Pharma: FDA Blues

It was a normal day for Wockhardt chairman Habil Khorakiwala that Monday in March 2013, till his factory head from Waluj rang him up at 11.30 in the morning. The production manager informed him that a team of FDA inspectors from the United States were at the site and were asking security guards in the parking area to open up the boots of office cars. The morning call not only shocked the Wockhardt chief, but also sent shudders through his organisation.

Apparently, the FDA inspectors had been tipped off that errant factory records had been hidden in the cars parked at the factory site. Exactly two months after the inspection, Wockhardt — India’s sixth largest drug maker — received an import alert from the US drug regulator, banning the company’s exports to the US from the Waluj plant. The (warning) letter from the FDA, said that during their March visit, the company’s quality-assurance personnel had tried to hide records of batch failures, begun destroying test samples and lied to inspectors about being given access to all areas of manufacturing.

While this was just the beginning of a series of compliance crises for Wockhardt, the experience was worse for India’s largest drug maker — Ranbaxy Laboratories in 2008. A series of import alerts on the company’s four key export facilities at Dewas, Poanta Sahib and Mohali in India devastated Ranbaxy’s US business. Ranbaxy also faced a more serious charge of data falsification, compelling the US authority to impose a huge fine on it. The US import ban continued for Ranbaxy notwithstanding the millions of dollars it spent on remedial measures. The company finally merged with Sun Pharma in a distress sale.

Wockhardt faced more such issues at all its US export plants located at Chikalthane,Shendraand Ankaleshwar, fully eroding its US sales. Sun Pharma, now India’s largest drug maker, having swallowed the ailing Ranbaxy Laboratories, did not escape the wrath of the FDA either. The company is now not only struggling with problems inherited from Ranbaxy, but also faces similar issues at its own facilities at Halol and Karkhadi in Gujarat.

The Indian drug industry’s FDA blues continued, as more than a dozen other Indian drug makers, including top players such as Lupin, Dr Reddy’s Lab, Zydus Cadila and Ipca Lab, had stories to add to the sector’s worst US GMP (good manufacturing practices) compliance fiasco. Since the US market accounts for a significant share of revenue and profit for these companies, the financial impact of the delayed product approvals and import restrictions is humungous. The top companies alone have lost about Rs 15,000 crore in US sales over the last two years and their market capitalisation has eroded by at least Rs 1 trillion during this period.

Not Quite Agile
Not upgrading with changing manufacturing standards set by regulatory authorities in foreign markets is no doubt, the primary reason for such a setback. The absence of a culture of quality manufacturing in the Indian pharmaceutical industry too complicates remedial measures at times.

“There are no guidelines on the changing FDA standards available to the industry, so the companies are bound to fail,” says a chief financial officer of a pharmaceutical major in India. According to him, the problem was complex, since the day-to-day activities on the shop floor, especially movement of people and personal interventions, were often not in the control of the company. “So, it’s mostly a trial and error process at the floor and the correction is traditionally warranted only when caught,” he says.

“The regulatory compliance issues are often not linked to lack of investments or cutting costs by drug companies,” says Ajaz Hussain, a former US FDA official and currently, an independent regulatory consultant to the drug industry. “It’s the mindset of people, who manage and work on the production floor, which makes the large difference in their adherence to best standards. So, it’s not only investment, but a change of attitude that is critically important for resolving such issues,” he adds.

Costly Remedies
“Lack of an open mindset to adopt best manufacturing practices often makes the industry pay through its nose for remedial services,” concedes Satish Khanna, an industry veteran and currently a mentor and serial entrepreneur in the related technology and services space. “Even though India has been exporting drugs and drug formulations to several countries, it is yet to learn professional skills to comply with the regulatory demand,” he says. Khanna has now taken up this area as a prime focus.

The Indian pharmaceutical industry has been almost fully self-reliant in key strengths, such as active pharma ingredients (API), formulation development and manufacturing, new drug development and innovation, accessories and allied services. Expertise in regulatory compliance has remained a major shortcoming for the industry, however.

Currently, the Indian drug industry depends entirely on foreign consultants for non-compliance remedial action. These consultants charge on an hourly basis, beginning from when they leave their country to the time they are back home. They are often not familiar with local culture, however. The pharmaceutical industry in India has so far spent close to a billion dollars on remedial measures and in engaging foreign consultants post the regulatory hit.

While many are still not out of the woods, some have managed to go for re-inspection by the FDA as a measure to clear up the existing mess. But, unfortunately, a stable quality compliance culture has not emerged in the sector, yet. “What we actually need is an advisor-cum-execution partner, who understands the psychology of the Indian industry,” says an industry CEO, who prefers not to be identified. “And if such a service is available at an Indian price, it will certainly be a revolutionary move,” he says.

It’s interesting to note that most of the observations or warning letters issued by the US drug regulator often raise alarms on non-technical issues, such as lack of hygiene, incomplete, wrong or missing data, mishandling test samples, etc. Unfortunately, saving cost on certain high value equipment and technology adaptation are still issues with some companies.

So, what the Indian industry needs are affordable local partners, who understand the real issues at stake and are willing to work with the companies all along. These partners need to check drug makers on time, instead of waiting for regulatory action and gradually bring in a quality manufacturing culture into the organisation.

Disrupting Legacy
Qualiminds is a path-breaking initiative that tries to fill in the missing link in the Indian drug industry. It is, according to the company’s CEO and managing director, K. Anand, an idea that can really disrupt existing practices and find an effective solution to the critical issue of compliance with US regulatory stipulations.

Qualiminds is India’s first regulatory advisory and remediation service initiative formed by a team of industry professionals from related fields of experience. It tries to equip the sector with expertise to enable it to avoid sudden regulatory hits. It is a first commercial venture globally, to offer an integrated approach and plans to work in partnership with drug makers as an advisor and remedial service provider.

Qualiminds claims that its services are offered at a fourth of the fee charged by foreign consultants like Lacmann Consultants and Quintiles, who offer only advisory services. With costs that are Indian and expertise that is global, Qualiminds has the potential to disrupt the market.

“All the legacy practices, which were highly non-compliant and were ‘managed’ by documenting selectively, got exposed and challenged on real time basis today,” says Mahesh Kulkarni, founder and CEO of Qualiculture Consulting Group, which has now merged with Qualiminds. Kulkarni is sure about the disruption that the new initiative would bring to the market. “I strongly believe that the home-grown consulting, with competitive cost and equally capable global technical skills, is the only solution for longevity of supply of generic medicines from India uninterrupted,” he says, adding, “And, it is also important that it has the ability to connect shop floor.”

“The market for compliance advisory is large in India and every new player can have a share in it. However, the affordability factor may not be a pressing need for the top drug makers,” says D.G. Shah, secretary general,Indian Pharmaceutical Alliance. “In my experience,” adds Kulkarni, “90 per cent of the success in remediation lies in the ability to connect shop floor teams, communicate, provide them parental comfort to uncover real issues, provide solutions and robust corrective and preventive action with realistic time lines to avoid re-occurrence of the issues.”

unni@businessworld.in