Sun Pharma to shut Detroit plant in US

123 to be laid off; unit was under US lens for breaking manufacturing norms

India's largest drugmaker Sun Pharmaceuticals has decided to shut its plant at Detroit and to lay off 123 employees. The facility, owned by Caraco Pharmaceutical Laboratories, the US subsidiary, was under US scrutiny. In the US, Sun Pharma has plants at Detroit, Wixom (MI), New Jersey and Ohio, along with URL Pharma's (subsidiary of Caraco) locations in Pennsylvania.

Caraco's two facilities in Michigan and Detroit were under the US Food and Drug Administration (FDA) scanner after violation of manufacturing norms. In 2009, the FDA had seized all drugs manufactured by Caraco at its Michigan facility for violations of manufacturing standards. In 2013, the US health regulator had raised concerns about manufacturing lapses at its Detroit plant.

However, in October, Sun Pharma had said that it addressed the US health regulator's concerns about manufacturing lapses at the plant and continued production.

"As a part of its manufacturing consolidation in the US, it has notified the Workforce Development Agency for the State of Michigan regarding its decision to cease manufacturing operations and close the Detroit facility located at Elijah McCoy Detroit. The company has provided the requisite advance written notice of the facility closure to the employee union and all affected employees," Sun said in its statement on Friday.

The company has ensured the impacted employees get compensated with more than their regular entitlement under the severance package. They will also receive other support services, including out-placement assistance. The rest of the employees are continuing through mutually consented arrangements, it added.

According to the company, the manufacturing of these products is being transferred to other units and all necessary steps have been taken to avoid market shortage. "Sun Pharma expects a negligible impact of this development on its 2014-15 consolidated revenues," the statement added.

A Sun Pharma spokesperson said the current workforce of the Detroit unit was 235 employees, of which 123 would get directly affected by the decision to close the unit.  

The spokesperson said Sun had turned round the unit after the consent decree. It was brought back into operation since 2012. The current decision to close the unit is in line with the company’s strategy to consolidate its manufacturing operations in the US.

In March, Caraco had recalled 2,528 bottles of Metformin HCL, a drug for Type 2 diabetes, after a customer complained of finding tablets of Gabapentin, an epilepsy drug, in a bottle. Caraco was founded in Detroit by Dr Arnold Curry in 1984 and acquired by Sun in 1997.

On Friday, Sun shares closed at Rs 630, down 0.25 per cent over previous close on BSE.

Having a consolidated turnover of Rs 11,408 crore (March ended 2013), Sun earns 54 per cent of its revenue from the US formulation market.