Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.
This is an entirely free service. No payments are to be made.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
Warning letters and import bans raised by the US drug regulator are unfortunately becoming a regular feature for Indian pharma companies. This has not only tarnished the image of these companies but has also thwarted growth in a market considered to be an important growth driver for generics. It goes without saying that the worst impacted has been Ranbaxy. The company's two manufacturing facilities at Poanta Sahib and Dewas were already under the USFDA scanner. And now one more facility at Mohali has received an import ban. One should note that this facility was developed and received USFDA clearance approximately 1.5 years back. This is unlike the other two which had problems since quite some time. Thus of the four facilities which had approval from the USFDA, three have been imposed by an import ban from the drug regulator.
Ranbaxy is not the only one. In recent times, Wockhardt's Waluj facility also received an import alert. And after that another important facility at Chikalthana received some 483 observations, from the USFDA.
Both the companies have hired consultants to resolve the issues and are working on corrective measures. While the issues at Ranbaxy and Wockhardt are serious, other pharma companies have also been at the receiving end of the US regulator. Indeed, companies such as Sun Pharma, Dr.Reddy's, Aurobindo Pharma and the like have also had problems with the US FDA in terms of maintaining good manufacturing practices (GMP). However, most of them seem to have resolved their respective issues.
That is why the risk of coming under the US FDA scanner has increased for the sector given that the US regulator has also become quite strict in this regard.
Indian pharma must learn a lesson...
In the past, Indian pharma companies had reaped the benefits from the US generics market on the back of many major drugs going off patent. A low cost advantage among others ensured that Indian firms remained competitive. But the spate of plants that have failed to match the standards of the US FDA is worrisome. An interesting, point highlighted in the Mint, says that the Indian companies are building a robust pipeline of drugs. However, if companies fail to comply with the GMP norms than these filings will just be futile.
In our view, it's high time that Indian companies become cautious and take the required steps before hand to ensure that plants are compliant. Else they will soon lose their ground in the US market, which has already become quite competitive. The USFDA is becoming more vigilant and also plans to increase its plant visits. Hence, surprise visits are bound to soon become a regular feature. That is why Indian pharma companies will have to consider this an urgent issue. From a longer term perspective, they will have to build up a system to ensure that the manufacturing facilities are compliant with FDA norms. Even if this entails the occurrence of additional costs.
Equitymaster requests your view! Post a comment on "Risk for Indian Pharma has increased". Click here!
Thank you for posting your view on Equitymaster!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!
Equitymaster requests your view! Post a comment on "Risk for Indian Pharma has increased". Click here!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear
on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!