Crisil: Indian drug makers must invest in compliance due to stricter USFDA enforcements

India has the largest number of FDA-approved drug manufacturing plants with more than 150 formulation facilities and is also the second-largest pharmaceutical supplier to the US market in terms of volume of generic drugs. About 30% or $4 billion worth of India's pharma exports are to the US. According to a report by global credit rating agency Crisil stricter norms by USFDA will lead to higher compliance costs for Indian pharma, although these enforcements are not country specific but more on account of cultural differences.

According to the ratings agency, companies like Dr Reddy's, Sun Pharma, Ranbaxy, Cipla and Lupintotal up to USD 3 billion of supplies to the US, while mid-sized companies like Torrent Pharma, IPCA Laboratories, GlenmarkPharma and Alembic Pharma account for the balance. The cost of compliance of Indian pharma companies has doubled over the past 5 years. The companies have to invest in bringing compliance processes up to speed, as the cost of not doing so (warning letters/import alerts may impact both current revenues and future pipeline) will be far higher. The report added that while the ratio of enforcements to manufacturing bases is lower in India compared with elsewhere, the enforcements in India have been clearly due to cultural differences, attitude of employees, inadequate interpretation/understanding and absence of due process and systems.

Most of the enforcements of the last 2 years were related to differences in interpretation or understanding. In the past year, companies like Wockhardt, Ranbaxy, SunPharma have been hit with import alerts from the US FDA on GMP violations. Stringent FDA norms are due to an increase in FDA staff and infrastructure with the number of inspectors being increased by 7 to 19 and opening offices in Hyderabad and Mumbai. However, Crisil said it expects the cost of compliance to rise as drug makers adapt to a stricter regime. This will include costs of hiring personnel and consultants, apart from investments in upgrading facilities to GMP standards.Crisilbelieves that large Indian pharma companies have the financial flexibility to bear the increased cost of compliance and remain competitive in the US.On the other hand, India continues to enjoy a rising share of ANDA approvals compared to other countries. Till date, the top 10 Indian pharma companies account for more than 800 ANDA filings.