‘Pharma firms should step up regulatory compliance’

Indian pharma players were pulled up fewer times by the US Food and Drug Administration (USFDA) in 2018 than in the past years, research agency India Ratings said in an analysis.

While up to 21.2 per cent of all players inspected in 2014 had received Official Action Indicated (OAI) letter from the USFDA, this dipped to 3.6 per cent in 2018. In 2019, however, a couple of pharma players received the Official Action Indicated notice and inspections were conducted by the USFDA at manufacturing facilities located in India and overseas.

The report from India Ratings also warned that US-focussed Indian pharmaceutical players will be required to step up regulatory compliance in the upcoming decade as they invest in complex generics, and specialised and innovative plays.

In May this year, Aurobindo Pharmaceuticals, in a filing with the stock exchanges, declared that it had received OAI notices from the USFDA for three of its manufacturing plants. Lupin’s Pithampur facility and Jubiliant Generics Limited’s Nanjangud and Roorkee facilities had also received OAI notices that directed the companies to step up compliance in their manufacturing facilities.

According to analysts, warning letters that are issued after lack of action on the OAI notice significantly impacted the credit profiles of Indian pharma companies. For example, Wockhardt’s business and financial profile has been significantly impacted due to escalating regulatory deviations across multiple facilities since 2014. “The company’s revenue and operating profitability was impacted by lack of approvals and its manufacturing facilities continue to be under regulatory restrictions till date,” stated the report.

Dr Reddy’s Labs business too was impacted over 2017-18, as its US-based business eroded through the financial year.

Ankit Bhembre, Senior Analyst at India Ratings, said: “Indian pharmaceutical companies need to step up their regulatory compliance to secure an impeccable reputation as reliable suppliers and provide the targeted return on the ongoing and planned research and development and capital investments over the next decade.”

In its decadal pharmaceutical outlook report, India Ratings also said that Indian formulators’ product portfolio mix will undergo a structural shift in the coming decade on account of movement up the value chain leading to near doubling of research and development investments.

Bhembre said that in the last nine years, between 2010 to 2019, the top ten listed Indian pharma players spent ₹687 billion on an average on research and development (R&D), which is about 7.6 per cent of their revenue. “This is likely to double between 2020 to 2030 on ultra-complex generics pursuits and rise in filing costs,” the analysis stated. In 2010, these companies spent only 5.6 per cent of their revenues on R&D, which rose to an all-time high of 9 per cent in 2017, before plummeting to 7.8 per cent in 2019.

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