 2017.

"During the re-inspections, the USFDA issued three observations with respect to our API facility at Miryalaguda, two observations with respect to our API facility at Srikakulam and thirteen observations with respect to our oncology formulation manufacturing facility," it said.

Dr Reddy's said it had responded to the observations and believed the issue could be resolved satisfactorily in a timely manner.