Decoding USFDA’s Role in Indian Pharma

Did you know? Before the Industrial revolution swept the world and the production of food and medicine became a large-scale enterprise, there was no way to know what a product really contained. Besides clever labels and glorified slogans, basic elements of consumer protection were not known!

Manufacturers began to exploit this ambiguity. Some would mask expired food; add low-quality ingredients, relied on substances that gave a high instead of healing. Thankfully, the times have now changed.

Knowing What You Consume

Today, authorities across the world strive to ensure evidence-based entry of food and drugs into the country. While importing, proper checks and regulations are put to ensure they are not harmful. One such agency is the US Food & Drug Administration (USFDA).

If you are an investor in pharma stocks, you would’ve often come across this name. It exists to ensure the safety of America's food, cosmetics, drugs and medical devices. While we have similar other agencies like DGCI in India, MHRA in Europe, TGA in Australia, Anvisa in Brazil and so on… USFDA is considered the most crucial. That’s because India is one of the largest supplier of drugs and biologics, especially low priced generic medicines to the US. We also have the highest number of USFDA compliant companies with plants outside of the US.

USFDA Audits – Shareholders’ Anxiety?

In pharma business, today compliance holds a lot of importance, especially for those involved in exporting to advanced countries. If FDA compliant, India can export drugs in a seamless manner not only in the US but also to other small countries that rely on USFDA approval stamp.

No wonder, Indian companies have been scrutinised intensively by USFDA in the recent past. The mention of “USFDA inspection” gives chills to the shareholders of any pharma company. There are good reasons for them to feel nervous about USFDA’s warnings letters. In the past, there have been instances when after USFDA inspection, the stock spiralled down or the company went out of business. One such company was Ranbaxy. Ranbaxy used to be a big company in India. When USFDA audit failed few years ago, it couldn’t sell its product in the US and eventually the company got sold. Now, the question is – how USFDA became critical for success in India? To understand this, let’s go back a little.

A Brief Background – How Compliance Made a Difference

Hailed as the ‘pharmacy of the world’ today, the story of India emerging as a powerhouse for affordable, generic medicines is fascinating. Pharma industry was not so big earlier. The real breakthrough in the pharma industry came in 1970s. The pharma players ventured into bulk drug manufacturing. Over the years, India emerged as a major player in bulk drugs. These companies were India-centric initially.

In the entire value chain, manufacturing, quality and supply chain did not get its proper importance. This changed when these companies started exporting to non-regulated first and then to advanced countries to capture larger market share. As India got exposed to foreign regulator’s scrutiny, enforcement of regulators made all the companies alert to quality. The companies realised that in a market like the US, clean compliance record and cost of products makes all the difference.

USFDA & Indian Pharma Growth Story

Since then, USFDA inspection has become a key thing to watch out for. An outcome of USFDA inspection can depend on many factors like the type of inspectors, how detailed was the inspection, what discrepancies were unearthed and how the company avoided the auditors luck. So, entirely depending on the outcome of USFDA inspection, the company’s future trajectory can be ascertained.

This is very important for any pharma stock. The pharma industry is recession-proof and enjoys good margins. With increasing competition, it is now extremely important that robust efficiencies are in place. If the quality metrics are defined aptly and good manufacturing practices are followed, Indian pharma industry can flourish worldwide. So, now that you know what USFDA inspections mean for your stock, add them to your portfolio wisely.

References:

sell.amazon.in/

www.fda.gov/

smithsonianmag

www.ibef.org/